The Morning Call
11/8/16
The
Market
Technical
The indices
(DJIA 178259, S&P 2131) rallied violently yesterday, apparently because
investors believe that Hillary will be the next president. Surprisingly, volume declined; and while
breadth improved, it was not nearly as much as I would have thought given the
substantial price rise. The VIX fell 17%,
but still closed above its 100 day moving average (now support), above its 200
day moving average (now support) and in a very short term uptrend. It did, however, fall back below the upper
boundary of its short term downtrend, voiding last Thursday’s break; and it has
started to adjust its divergent behavior viz a viz stocks.
The Dow ended
[a] right on 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 {11544-24389} and [d] in a long term uptrend
{5541-19431}.
The S&P
finished [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
{1995-2193}, [d] in an intermediate uptrend {1976-2578} and [e] in a long term
uptrend {862-2400}.
The long
Treasury declined, closing below its 100 day moving average (now resistance),
below its 200 day moving average (now resistance), below a key Fibonacci level
and in a developing a very short term downtrend. Clearly fixed income investors were not
nearly as impressed by the prospects of a Clinton presidency as equity
investors.
GLD was down 1.8%,
finishing right on its 200 day moving average and the lower boundary of its
recent very short term uptrend. So it is
near challenging the recent progress that it has made---not a hopeful sign.
Bottom line: so
much for the pathetic response to an oversold condition; although as I noted
above, yesterday’s moonshot was on declining volume and anemic breadth. Indeed, the flow of funds indicator and on
balance volume barely moved, certainly providing no clue of a 2% Market rally. On the other hand, both of the indices are
back within those trading ranges that prevailed since July; although both
remain in very short term downtrends. I
have to admit that I was surprised by the Market’s pin action yesterday; so
color me confused. As always follow
through or lack thereof will provide some clarity.
Fundamental
Headlines
No
economic news either here or abroad yesterday; though we did get the latest
consumer credit numbers and they weren’t all that positive.
Auto
and student loans hit all time high (short):
***overnight,
October EU corporate profits declined, German industrial output fell, UK
factory output rose and Chinese exports declined,
China
replaces reform minded finance minister (medium):
Really
yesterday’s only story was the weekend news that Comey announced that there was
nothing new in any of the recently discovered Clinton/Weiner emails. That sparked a ‘thank God it is Clinton’
rally which is about the only thing in the print, internet and television media
coverage yesterday.
Bottom
line: I am baffled that a group of folks whose livelihood is at least partially
defined by corporate profits could be wee weeing in the pants at the prospect
of a Clinton presidency. You may love
her social policies; but she is very likely to be deleterious to earnings. That said, Wall Street has prospered
enormously under a democratic administration for the last eight years (despite
lousy corporate profitability); and it is likely that they are anticipating
more of the same. Good for them; but not
for you, me and most of the rest of the country. Sooner or later, that is likely to end.
Some
pundits are saying that yesterday’s rally was because of increased
certainty. So let me get this straight,
investors are happy because there is certainty that the taxes are going up,
government regulations are going up and the balance in the Supreme Court could
be altered for a generation.
Clearly, the
bond guys weren’t that enthralled. I am assuming because they believe that
government debt and inflation are probably going up---which incidentally haven’t
been all that great for profits or P/E’s historically.
This
is not to say that stock prices won’t go higher. After all, they have achieved ridiculous
heights on lousy economic growth, declining earnings, soaring debt levels; so
there is no reason that trend won’t continue.
Take the current
opportunity to build your cash position by lightening up on your winners and
selling your losers.
My
thought for the day: another bad habit of investors is to prepare for the last
thing that happened as opposed to what is going to happen next. For instance, many investors believe that since
stock prices skyrocketed in a period of QE, more government spending and more
government regulation, that they are sure to continue to soar under the same
circumstances. The joke is that nothing
goes on forever and this time is never different.
Investing for Survival
How
to find the good in a nasty election cycle.
News on Stocks in Our Portfolios
Economics
This Week’s Data
The
October small business optimism index was reported at 94.9 versus expectations
of 94.3.
Other
The
latest from Alan Greenspan (medium):
Fed’s
jobs indicator flashes recession (medium):
The
latest on OPEC (production cuts) (medium):
Politics
Domestic
The legacy of
Obama’s Department of Justice (medium):
International
US/Russian tensions continue to rise
(medium):
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