The Morning Call
1/26/17
The
Market
Technical
The indices
(DJIA 20600, S&P 2298) soared again, pushing the Dow above the magic 20000
mark. Volume was flat, but remains at elevated levels; breadth improved. The VIX (10.8) fell another 2%, closing
below the upper boundary of a very short term downtrend, below its 100 and 200
day moving averages (now resistance), in a short term downtrend and is once
again nearing the lower boundary of its intermediate term trading range (10.3).
The Dow ended
[a] above its 100 day moving average, now support, [b] above its 200 day moving
average, now support, [c] in a short term uptrend {18560-20600}, [c] in an
intermediate term uptrend {11708-24558} and [d] in a long term uptrend
{5730-20736}.
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 {2169-2512},
[d] in an intermediate uptrend {2030-2631} and [e] in a long term uptrend
{881-2500}.
The long
Treasury fell 1 ¼ %, closing below the lower boundary of a five week uptrend,
in a very short term downtrend, in a short term trading range and below the 100
day moving average (now resistance), falling further below its 200 day moving
average (now resistance).
GLD declined
fractionally, ending in a short term downtrend and below its 100 day moving
average (now resistance) which continues to push further below its 200 day
moving average (now resistance) and finished below a very short term uptrend (if
it closes there today, that trend will be negated).
The dollar dropped,
finishing above its 100 or 200 day moving averages (now support) and in a short
term uptrend. However, it continues to develop
a very short term downtrend and is near its 100 day moving average.
Bottom line: clearly
the challenge is on with the Dow mounting 20000 but the S&P falling short of
2300. It seems like the universe
believes that the challenge is already over.
It maybe; but the S&P isn’t there yet. If the challenge is successful, there is no
resistance for the indices between 20000/2300 and the upper boundaries of their
long term uptrends. I don’t believe a
challenge of those boundaries will be successful. But first things, first; let’s get through
20000/2300.
TLT, GLD and UUP
were all down, once again sending a mixed message.
Fundamental
Headlines
Only
one US datapoint yesterday: weekly mortgage and purchase applications were up.
Overseas,
December Japanese exports were the highest in the last 15 months; January
German business confidence was less than expected.
***overnight,
fourth quarter UK GDP rose 0.6% equal to the growth rate of the prior two
quarters.
Wednesday
with Trump:
(1)
signs executive order to build wall on southern border,
(2)
signs executive order to strip federal grant money from
sanctuary cities
Both were part
of the Donald’s campaign pledges; but they both have more social than economic implications. I try to avoid social commentary; the only
thing I will observe is that as long as Trump continues to fulfill his
promises, irrespective of their impact on the economy or corporate profits,
investors are likely to view them as a plus for the Market.
That said, I am going
to continue to hammer on a problem that Trump is creating---protectionism:
Protectionism
brings misery (medium):
More thought on the
subject (short):
How Trump’s China bashing
fits into this problem (medium and a must read):
And one that he
didn’t create: the federal debt. Like it
or not, he still has to deal with it.
Obama’s deficit
legacy (medium and a must read):
And how it will affect
Trump’s fiscal flexibility (medium):
The problem with
the normalization of interest rates (short and a must read):
Bottom line: the
Donald again acted to fulfill yet another campaign promise; and that, in
itself, seems to be the fuel driving stock prices higher. Whether or not you appreciate this change in
the social/political direction of this country, it nevertheless seems to be
welcomed by the investor class as a whole.
It is a bit puzzling to me that the policies being followed, to
date, having the greatest economic implications are negative. I am not going to beat on the corporate
intervention, talking the dollar down and free trade themes again. But that doesn’t mean that they aren’t
there. Further, as the above budget
discussion suggest, the math of lower taxes and higher infrastructure spending doesn’t
work with a federal debt and budget deficit of the current magnitude. How Trump and the GOP address this issue will
say more about the economy and corporate profits in the next five years than
anything else that has or will be done.
Here is the good
news (medium):
My best advice
is to sit back and enjoy the ride; but get up morning and remind yourself that
the most optimistic earnings and discount factor numbers don’t get stocks to
current valuations. So caution is
advisable for all but the nimble traders.
Investing for Survival
Extrapolating
without analyzing.
News on Stocks in Our Portfolios
Revenue of $3.4B (+3.7%
Y/Y) misses by $10M.
T. Rowe Price (NASDAQ:TROW): Q4 EPS of $1.21 may not be comparable
to consensus of $1.43.
Revenue of $1.09B (+3.8%
Y/Y) misses by $10M
Revenue of $9.57B (-13.2%
Y/Y) misses by $270M.
Revenue of $2.78B (+6.9%
Y/Y) beats by $90M.
Praxair (NYSE:PX) declares $0.7875/share quarterly dividend, 5%
increase from prior dividend of
$0.75.
Praxair (NYSE:PX):
Q4 EPS of $1.41 in-line.
Revenue of $2.64B (+1.5%
Y/Y) misses by $30M.
Revenue of $6B (+4.0% Y/Y) misses
by $120M.
AT&T (NYSE:T): Q4 EPS of $0.66 in-line.
Revenue of $41.8B (-0.8%
Y/Y) misses by $240M.
Economics
This Week’s Data
The
December US trade deficit was $65 billion versus expectations of $65.5 billion.
Weekly
jobless claims rose 22,000 versus estimates of up 12,000.
The
December Chicago national activity index was reported at .14 versus the prior
reading of -.33.
Other
House
flippers are back at again (short):
Politics
Domestic
International War Against Radical
Islam
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