The Morning Call
10/26/16
The
Market
Technical
The indices
(DJIA 18169, S&P 2143) once again couldn’t muster any follow through---this
time to the upside. Volume fell; breadth
weakened. The VIX was up 4%, closing below
its 100 day moving average and in a short term downtrend---which remains
supportive of stocks. It bounced off the
lower boundary of its very short term uptrend; its sixth higher low. This is not a plus for stocks and 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] closed right on its 100 day moving average, now resistance; I am
putting Monday’s break above this MA on hold and let today decide if the break
is confirmed or negated, [b] above its 200 day moving average, now support, [c]
within a short term trading range {1995-2193}, [d] in an intermediate uptrend
{1968-2570} and [e] in a long term uptrend {862-2400}.
The long
Treasury was up fractionally, ending below its 100 day moving average and is
developing a very short term downtrend.
However, it seems to have found support at a key Fibonacci level and,
more importantly, remains in short, intermediate and long term uptrends. It remains sound on a long term basis but is
still struggling.
What a 1% rise
in interest rates would mean (short):
GLD rose, but finished
below its 100 day moving average (resistance) and within a short term downtrend. The good news is that it ended back above its
200 day moving average, negating Friday’s break (now support) and continues to
hold above a key Fibonacci level. A ray
of hope.
Bottom line: the
indices inability to put together either a winning or losing streak continues
to confirm my observation that they remain at an inflection point. The only possible directional signal is the
VIX making its sixth higher low of a very short term uptrend. I would not be betting money on it; but it is
something to watch. Patience.
Which
way could it break (medium)?
Insider
buying drops to five year low (short):
Fundamental
Headlines
After
a good data day on Monday, yesterday was a disappointment: month to date retail
chain store sales growth slowed, October consumer confidence fell, the October
Richmond Fed manufacturing index was negative and the August Case Shiller home
price index was flat.
Better
news overseas: October German business confidence was above expectations; the
EU approved a new E2.3 billion package of financial aid to Greece.
Yesterday
was a big earnings report day; net, net the results were mixed. However, in total to date, earnings are now
up slightly---which if this trend held would break a string of four quarters of
down profits. If that occurs, it clearly would be a positive. However, we are still relatively early in the
process.
Here
is some reading on topics that are increasingly a part of the current Market
narrative:
Elections
impact the Market much less than you think (short):
Investors
aren’t ready for the pickup in inflation (medium):
Russia
apparently against oil production cuts (medium):
$8
billion pulled from Deutschebank ETF unit (medium):
Bottom line: the
trend in US economic stats has not really improved; however, after a couple
weeks of mixed data, the international numbers have been pretty good this week;
and perhaps best of all, this earnings season may be headed for a positive
showing. Offsetting that are rising concerns
about inflation, rising odds of a December Fed rate hike and an OPEC production
cut is far from a forgone conclusion.
Judging by the
pin action, none of this has provided enough clarity to resolve the current
price impasse. But as I said last week, ‘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.
My
thought for the day: One of the biggest
problems for most investors is the timing of their sales. Many they think that they will ‘know’ when to
Sell but have no firm discipline upon which to make that decision. One of the lessons that they never seem to
learn is that when a stock or Market turns, only one guy gets out
unscathed---and the odds are enormous that it won’t be the investor. Another rationale for developing our Sell
Discipline is to force a Sale as the stock is rising; in other words, Selling
when I can and not when I have to.
Investing for Survival
The
long term is nothing but a succession of a bunch of short terms (must read):
News on Stocks in Our Portfolios
International Business Machines (NYSE:IBM) declares $1.40/share quarterly dividend, in line
with previous.
Canadian National Railway (NYSE:CNI) declares C$0.375/share quarterly dividend,
in-line with previous
Revenue of $941.9M (+8.8% Y/Y) beats
by $10.24M
Revenue of $3.36B (-1.8% Y/Y) beats
by $30M.
Revenue of C$3.01B (-6.5% Y/Y) beats by C$660M.
Revenue of $7.73B (-3.3% Y/Y) misses
by $180M
Revenue of $23.9B (-7.5% Y/Y) beats
by $260M
Revenue of $10.63B (-7.0% Y/Y) beats
by $90M
Economics
This Week’s Data
Month
to date retail chain store sales were much lower than in the prior week.
The
August Case Shiller home price index was up 0.2%, in line.
October
consumer confidence came in at 98.6 versus estimates of 101.0.
The
October Richmond Fed manufacturing index was reported at -4 versus a reading of
-8 in September.
Weekly mortgage applications
fell 4.1% while purchase applications declined 7.0%.
The
September US trade deficit was $56.1 billion versus forecasts of $60.5 billion.
Other
Figuring
home resales (medium):
More
on student loans (medium):
Politics
Domestic
The politics of
rage (medium):
International War Against Radical
Islam
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for Survival’s website (http://investingforsurvival.com/home)
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