The Morning Call
9/23/16
The
Market
Technical
The indices
(DJIA 18392, S&P 2177) followed through strongly on Wednesday’s Fed rally. Volume was back in the anemic range; breadth
continued to improve. The VIX was down
another 10%, closing below its 100 day moving average and in a short term
downtrend. In addition, it finished
right on the lower boundary of a very short term uptrend. This pin action is clearly a big plus for
stocks.
The
shrinking US stock market (short):
The Dow ended
[a] above a rising 100 day moving average, now support, [b] above its 200 day
moving average, now support, [c] within a short term uptrend {18016-19750}, [c]
in an intermediate term uptrend {11402-24229} 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 {2120-2356},
[d] in an intermediate uptrend {1943-2545} and [e] in a long term uptrend
{862-2400}.
The long Treasury was up on volume again, closing well within short term,
intermediate term and long term uptrends.
It [a] closed above its 100 day moving average, now resistance; if it remains
there through the close on Monday, this MA will become support and [b] remained
above a key Fibonacci level. Both point
to lower interest rates.
GLD was up on
volume again, ending in a short term trading range but back above the lower boundary
of its former short term uptrend for the second day. If it remains there for much longer, I will
likely negate the recent break of that short term uptrend. It also
finished above its 100 day moving average (support) and a key Fibonacci level. This pin action is a plus for our GDX
position.
Bottom line: all
Markets continue to point to an extension of the QE holiday. However, they all
have near in obstacles to overcome. The
indices are closing in on their former all-time highs (18668/2194) which should
act as resistance and slow, at least temporarily, the current phase of upward momentum.
TLT is nearing
the upper boundary of its short term uptrend---also a resistance level. Plus it gapped open yesterday; and
historically gaps get filled.
GLD (127) is
pushing up against the upper boundary of a very short term downtrend; but if
that is overcome, its next resistance point is the upper boundary of its
intermediate term downtrend (136).
Fundamental
Headlines
The
four week run in really poor US economic data is getting depressing: yesterday,
August existing home sales (primary indicator) and August leading economic indicators
(primary indicator) were both disappointing.
That pretty much cements this week as another negative. More important, almost all the primary
indicators over this four week period have been downbeat. That certainly supports not only our own
forecast but the cuts that were made in the Fed’s outlook on Wednesday. The mystery here is why the Fed’s official
forecast is that everything is great; and perhaps even more baffling is why
investors are buying that routine.
David
Stockman on the latest Fed (non) move (medium):
JP
Morgan on the latest Fed (non) move (medium):
***overnight,
Markit released its September EU Flash PMI’s. The individual countries varied
somewhat but the EU Composite and Services PMI were below estimates, while the
Manufacturing PMI was above.
Bottom line:
investors continued to tip toe through the tulips yesterday---demonstrating
little concern about the growing disconnect between the Fed’s magic kingdom and
the real world. As long as they elect
the path of willful ignorance, stocks are going up. A test of the recent highs is imminent and
barring some negative event, so too is a challenge of the upper boundaries of
the Averages long term uptrends.
I would use this
strength to lighten up on your winners and get rid of your losers.
Friday
morning humor (short):
My
thought for the day: The world of investing is infinitely complex. As a result, many investors wrongly conclude
that they, therefore, need complex strategies in order to generate
returns. However, complicated strategies
provide more opportunities for failure simply because there are more factors on
which to be wrong. For most investors, a
simple strategy is easier to understand and easier to execute, making mistakes
less likely particularly in times of high emotion (greed and panic).
Investing for Survival
Keeping
your wits when stocks come unglued.
News on Stocks in Our Portfolios
Economics
This Week’s Data
August
existing home sales fell 0.9% versus forecast of being flat.
August
leading economic indicators dropped 0.2% versus expectations of a -0.1%
increase.
August
CPI rose 0.2% versus estimates of up 0.1%; ex food and energy, it was up 0.3%
versus projections of up 0.2%.
Other
Politics
Domestic
70% of arrested Charlotte
rioters are from out of state (medium):
International War Against Radical
Islam
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for Survival’s website (http://investingforsurvival.com/home)
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