The Morning Call
1/27/17
The
Market
Technical
The indices
(DJIA 20100, S&P 2296) paused in uneven trading (Dow up, S&P down). Volume declined, but remains at elevated
levels; breadth was mixed. The VIX (10.6)
fell 1 ½ %, 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 drawing ever nearer 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 {2032-2633} and [e] in a long term uptrend
{881-2500}.
The long
Treasury was up slightly, closing below the lower boundary of a five week
uptrend, voiding that trend, 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 1%,
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, negating that trend.
The dollar rose,
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: the
Averages’ performance remain divergent with the Dow having successfully challenged
20000 but the S&P again falling short of 2300. Consensus believes that the challenge is
already over. But it is not; and until the
S&P tales out 2300, a move towards the upper boundaries of the indices long
term uptrend remains in abeyance. They maybe header higher; but the S&P isn’t
there yet.
Both TLT and GLD
have broken their counter trend rallies, pointing to further downside.
Fundamental
Headlines
Yesterday’s
US economic stats were mixed again: the December trade deficit and the leading economic
indicators were flat, the January Markit flash services PMI and the January
Kansas City Fed manufacturing index were better than expected, while weekly
jobless claims and December new home sales were disappointing.
Overseas,
fourth quarter UK GDP rose 0.6% equal to the growth rate of the prior two
quarters.
***overnight,
December Japanese CPI fell 0.2%; Greece and its creditors failed to reached an
agreement on the next step in its bailout.
Thursday
with Trump:
Not
much happening: a directive to investigate voter fraud---again with the social
policy.
Meanwhile, the tussle
with Mexico escalates.
And
Trump is now threatening a border tax to solve the problem.
Club
for Growth on the border tax (short):
http://www.clubforgrowth.org/government-spending/club-for-growth-opposes-gops-proposed-consumer-tax/
Café
Hayek on the Mexican border tax (short):
Bottom line: the
Donald slowed down his reforms yesterday but seemingly continued down the road
toward more protectionism. My hope is
that this strategy is just the way he negotiates; but until we see the outcome,
I think that it is appropriate to be concerned that he is headed in an
anti-free trade direction.
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…. 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.
More on the math
of a tax cut (short):
My best advice
is to sit back and enjoy the ride; but get up every 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.
Here is the good
news (medium):
And
the bad news (medium):
How
long will the celebration last?
My
thought for the day: the relationship between income and wealth is tenuous at
best. I know plenty of guys in the
financial community that made great money and thought that it would last
forever. So they borrowed money to
enhance their lifestyle even further. And
then the gravy train went off the tracks.
Now they will likely be forced to work well into their 70’s. I also know guys that made 50K a year, saved regularly
and are now retired comfortably on their own terms. The difference was debt.
Investing for Survival
The
most powerful force in the universe.
News on Stocks in Our Portfolios
Revenue of $967.1M (+11.1%
Y/Y) beats by $11.64M.
Revenue of $26.07B beats
by $790M.
Revenue of $8.23B (+5.4%
Y/Y) misses by $60M.
Economics
This Week’s Data
The
January Markit flash services PMI came in at 55.1 versus the prior reading of
53.4.
December
new home sales dropped 10.3% versus expectations of flat.
December
leading economic indicators were up 0.5% versus estimates of up 0.4%; the month
was revised up 0.1%.
The
January Kansas City Fed manufacturing index came in at 9 versus the revised
December reading of 9.
December durable goods
orders fell 0.4% versus projections of an increase of 2.6%; however, ex
transportation the number was +0.5%, in line.
The
initial estimate of fourth quarter GDP came in at +1.9% versus forecasts on
+2.2%.
Other
Will
Trump’s energy directives push down the price of oil (medium)?
China
imposes more strict capital control (medium):
Politics
Domestic
The State
Department’s entire senior administrative team resigns (medium):
International War Against Radical
Islam
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for Survival’s website (http://investingforsurvival.com/home)
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