The Morning Call
9/21/16
The
Market
Technical
The indices
(DJIA 18129, S&P 2139) were basically flat yesterday. Volume was even lower than on Monday; breadth
remained weak though improved slightly.
The VIX rose 2 ½%, closing above its 100 day moving average and making a
third higher low. This is not a positive sign for stocks. However, as long as it remains in a short
term downtrend, the implications are not ominous.
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 {17971-19705}, [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 {2114-2350},
[d] in an intermediate uptrend {1943-2545} and [e] in a long term uptrend
{862-2400}.
The long Treasury (134) was up, finishing well within short term,
intermediate term and long term uptrends.
While, it closed below its 100 day moving average, now resistance, it
also remained above a key Fibonacci level.
That leaves open the possibility for some additional price weakness
though the trend to lower rates (higher prices) will remain intact until the
short term uptrend (126) is broken.
GLD was up, ending
in a short term trading range and above its 100 day moving average (support) and
a key Fibonacci level. I am interpreting
this as a hopeful sign and continue to Hold the GDX position---but my finger is
on the trigger.
Bottom line: investors
remained on the sidelines yesterday awaiting the results of today’s FOMC and
Bank of Japan meetings. As I noted in
yesterday’s Morning Call, I am not expecting anything dramatic. If that is the case, the assumption remains
that the indices will challenge the upper boundaries of their long term
uptrends.
Fundamental
Headlines
The
US economic dataflow continued its weak performance: August housing starts and
building permits were well below projections and month to date retail chain
store sales slowed.
Certainly,
these numbers are a continuation of the grim economic data released in the last
three weeks. So it seems highly unlikely that rates will be increased at today’s
Fed meeting. About the only question is
how deep the bullsh*t gets in the post meeting statement and in Yellen’s subsequent
press conference.
David Stockman
on the Fed---again (medium):
Another
point on how the Fed has gotten it so wrong (medium):
Overnight,
Chinese loan demand dropped to all-time low---and there is a good reason. A rather long in depth look at China’s debt
problem (long):
Bottom
line: it seems a waste of time to pound the central banks in advance of their meetings
today when I can wait and include any new material that may flow forth during
those meetings.
|
***overnight,
the BOJ held rates steady at -0.1% following its latest meeting, but announced that it would modify
its policy framework, marking the latest attempt to boost prices and goose
economic growth. Among the changes,
the BOJ said that it would introduce yield curve controls, eliminate the
maturity range of purchases, abandon its monetary base targets and confirmed
that cutting rates further remained an option.
|
I would include
that yesterday’s housing data does not help the overall outlook for the
economy. Indeed, the Atlanta Fed just
released its newest revision for third quarter GDP growth; and not surprisingly
it was down. That is likely to weigh on the
FOMC members.
Update on the
Atlanta Fed’s third quarter GDP estimate (short):
http://www.zerohedge.com/news/2016-09-20/atlanta-feds-exuberant-q3-gdp-estimate-tumbles-back-reality
But remember, I think
that rates should be raised because (1) they will not likely have any detrimental
effect on the economy and (2) they will be a step towards normalizing asset
pricing and allocation.
My thought for the day: Accepting or rejecting an
argument is generally based on how well it fits your pre-defined beliefs,
rather than the objective facts of the situation. Pointing out the lack of economic progress that
has resulted from QE is met with suspicion by those who believe the Federal
Reserve's actions benefit growth.
Investing for Survival
Seven
crucial lessons people learn too late in life (medium):
News on Stocks in Our Portfolios
Revenue of $3.91B (-7.1% Y/Y) misses
by $10M
Economics
This Week’s Data
Month
to date retail chain store sales grew slower than in the prior week.
Weekly
mortgage applications fell 7.3% while purchase applications were down 7.0%.
Other
The
OECD lowered its 2017 global growth forecast to 2.9%, the lowest rate since the
financial crisis.
Politics
Domestic
International War Against Radical
Islam
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