The Morning Call
10/27/16
The
Market
Technical
The indices
(DJIA 18199, S&P 2139) were mixed yesterday. Volume was up slightly; breadth improved. The VIX was up 6%, closing in a short term
downtrend and below its 100 day moving average---but just barely. In addition, it had strong follow through off
the lower boundary of its very short term uptrend, which is not a good sign for
stocks; and, as I suggested yesterday, this could be signaling that stocks aren’t
likely to see much higher prices.
The Dow ended
[a] below its 100 day moving average, now resistance; [b] above its 200 day moving average, now
support, [c] within a short term trading range {17092-18693}, [c] in an
intermediate term uptrend {11529-24374} and [d] in a long term uptrend
{5541-19431}.
The S&P
finished [a] below its 100 day moving average, negating Monday’s break and
leaving it as resistance, [b] above its 200 day moving average, now support,
[c] within a short term trading range {1995-2193}, [d] in an intermediate
uptrend {1970-2572} and [e] in a long term uptrend {862-2400}.
The long
Treasury got popped, ending below its 100 day moving average, in a developing a very short term downtrend and
right on a key Fibonacci level as well as its 200 day moving
average---potential bad news. In
addition, other segments of the debt market were also pounded. While TLT remains in short, intermediate and
long term uptrends, its struggle is getting more labored.
GLD fell, finishing
below its 100 day moving average (resistance), within a short term downtrend,
back below its 200 day moving average (now support), commencing a new challenge
(if it remains there through the close next Monday, it will revert to
resistance). The only good news is that
it continues to hold above a key Fibonacci level. A fading ray of hope.
Bottom line: yesterday’s
pin action continues to confirm my observation that stocks remain at an
inflection point. The only possible directional
signal is the VIX making its sixth higher low of a very short term uptrend,
giving strength to the notion that stocks may have seen their highs.
http://www.marketwatch.com/story/let-this-chart-help-you-find-the-direction-of-the-market-2016-10-26
More investors exiting equity
mutual funds (short):
Fundamental
Headlines
Yesterday’s
US economic data was mixed: weekly mortgage and purchase applications as well
as September/August new home sales combo were negative, while the September
trade deficit and the October Markit flash services PMI were better than anticipated. No international stats; but an ECB official
did make dovish comments on extension of QE.
Mohamed
El Erian on the potential December Fed rate hike (medium):
Another
opinion (medium):
Some
cognitive dissonance to the rising inflation thesis (short):
Yellen
has questions?????? (medium):
Bottom line: the
news flow was fairly benign yesterday (mixed US numbers, no international data
and [thankfully] no Fed speeches), though a roller coaster ride in oil prices seemed
to generate the most attention. That
adds little clarity to the multitude on uncertainties facing investors which
helps explain a flat market on low volume.
We seem to be stuck
in our own version of ‘Groundhog Day’; and the only out is likely a new
development in one or more areas of uncertainty; though I haven’t a clue which.
‘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 (short and a must read).
The
latest from David Rosenberg (medium)
http://www.zerohedge.com/news/2016-10-26/we-are-late-game-david-rosenberg-markets-flashing-red-signs
Investing for Survival
Why
indexers do better than average
News on Stocks in Our Portfolios
United Parcel Service (NYSE:UPS):
Q3 EPS of $1.44 in-line.
Revenue of $14.93B (+4.8% Y/Y) beats
by $200M
Revenue of $1.09B (+3.8% Y/Y) beats
by $10M.
Qualcomm
(NASDAQ:QCOM)
has agreed to buy NXP Semiconductors (NASDAQ:NXPI)
in a deal that values the chip maker at $110 a share, or $47B, including debt,
as it seeks to expand the reach of its chips from phones to cars.
The
combined company is expected to have annual revenues of more than $30B,
serviceable addressable markets of $138B in 2020 and leadership positions
across mobile, automotive, IoT, security, RF and networking
Praxair (NYSE:PX): Q3 EPS of $1.41 in-line.
Revenue of $2.72B (+1.1% Y/Y) beats
by $20M.
Economics
This Week’s Data
The
October Markit flash services index was reported at 54.8 versus the September
reading of 51.9.
September
new home sales rose 3.1% versus expectations of a 1.3% increase; however, the
August number was revised down 5.5%.
Weekly
jobless claims fell 3,000 versus consensus of down 5,000.
September
durable goods orders dropped 0.1% versus estimates of 0.2% increase; ex
transportation, they were up 0.2% versus forecasts of up 0.1%.
Other
Politics
Domestic
Quote of the day
(short):
International War Against Radical
Islam
Putin
on Syria (medium):
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