The Morning Call
10/4/16
The
Market
Technical
Unable to
generate a follow through to Friday’s upbeat performance, the indices (DJIA 18253,
S&P 2161) fell yesterday. Volume disappeared;
breadth was mixed. The VIX was up 2%, but
still closed below its 100 day moving average and in a short term downtrend---which
remains supportive of stocks.
Nonetheless, it is still in a very short term uptrend---a negative.
The Dow ended
[a] above its 100 day moving average,
now support, [b] above its 200 day moving average, now support, [c] within a
short term uptrend {18132-19866}, [c] in an intermediate term uptrend {11437-24282}
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 {2136-2372},
[d] in an intermediate uptrend {1952-2554} and [e] in a long term uptrend
{862-2400}.
The long
Treasury had another poor day, as Fed governors are out once again talking up a
rate hike. It remained above its 100 day
moving average and well within very short term, intermediate term and long term
uptrends. Still TLT’s chart is starting
to get a little squirrelly.
GLD fell yet again,
finishing below its 100 day moving average and within a short term trading
range. It has now made a fourth lower
high. This is not a healthy chart and it
is getting more unhealthy---not a plus for our GDX holding.
***overnight,
GLD is getting crushed. If it opens down
big, the Aggressive Growth Portfolio will Sell its GDX.
Bottom line: the
Averages edged lower on paltry volume, indicative of nothing. The momentum remains to the upside. So I continue to believe that a challenge of
the former all-time highs (18668/2194) is highly likely.
Fundamental
Headlines
Yesterday’s
US economic data was mixed: the September ISM manufacturing index and September
vehicle sales came in ahead of expectations while the September Markit
manufacturing PMI and August construction spending were below estimates.
***overnight,
the Atlanta Fed lowered its third quarter GDP growth outlook (again) to 2.2%.
Overseas, the
news was much better---both September Chinese manufacturing and
nonmanufacturing PMI’s advanced; the September EU manufacturing PMI was up
***overnight,
Japanese September consumer confidence came in above forecasts; the central
bank of India cut key interest rates.
Last
week’s headlines carried through yesterday:
More
on the OPEC production ‘cut’ (medium):
Mohamed
El Erian on Deutschebank (medium):
Bottom line: longer
term, the economic data both here and abroad provides little optimism. Last week’s upbeat US stats and mixed
overseas numbers along with yesterday’s mixed US stats and very positive
foreign numbers hardly bring that long term trend into question. Nonetheless, improvement has to start
somewhere, sometime. So I am not
dismissing this progress as irrelevant. Indeed, I acknowledge that there is an
outside chance that the US economy could be stabilizing---‘outside’ being the
operative word. It is way too soon to
seriously consider an economic rebound.
In addition to
the poor trend in data, there are a number of current and upcoming political/economic
events (OPEC, Deutschebank, Brexit, the Italian referendum and the US
elections) that could be disruptive.
Here is two
more. Patience.
Problems in the
land of the rising sun (medium):
US ends FY2016
with third largest deficit in history (medium and a must read):
I continue to
believe that the Market is giving investors a great opportunity to shift their
asset allocation to a more conservative stance (like more cash).
Update
on market valuation (medium):
My
thought for the day: mean reversion is a powerful force, both in economics and
the Market. In the case of stocks, when
multiples reach historic highs, the odds increase of a return to the norm; and
the more stretched those multiples get, the more powerful the mean
reversion. Less certain is the timing of
the process; and that is why investors get aestheticized by old adages like ‘it
is different this time’ and the ‘market climbs a wall of worry’ which are true
until they are not. Mean reversion has
always been true.
Investing for Survival
Planning
how not to lose.
News on Stocks in Our Portfolios
Economics
This Week’s Data
The
September Markit manufacturing PMI came in at 51.5 versus the August reading of
52.0.
The
September ISM manufacturing index was reported at 51.5 versus expectations of a
50.2.
August
construction spending fell 0.7% versus estimates of +0.3%.
September
vehicle sales were 17.8 million units versus forecasts of 17.4 million.
Other
Buffett
and his Wells Fargo holding (medium):
Who
is driving global growth (short)?
Negative
yield bonds now total $12 trillion worldwide (short):
Bankruptcies
pile up in restaurant industry (medium):
Politics
Domestic
Quote of the day
(short):
International War Against Radical
Islam
Syria
continues to deteriorate (medium):
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