The Morning Call
10/14/16
This weekend is my annual pledge
class reunion. I leave for Norman
shortly and return Sunday. No Closing
Bell. Go Sooners.
The
Market
Technical
Yesterday, the
indices (DJIA 18098, S&P 2132) slipped. Volume was up slightly; breadth
negative. The VIX up another 5%, closing
above its 100 day moving average (support; the moving average I have been mistakenly
discussing in the prior narratives has been the 200 day moving average….duh),
broke above its 200 day moving average (now resistance; if it remains there
through the close next Tuesday, it will revert to support); but it finished in a
short term downtrend. It is still in a
very short term uptrend. So this chart
is getting more negative for stocks.
The Dow ended
[a] below its 100 day moving average for the third day, reverting to resistance,
[b] above its 200 day moving average, now support, [c] below the lower boundary
of its short term uptrend for the third day, resetting to a 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] below its 100 day moving average for the third day, reverting to
resistance, [b] above its 200 day moving average, now support, [c] below the
lower boundary of its short term uptrend for the third day, resetting to a
trading range {1995-2193}, [d] in an intermediate uptrend {1960-2562} and [e]
in a long term uptrend {862-2400}.
The long
Treasury was up fractionally, but still closed below its 100 day moving average
(resistance), below a third Fibonacci level and within a very short term downtrend.
It remained within short term, intermediate term and long term uptrends. TLT’s chart is still healthy but getting less
so.
GLD also rose, but
ended below a key Fibonacci level, below its 100 day moving average
(resistance), in a short term downtrend and below its 200 day moving average
for the third day (if it remains there through the close today, it will revert
to resistance). This chart gets uglier.
Bottom line: the
Averages couldn’t regain their 100 day moving averages (reverting to
resistance) and the lower boundaries of their short term uptrends (resetting to
trading ranges)---indicating a loss of upside momentum. On the other hand, there has been little
follow through to Tuesday’s initial challenge of the aforementioned support
levels---so it is unclear just how much support has been loss for stocks. Likewise, TLT and GLD have stabilized, at
least temporarily. As I said yesterday,
it seems like the technical action in all these Markets is suggesting an
inflection point. If that is so,
unfortunately, I have no clue which direction prices will break.
Fundamental
Headlines
It
was another slow day for economic releases.
In the US, weekly jobless claims were slightly better than expected and September
import and export prices were mixed.
Overseas, the news was not good---September Chinese trade numbers were
lousy. Given the importance of the
Chinese economy to global activity, these were not welcome stats.
***overnight,
September Chinese PPI and CPI were ahead forecasts. Global equity markets are up (bonds and gold
are down) on the thesis that this shows the risk of recession is decreasing in
China. But remember weak foreign economic
data was one of the big excuses the Fed used to justify not raising rates. Presumably better global data means a higher
probability of a December rate hike.
Recession
fatigue---fatigue (medium and today’s must read):
Bottom line: I
think that the poor pin action of the last couple of weeks reflects that
investors are having trouble weighing the relative importance of a number of
potentially significant economic factors (1) a prospective December Fed rate
hike, (2) a softening in attitude toward monetary normalization by the ECB and
BOJ, (3) a weakening global economy, (4) a possible poor third quarter earnings
season, (5) the effects of a 2017 Brexit and (6) the magnitude of any OPEC
production cut. Plus, the somewhat
chaotic US political environment probably doesn’t help. Clarity will ultimately occur and with it a
better sense of Market direction. Until
that happens, patience is important. That
said, it is not too late to take some money off the table.
Mohamed
El Erian on the Fed minutes (medium):
For
the bulls (medium):
My
thought for the day: I often talk of the benefits of diversification---avoiding
big losses and insuring participation in the best performance. Our Price Discipline attempts to improve on
the principle of diversification. First,
by setting a Stop Loss Price for every stock, our Portfolios avoid the big
losses that would be sustained in a passively managed portfolio. Second, it is important to recognize that our
Portfolios will always own underperforming positions. A major purpose of our Price Discipline is be
sure our Portfolios retain stocks that trade within their long term uptrends
and whose underlying company remains financial sound. It only makes sense that not all of our
holding are going to trade at the top end or bottom end of their Valuation
envelope at the same time. So the stocks
that carry the near term performance of a portfolio will vary over time.
Investing for Survival
The
potential problem with ETF’s
News on Stocks in Our Portfolios
Economics
This Week’s Data
September
retail sales were up 0.6%, in line; ex autos, they were up 0.5%, also in line.
September
PPI was up 0.3% versus expectations of up 0.2%; ex food and energy, it was up
0.2% versus estimates of up 0.1%.
Other
The
failure of negative interest rates (medium):
Update
on subprime auto loans (medium):
Politics
Domestic
What the
candidates won’t say (medium):
America’s
military and diplomatic power in visible decline (medium):
The media
narrative (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.
No comments:
Post a Comment