The Morning Call
12/16/16
The
Market
Technical
Yesterday, the
indices (DJIA 19852, S&P 2262) recovered Wednesday’s drubbing. Volume remained huge; breadth improved
keeping stocks in overbought territory. The VIX (12.8) fell 3%, closing below its 200
day moving average (now resistance), below its 100 day moving average (now
resistance) and within a short term downtrend. However, it has successfully challenged a very
short term downtrend, raising the question as to loss of downside momentum. The
lower boundaries of its intermediate term trading range (10.3) and long term
trading range (9.8) are close by---both of which were set back in 2006.
The Dow ended
[a] above on its 100 day moving average, now support, [b] above its 200 day
moving average, now support, [c] in a short term uptrend {18224-20274}, [c] in
an intermediate term uptrend {11627-24477} and [d] in a long term uptrend {5720-20271}.
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 uptrend {2127-2471},
[d] in an intermediate uptrend {2004-2606} and [e] in a long term uptrend {881-2419}.
The long
Treasury (117.4) was up, but ended below its 100 day moving average (now
resistance), below its 200 day moving average (now resistance), below a key
Fibonacci level and in a very short term downtrend. However, it closed back above the lower boundary
of its short term trading range, negating Wednesday’s break.
And:
And, US
Treasuries being dumped by foreign investors (medium):
GLD (107.3) was hammered
again, finishing below its 100 day moving average (now resistance), below its
200 day moving average (now resistance), below the lower boundary of its short
term downtrend and back below a key Fibonacci level. There is not much stopping it from going to
the lower boundary of its intermediate term trading range (100.0).
The dollar was
up another 1%, back above the upper boundary of its short term trading range
(for the fourth time) for the second day.
If it remains there through the close on today, it will reset to an
uptrend. It also finished above the
upper boundary of its intermediate term trading range; if it remains there
through the close next Tuesday, it will reset to an uptrend.
Bottom line: Wednesday’s
declined may go in the record book as one of the quickest consolidations from
one of the most overbought conditions.
That reinforces my assumption that the Averages will surmount the 20000/2300
levels near term and could challenge of the upper boundaries of their long term
uptrends.
GLD and UUP returned
to more normal behavior---a strong stock market, weak GLD and strong dollar all
go hand in hand. But it also suggests
higher yields/lower bond prices, continuing TLT’s somewhat quizzical
performance.
Fundamental
Headlines
Lots
of data releases yesterday and most of it was upbeat: weekly jobless claims,
the December Philly Fed business outlook survey, the December NY Fed manufacturing
index, the December Markit flash manufacturing index, the December housing
index and the third quarter trade deficit were all better than expected. The only disappointments were the November
CPI headline and ex food and energy numbers.
Overseas,
the December EU flash manufacturing index was better than estimates while the
services index was worse.
***
overnight, China suffers failed treasury auction (medium):
Bottom line: yesterday’s
economic data was clearly a positive; but I think that the Market itself continues
to be the story. Wednesday’s Fed (more
hawkish than expected) surprise turned out to be a mere hiccup, despite the extremely
overbought condition of the Market. Most
of yesterday’s narrative was focused either entirely on whether the indices
would cross the 20000/2300 levels on that day or how the Fed’s move was not
that big a problem for stocks. To repeat
what I said yesterday: ‘At this point in time, it seems hard to
imagine anything breaking the bullish spell that has been cast over the Market.’
Goldman
warns that rising yields pose risk to stocks (medium):
My
thought for the day: investors generally more frequently remember ‘good’
outcomes (their winning decisions) than they do ‘neutral’ or ‘bad’ outcomes (their
losing decisions). That leads them to
remember all the great decisions that they made in the last six years and push memories
of 2000 and 2008 aside. Learn from your
mistakes, not ignore them.
Investing for Survival
Betting
on perfection.
News on Stocks in Our Portfolios
Revenue
of $9.07B (+0.8% Y/Y) misses by $50M
Economics
This Week’s Data
The
December Markit flash manufacturing index was reported at 54.2 versus the prior
reading of 53.9.
The
December housing market index came in at 70 versus expectations of 63.
November housing starts
fell 18.6% versus estimates of a 7.0% decline; building permits dropped 4.7%
versus forecasts of an increase of .9%.
Other
How
badly will debt laden consumers get hurt by rising interest rates? (medium)
Decline
in Chinese yuan continues (medium):
Politics
Domestic
International War Against Radical
Islam
Nassim Taleb condenses the Syrian
conflict (short):
The irony of it all (medium):
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