The Morning Call
1/24/17
The
Market
Technical
The indices
(DJIA 19799, S&P 2265) were off yesterday, but continued to trade within
the tight range dating back to mid-December.
Volume fell, but remains at elevated levels; breadth was mixed. The VIX (11.8) rose 2%, closing below the upper
boundary of a very short term downtrend, near its 100 and 200 day moving
averages (now resistance) and in a short term downtrend.
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 {18523-20563}, [c] in an
intermediate term uptrend {11708-24558} 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 {2165-2508},
[d] in an intermediate uptrend {2028-2629} and [e] in a long term uptrend
{881-2435}.
The long
Treasury rallied, remaining in a five week uptrend; however, it closed 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 rose, 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)---but also finished in a very short term uptrend.
The dollar fell,
finishing above its 100 or 200 day moving averages (now support) and in a short
term uptrend. However, it continues to develop
very short term downtrend and is approaching its 100 day moving average.
Bottom line: the
Averages continued their aimless meandering of the last five weeks, ending within
the recent very tight trading range. There
does seem to be some cognitive dissonance creeping into the Market narrative,
questioning the rapidity and magnitude of any Trump fiscal/regulatory
reforms. However, that isn’t generating
a lot of selling, suggesting that, at least to date, investor optimism has yet
to be dampened. My assumption that the indices will challenge
the 20000/2300 level remains intact.
Fundamental
Headlines
There
were no economic releases either here or abroad yesterday.
***overnight,
the January Japanese Markit flash manufacturing PMI was up versus its December
reading; the Turkish lira continues to crash.
As
expected, the Donald got busy issuing executive orders. The two most impactful being---the freeze on
federal hiring and action on TPP and NAFTA (medium):
Bottom line: the
Donald got off to a decent start in implementing the promised change, although
one of his three executive orders dealt with a more protectionist US trade
policy---which, as you know, I think is economically unsound and not
pro-growth. In addition, the Secretary
of Treasury tried to talk down the dollar.
So I am not particularly impressed with this start. Of course, this was only one day; so it is
hard to draw conclusions.
Longer term, what I want to know is how new
fiscal/regulatory policies will impact corporate profits and P/E’s (interest
rates). My task is to quantify the effect
of Trump’s (hopefully) new economy and build it into our Models. Unfortunately, at this time, when I plug in
many of the optimists’ assumptions about the impact of Trump policies on
corporate earnings, our Valuation Model doesn’t produce a Fair Value that comes
close to current price levels. Hence, I will continue to Sell Half of any stock
that reaches its Sell Half Price and any company that fails to meet the minimum
fundamental criteria for inclusion in our Universe.
The
latest from Mohamed El Erian (medium):
My
thought for the day: I spend a lot of time and energy analyzing economic and
political developments. But at no time
have I ever concluded than one or a series of factors was a reason to trade a
stock or alter our Portfolios holdings.
The purpose is to provide increased understanding on how the world/equity
valuations work.
Our Buy/Sell parameters
are determined by our Valuation Models which are, in turn, heavily influenced based
on historical relationships and change very slowly over time. All you have to do is read my comments to
know that the 24 hour news cycle has little impact on our investment
strategy. Indeed, I could summarize all
the daily notes from the last two years in one sentence: the
economy is sluggish but stocks are getting ahead of themselves as a result of
irresponsible central bank monetary policy.
That was all you needed to know.
Investing for Survival
Averaging down.
News on Stocks in Our Portfolios
Revenue of $7.33B (+0.4%
Y/Y) in-line
Revenue of $4.54B (flat
Y/Y) misses by $10M
Revenue of $18.11B (+1.7%
Y/Y) misses by $170M.
Economics
This Week’s Data
The
January Markit flash composite PMI came in at 54.3 versus December’s reading of
54.4.
Other
Why
inflation won’t last (medium):
And
why the growth rate of GDP is unlikely to increase (medium):
World
trade has grown less than 1% annually since 2007 (short):
The
cost of regulatory compliance (medium):
Update
on auto loans (short):
Politics
Domestic
International War Against Radical
Islam
Iran
caught smuggling anti-tank missile systems in direct violation of numerous
agreements (short):
Visit Investing
for Survival’s website (http://investingforsurvival.com/home)
to learn more about our Investment Strategy, Prices Disciplines and Subscriber
Service.
No comments:
Post a Comment