The Morning Call
8/25/16
The
Market
Technical
The indices
(DJIA 18481, S&P 2175) moved lower yesterday. Volume was flat (and still quite low);
breadth weakened. The VIX rose 8%, but is
still below its 100 day moving average and within a short term downtrend. However, it is back above the lower boundary of
its former short term trading range and has now made its third higher low.
The Dow ended
[a] above rising 100 day moving average, now support, [b] above its 200 day
moving average, now support, [c] within a short term uptrend {17681-19415}, [c]
in an intermediate term uptrend {11333-24160} and [d] in a long term uptrend
{5541-19431}.
The S&P finished
[a] above its rising 100 day moving average, now support, [b] above its 200 day
moving average, now support, [c] within a short term uptrend {2077-2316}, [d]
in an intermediate uptrend {1923-2525} and [e] in a long term uptrend {862-2400}.
The long
Treasury declined fractionally, remaining above its 100 day moving average and
well within very short term, short term, intermediate term and long term
uptrends. However, it has been stalled
since late June.
GLD fell 1%, but
ended above its 100 day moving average and within short term and intermediate
term uptrends. Like TLT, it has gone
nowhere since late June; but it is now near the lower end of that trading range.
This only heightens my concern about its failure at its second try to surmount
a key Fibonacci level, then its negating a very short term uptrend.
Bottom line: while
trading in all the Markets yesterday reflected a sour mood by investors, I don’t
think that it really means much since the universe appears to be awaiting the
Yellen speech before making any trading/investment decisions. So in the absence of some exogenous event or
the release of her prepared speech, stocks are likely to stay in a narrow
trading range until Friday.
Fundamental
Headlines
Yesterday’s
US data was discouraging: weekly mortgage and purchase applications were down
and July existing home sales were very bad---which seems a bit inconsistent
with Tuesday’s blockbuster new home sales number. I am sure this will all get worked out in the
revisions; although remember the new home sales number was itself subject to
some big revisions. These data continue
the recent trend in big seasonal adjustments---something that I initially
pointed to in the first quarter when the accountants started tinkering with
those factors because their masters didn’t like what was being reported. However, this gets resolved, remember that the
existing home sales market is about ten times the size of the new home market.
Nothing
from overseas.
***overnight,
the German Info Institute business climate index declined and was worse than
anticipated; July Japanese PPI came in at the highest level in ten months.
Still
investor preoccupation is focused on Yellen’s speech on Friday.
How
the central banks got it wrong (medium):
Bottom line: the
economic bulls who trumpeted Tuesday’s new home sales were nowhere to be found
after yesterday’s existing home sales report.
Of course, both are simply a part of an economic big picture that is
very uncertain no matter how upbeat one makes their forecast---and that is the
key. My forecast of a recession is no
better than one expecting a recovery. No
one knows and no one can claim in particular insight because the data has, at
best, no trend.
So if the Fed is
as ‘data dependent’ as it says that it is, I can’t see a rate hike
soon---assuming that these guys are focused on the data in the first
place. Which we all know that they are
not. They have been, are and will be focused
on the Markets. So given the elevated
level of stock prices, then in the absence of a precipitous drop in those
prices today, the Yellen could very well deliver a hawkish speech on
Friday. Then if the Markets take it
hard, the Fed can always back off in their September meeting.
If this is all
very confusing, join the crowd. Unfortunately,
it is the result of the Fed’s pursuit of an ill-conceived monetary policy, lying
about the goals of that policy, failing to achieve even a modicum of success in
improving the economy, driving asset prices to extreme speculative levels,
neglecting to admit any of the above and creating the fantasy that they have
matters under control when in fact they are clueless and powerless to correct
the disaster which they have created for the economy and the Markets.
Remember: QE did
nothing for the economy, so it absence will not likely matter; however, it has
led to extreme asset valuations and its absence will likely unwind that
process.
My
thought for the day: Investors can
convince themselves that they can be great investors because they have read and
studied everything about the investing techniques of a Warren Buffet or Peter
Lynch. The temptation is to think ‘yeah,
I understand that completely. I can do just
as well.’ Unfortunately, that is like
reading and studying the techniques of Ben Hogan and then thinking they can go
out and shoot a 68. Instead, investors
should approach the very taxing job of managing their money with a huge dose of
humility, a keen sense of that they don’t know and the recognition that the
real money gets made in times of greed and panic---and that takes a strong
stomach and a lot of nerve.
Investing for Survival
Wiped
out.
News on Stocks in Our Portfolios
Revenue of $7.17B (-1.4% Y/Y) in-line.
Revenue of $932M (-5.9% Y/Y) misses
by $2.74M.
Economics
This Week’s Data
July
existing home sales fell 3.2% versus expectations of -0.1%.
July
durable goods orders rose 4.4% versus estimates of +3.7%; ex transportation,
they were up 1.5% versus forecasts of +0.5%.
Weekly
jobless claims declined 1,000 versus consensus of +3,000.
Other
Latest
snapshot of S&P trailing earnings (short):
Chinese
‘liquidity trap’?
With the change
of Saudi oil ministers and Iran reaching its max production, the conditions may
now favor a production freeze agreement (though at higher levels) at the
Algiers meeting in late September.
Plus
there is always this: (short):
The
demographics of home buying (medium):
Politics
Domestic
Media ignores
Soros hacked email dump (medium):
International War Against Radical
Islam
The US State Department has issued a
travel warning to all US citizens to leave Gaza (medium):
http://www.zerohedge.com/news/2016-08-24/state-department-urges-us-citizens-leave-gaza-soon-possible
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for Survival’s website (http://investingforsurvival.com/home)
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