The Morning Call
12/14/16
The
Market
Technical
The indices
(DJIA 19911, S&P 2271) moved higher yesterday, again on big volume and
improving breadth. The VIX (12.7) moved
up fractionally, but remained below its 200 day moving average (now resistance),
below its 100 day moving average (now resistance) and within a short term downtrend.
It stayed right on the upper boundary of
that very short term downtrend. A finish
above that boundary would indicate the potential 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 {18192-20242}, [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 {2123-2467},
[d] in an intermediate uptrend {2002-2604} and [e] in a long term uptrend {881-2419}.
The long
Treasury (118.47) rose slightly, but still 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 remained above the lower boundary
of its short term trading range, avoiding for the moment a challenge of that level
(117.3).
And:
GLD (110.4) was
up fractionally, but still closed 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
lower.
The dollar rose
slightly, but remained below the upper boundary of its short term trading range
(for the third time), keeping us all in suspense about whether it can successfully
challenge that boundary. Failure to do
so would be a plus for US companies with global operations.
Bottom line: it
sure looks like the Averages are zeroing in on another set of round numbers
(20000/2300). I have little doubt that
those levels will be reached given seasonal factors along with institutional
investors being underinvested and all investors being unwilling to sell until
next year because of the anticipated changes in the tax code. That said, time is running out on the indices
continuing to advance while in extremely overbought territory. That is not too say, there couldn’t be a
sharp correction followed by another moonshot through year end. Further, I think it likely that they will
attempt a challenge of the upper boundaries of their long term uptrends---but
that will prove unsuccessful.
Unlike stocks,
TLT, GLD and UUP seem to have halted their earlier strong directional moves which
raises the question are they or are stocks the leading indicator?
Fundamental
Headlines
Yesterday’s
US economic data was good: month to date retail chain store sales and the November
small business optimism index were upbeat but November import and export prices
were down less than forecast.
***overnight,
Wells Fargo failed a key financial test for the second time.
Overseas,
(1) November
Chinese retail sales and industrial output came in above expectations while
fixed asset investment was in line. At
the same time, a Chinese official acknowledged that its economic data contained
made up stats,
(2)
Italy’s largest bank said in would lay off 14,000
workers and raise E13 billion in new capital. In addition, Moody’s cut its outlook for Italian
banks to negative (medium):
(3)
on the heels of the OPEC production cut agreement, China
announced that it was ramping up oil production by most in three years (short):
***overnight, November
Japanese business sentiment rose for the first time in 18 months; having
suggested last week that it may begin tightening, the Bank of Japan stepped up
its bond buying program; November UK employment fell.
Bottom
line: the Market has become the story; the latest chapter being everyone
eagerly anticipating Dow 20000 and S&P 2300---which now seems inevitable. No one appears to be paying much attention to
events or the stats. Although, it will
be interesting to see how today’s statement and press conference following this
week’s FOMC meeting are received. That
said, everything is awesome, so I see no reason why these wouldn’t be.
My thought for the
day: wishful thinking occurs when people are too optimistic;
wanting to see things in a positive light.
It can distort perception and objective thinking. Just because you
really, really, really want your investment to appreciate, doesn’t mean it
will.
Investing for Survival
Diversification
is no fun.
News on Stocks in Our Portfolios
Economics
This Week’s Data
Month
to date retail chain store sales grew more than in the prior week.
Weekly
mortgage applications fell 4.0% while purchase applications were down 3.0%.
November
PPI was up 0.4% versus expectations of up 0.2%; ex food and energy, it was up
0.4% versus forecasts of up 0.2%.
November
retail sales rose 0.1% versus consensus of +0.4%; ex autos, they increased 0.2%
versus projections of +0.4%.
Other
The
history of a unified GOP government. Something
to think about (medium):
New
approach of corporate tax policy has house GOP support (medium):
In
eight months the ECB balance sheet will equal the Fed’s (short):
Politics
Domestic
A review of
Federalist 68 (the electoral college) (medium):
International War Against Radical
Islam
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