The Morning Call
10/21/16
The
Market
Technical
Yesterday, the
indices (DJIA 18162, S&P 2141) couldn’t make it three up days in a row. Volume was flat; breadth weakened. The VIX was down 4 1/2% (unusual for a down
Market day), closing [a] below its 100 day moving average for the second day (support;
if it remains there through the close today, it will revert to resistance), [b]
below its 200 day moving average (now resistance), [c] in a short term downtrend
and [d] in a very short term uptrend. If
the VIX is able to hold below its 100 day moving average, it will improve the
short term outlook for stocks.
The Dow ended
[a] below its 100 day moving average, now resistance, [b] above its 200 day
moving average, now support, [c] in a short term trading range {17092-18693},
[c] in an intermediate term uptrend {11503-24348} and [d] in a long term
uptrend {5541-19431}.
The S&P
finished [a] back below its 100 day moving average {now resistance}, negating
Wednesday’s upside break, [b] above its 200 day moving average, now support,
[c] in a short term trading range {1995-2193}, [d] in an intermediate uptrend
{1964-2566} and [e] in a long term uptrend {862-2400}.
The long
Treasury rose slightly, closing below its 100 day moving average (resistance),
within a very short term downtrend, above a key Fibonacci level and within
short term, intermediate term and long term uptrends. Long term, TLT’s chart is still healthy; but short
term not so much so.
GLD fell, ending
below its 100 day moving average (resistance) and in a short term downtrend. However, it finished right on its 200 day moving
average and above a key Fibonacci level.
It is trying to stabilize after a rough couple of months.
Bottom line: I
think that the S&P negating the break above its 100 day moving average is
less significant than recognizing that this pin action is part of a bigger
picture that includes the DJIA, bonds and gold; and that is that it reflects
that all these Markets continue to trade as though they are at an inflection
point. I await its resolution.
Why
technical analysis gets a bad rap (short):
Fundamental
Headlines
Yesterday’s
US economic data weighed to the upside: weekly jobless claims were negative,
September leading economic indicators were neutral and the October Philly Fed
index and September existing home sales were better than consensus. There are no releases today; so that means
this week will get scored as a slight positive.
Overseas,
the ECB left key interest rates unchanged.
Plus Draghi declined to discuss the start of tapering scheduled to begin
in 2017; that led investors to believe that this date will be pushed out. Again we see that no matter how much jawing
the central bankers do about normalizing monetary policy, they simply don’t
have the courage to start the process.
Most
of the media, both print and television, spent the bulk of their time and space
analyzing Wednesday night’s debate. As a
general rule, I try to stay out of the political narrative game; but I will
make one observation. I think that Trump’s
comments about not being ready to accept the outcome of the election (despite
his later ‘clarification’) not only clinched his defeat but also may have put
at risk the down ballot elections. What
concerns me is a democratic party sweep of congress with all that implies about
taxes, spending and regulations and their impact on our economy.
That
said, here is a little history (medium):
Bottom line: this is one of those times that occur occasionally
in which the technical picture dominates, i.e. the Market appears to be
struggling at an inflection point. To be
sure, there are a number of fundamental factors which lack clarity that are
behind the narrow back and forth trading.
But I have no idea which of these factors weigh the most heavily on
investors’ minds or how to anticipate the news flow on each or what defines the
degree of positive or negative surprise on each that would prompt action as a
result. The only way I am going to know
is how the Market reacts to that news flow viz a viz support/resistance levels.
As long as clarity is lacking, the Market is apt to churn directionlessly.
If you haven’t
already, take the opportunity to build your cash position by lightening up on
your winners and selling your losers.
Mohamed
El Erian on the Market (short):
My
thought for the day: historically,
stocks are embraced as investments or dismissed as gambles in routine and
circular fashion and usually at the wrong times. Said another way, investors hate stocks when
they are cheap because the prevailing emotion is fear and love them when they
are expensive because the prevailing emotion is greed. The reason that they are usually wrong is
because when stocks are cheap, they reflect (discount) all the bad news and
none of the good and when stocks are expensive, they reflect all of the good
news and none of bad. That in a nutshell
is why I developed our Price Disciplines.
Investing for Survival
Avoiding
stupidity.
News on Stocks in Our Portfolios
Revenue
of $7.02B (-17.1% Y/Y) misses by $60M.
Revenue
of $22.3B (+3.0% Y/Y) beats by $590M.
Revenue
of $6.42B (-3.0% Y/Y) beats by $140M
Economics
This Week’s Data
September
existing home sales rose 3.2% versus expectations of no increase.
September
leading economic indicators were up 0.2%, in line.
Other
The
‘happiness’ index (medium):
Politics
Obamacare
premiums are soaring (medium):
Obama’s
cure for Obamacare---more government intervention (medium):
Quote
of the day (short):
Domestic
Foreign policy ‘elites’
eager for change (medium):
International War Against Radical
Islam
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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