The Morning Call
9/28/16
The
Market
Technical
The indices
(DJIA 18228, S&P 2159) recovered nicely yesterday after a couple of rough
days. Volume fell but breadth improved. The VIX dropped 10%, retreating from its 100
day moving average and ending in short term downtrend---which is supportive of
stocks. Nonetheless, it remains in a
very short term uptrend.
The Dow ended
[a] back above its 100 day moving average, now support and negated Monday’s
break, [b] above its 200 day moving average, now support, [c] within a short
term uptrend {18069-19803}, [c] in an intermediate term uptrend {11420-24247}
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 {2126-2362},
[d] in an intermediate uptrend {1946-2548} and [e] in a long term uptrend
{862-2400}.
The long
Treasury was up again on volume, ending above its 100 day moving average and
well within very short term, intermediate term and long term uptrends. This extends a very upbeat two week run in
prices---suggesting that the odds of a December rate hike are shrinking.
GLD fell, finishing
back below its 100 day moving average and within a short term trading
range. It has now made a fourth lower
high---not a plus for our GDX holding.
Bottom line: the
DJIA undid Monday’s technical damage, leaving both of the Averages above key
momentum indicators and within uptrends across all timeframes. Support exists at their 100 day moving averages
and the lower boundaries of their short term uptrends, resistance at their
recent highs (18668/2194).
Fundamental
Headlines
Yesterday’s
US economic data was generally upbeat: month to date retail chain store sales
and the July Case Shiller home price index were flat; the September Richmond
Fed manufacturing index was down but not as much as anticipated; while September
consumer confidence and the Markit Services Flash PMI were better than
forecast.
Overseas, the
World Trade Organization lowered its 2016 estimate for global growth as well as
its forecast for 2016 and 2017 global trade; August Chinese industrial profits
rose much more than projected.
After four weeks
of very poor data, getting some positive news is a relief. At least we have reason to believe that the economy
is not sinking like a stone. Let’s see
how the rest of the week goes before getting too jiggy.
***overnight,
it was rumored that German financial authorities are preparing a rescue plan
for Deutschebank if it is unable to raise the capital to pay the $14 billion US
fine; Greek law makers approved another austerity measure that will assure the
next bailout funding; and US lawmakers failed to pass a stop gap funding measure
to keep the government running. Today
will be a potentially big news day as OPEC wraps up its meeting, Yellen
testifies before the House Financial Services Committee and Draghi addresses
the German parliament.
Bottom
line: the economic data improved yesterday, though one day in the last four
weeks isn’t exactly a reason to jump for joy.
In addition, Deutschbank’s solvency issues remains very much in
question, rumors notwithstanding. As I noted
yesterday, there are too many variables bearing on this problem to make any
dire predictions. However, the bank’s
financial position is weak enough that having some protection against a big
negative event makes sense---especially given the current very generous stock
valuations. With 50-55% cash position,
our Portfolios already have that. However,
if you don’t, this Market is giving you a great opportunity to take some money off
the table in stocks that have been good performers and/or let your losers go.
More on
Deutschebank (medium):
The
latest from John Hussman (medium):
My
thought for the day: people in general tend to overestimate their ability to
control their emotions. As it applies to
investors, many consider themselves contrarians who want to buy when the bottom
is falling out. Yet when the Market is
nosediving, they panic like everyone else.
I developed our Price Disciplines to help overcome this tendency---when our
Model has set a Buy Price when conditions are normal, it helps to reassure me that
I am Buying real value when the sky is falling.
The opposite is also true---forcing me to take profits when everything
is seemingly coming up roses.
Investing for Survival
Bull
markets are the hardest part.
News on Stocks in Our Portfolios
Revenue of $9.06B (+7.7% Y/Y) beats
by $190M
Economics
This Week’s Data
Month
to date retail chain store sales were flat with the prior week.
The
July Case Shiller home price index was flat versus expectations of being up
0.1%.
The
September Markit Services Flash PMI came in at 51.9 versus the August reading of
50.9.
September
consumer confidence was reported at 104.1 versus estimates of 98.8.
The
September Richmond Fed manufacturing index came in at -8 versus the prior
reading of -11.
Weekly mortgage
applications fell 0.7% while purchase applications were up 1.0%.
August
durable goods orders were flat versus forecasts of -1.9%, though the July number
was revised down substantially; ex transportation, they were down 0.4% versus
consensus of -0.5%.
Other
Estimated
US corporate sales growth is anemic (short):
More
bankruptcies coming in the oil and gas industry (medium):
Politics
Domestic
Do stocks
predict elections (short)?
International War Against Radical
Islam
Jihadists
target Spain (medium):
Visit Investing
for Survival’s website (http://investingforsurvival.com/home)
to learn more about our Investment Strategy, Prices Disciplines and Subscriber
Service.
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