The Morning Call
1/11/17
The
Market
Technical
Yesterday, the
indices (DJIA 19855, S&P 2268) continued to tread water (DJIA down, S&P
unchanged). Volume was up slightly,
remaining high. Breadth weakened again. The VIX (11.5) declined slightly, closing
below its 200 day moving average (now resistance), below its 100 day moving
average (now resistance), within a short term downtrend and remains close to
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 {18429-20469}, [c] in an
intermediate term uptrend {11685-24535} and [d] in a long term uptrend
{5730-20318}.
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 {2152-2496},
[d] in an intermediate uptrend {2019-2621} and [e] in a long term uptrend
{881-2435}.
The long
Treasury declined fractionally, ending 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). It still has plenty of room to rebound before
it meets any of the multiple resistance levels or threatens to break any major
downtrends.
The latest from
Bill Gross (medium):
GLD broke with TLT,
moving higher but remaining 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). However
like TLT, it can recover significantly before threatening to challenge major
resistance/downtrends.
The dollar rose,
continuing its pattern of acting in reverse of GLD (and TLT?), finishing
considerably above multiple support levels---so it can fall a lot and not
challenge its 100 or 200 day moving averages (now support) or its short term
uptrend.
Bottom line: my
assumption continues to be that the indices will at least challenge the
20000/2300 levels. However, investors
are now facing the nasty sausage making process of implementing new policies as
less than collegial debates have begun on the budget, trade and Obamacare---which
raises the probability that I could be wrong.
Fundamental
Headlines
Yesterday’s
US economic news turned negative: month to date retail chain store sales were
disappointing while November wholesale inventories rose but primarily due to a
decline in sales.
Overseas,
December Chinese CPI rose 2.1% while PPI was up 5.5%.
Bottom line; the
headlines remain fixed on politics as Trump nominees begin the painful
congressional approval process and new policies are debated. Topping the list was the budget, Obamacare
and trade.
Trump’s
border tax (short and a must read):
When the rubber (Obamacare)
meets the road (medium):
Part III (the
budget):
Whether
this new cognitive dissonance dampens investor enthusiasm remains to be seen. Certainly, I have underestimated their
willingness to overlook fundamental negatives and as well as extremes in
valuation. Nonetheless, for long term
investors, current price levels are a gift enabling the sale of losers and paring
back in big winners.
My
thought for the day: investors
inherently prefer narrative to data---often to the detriment of their understanding.
That’s why ridiculous conspiracy theories abound, even among otherwise smart
and intelligent people, without a bit of good evidence. It’s also why we
will tend to distrust data unless and until a good story is attached to it. Unfortunately, the results are often
disappointing. Yet another reason for
doing the homework.
Investing for Survival
More
January advice.
News on Stocks in Our Portfolios
Economics
This Week’s Data
Growth
of month to date retail chain store sales was significantly lower than in the
prior week.
November
wholesale inventories rose 1.0% versus forecasts of up 0.9%; however, sales
were up only 0.4%.
Weekly
mortgage applications rose 5.8% while purchase applications were up 6.0%.
Other
Monetary
policy can’t fix a broken economy (medium):
The
economic risk of ignoring arithmetic (medium):
Labor market
index reflects slower job growth (medium):
The
impact of Fed remittances to the Treasury (medium):
Politics
Domestic
International War Against Radical
Islam
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for Survival’s website (http://investingforsurvival.com/home)
to learn more about our Investment Strategy, Prices Disciplines and Subscriber
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