The Morning Call
11/15/16
The
Market
Technical
Another mixed
day for the indices (DJIA 18868, S&P 2164)---Dow up, S&P flat, NASDAQ down. Volume
declined; breadth continued to improve, though it pushed further into
overbought territory. So a correction near term should be expected. The VIX rose 2 ½%, closing below its 100 day
moving average (now resistance), back above its 200 day moving average (now
support) and within a very short term uptrend.
If that trend holds, then stocks will likely have seen their best days.
The Dow ended
[a] above on its 100 day moving average, now support, [b] above its 200 day
moving average, now support, [c] above the upper boundary of its short term
trading range for the third day, resetting to an uptrend {17943-20000}, [c] in
an intermediate term uptrend {11544-24389} and [d] in a long term uptrend
{5541-19431}.
The S&P
finished [a] above its 100 day moving average , now support, [b] above its 200
day moving average, now support, [c] within a short term trading range
{1995-2193}, [d] in an intermediate uptrend {1983-2585} and [e] in a long term
uptrend {862-2400}. However, it still
has a way to go before it challenges its all-time high.
The long
Treasury had another down day on big volume, closing below its 100 day moving
average (now resistance), below its 200 day moving average (now resistance),
below a key Fibonacci level, in a developing a very short term downtrend, in a
short term trading range and below the lower boundary of its intermediate term
uptrend for a fourth day, resetting to a trading range.
End
of the bond bull market? (medium):
Stock/bond
correlation (short):
GLD got pounded
again also on heavy volume, finishing below its 100 day moving average (now
resistance), below its 200 day moving average (now resistance) and in a short
term downtrend. Uglier and uglier.
Bottom line: the
Dow reset its short term trend to up, though the S&P hasn’t risen at the same
pace and is still a fair distance from its all-time high. Two takeaways: (1) stocks are overbought; so some
consolidation is to be expected and (2) the major indices are now in divergent
short term trends. That leaves the
Market trendless and it will remain so until the indices are once again in
confirmation.
Meanwhile, bonds
and gold continue to get beaten like a rented mule. The pin action in bonds is a bit concerning
because the worse it gets, the more impactful it will be on the equity discount
factor.
Fundamental
Headlines
No
US datapoints released yesterday, though overall this week will be a busy
one. Overseas, the stats remain
disappointing: third quarter Japanese GDP came in ahead of estimates while
household spending and capital investment were flat; October Chinese retail
sales and industrial output were below expectations while fixed asset investment
was in line. In addition:
Italian
bond yields up ahead of referendum (medium):
Yuan
continues to crash (short):
***overnight,
third quarter EU GDP grew 0.3%, in line with a recently downwardly revised
estimate; German GDP was below forecasts; UK inflation was below expectations;
OPEC is making another diplomatic effort to reach an agreement on production
cuts.
The
name of the game continues to be mulling over what a Trump presidency means and
with it some cognitive dissonance is appearing at the margins.
Goldman
throws cold water on post-election euphoria (medium):
Bottom
line: I have beaten the Trump election/GOP sweep election to death in the last
week. If you didn’t read the last
Closing Bell, it summarizes all the pros and cons. The abridged edition is (1) some of the Trump
initial proposals, if they are passed, should have a positive impact on the
economy, (2) some should not, (3) overall, the net effect will likely be a plus
and I will have to revise our forecast to reflect it, (4) however, the economy
is not the issue, (5) the issue is the gross overvaluation of equities courtesy
of an irresponsibly easy Fed, (6) while an improved earnings outlook may be
help that problem, a higher discount rate [higher interest rates/lower P/E]
should be a counterpoint, (7) the net being, stocks will still be overvalued.
If
you haven’t already, I would build your portfolio’s cash position by selling a
portion of those stocks that have performed well and all of your losers.
My
thought for the day: if during Market
corrections/collapses/drops/freefalls you can summon the courage to buy stocks
when your stomach says sell, you will find opportunities that you wouldn’t have
thought you would ever see. Of course,
the precondition for buying at the low, is to have the cash with which to do
the buying; and that means doing some selling when stock prices are high.
Investing for Survival
How
we view our world creates it.
News on Stocks in Our Portfolios
·
Revenue of $5.56B
(+15.4% Y/Y) misses by $190M.
·
Revenue of $23.15B
(+6.1% Y/Y) beats by $110M.
Economics
This Week’s Data
October
retail sales rose 0.8% versus expectations of up 0.6%; ex auto they were up
0.8% versus projections of up 0.5%.
The
November New York Fed manufacturing index came in at +1.5 versus estimates of
-2.3.
October
US import prices rose 0.5% versus forecasts of up 0.4% while export prices were
up 0.2% versus consensus of up 0.1%
Other
Update
on auto loans (short):
Politics
Domestic
Former Goldman
banker recommended for Secretary of Treasury (medium):
Thoughts on the
electoral college (short):
International
Trump and Putin talk (short):
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