The Morning Call
2/23/17
The
Market
Technical
The indices
(DJIA 20775, S&P 2367) turned in a mixed day (Dow up, S&P down)---not
that unusual for an overbought Market.
Volume fell, but remained at a high level; breadth was very strong. The VIX (11.7) was up slightly, but finished
below its 100 and 200 day moving averages (now resistance) and in a short term
downtrend but is near the lower boundary of its intermediate term trading range
(10.3)---leaving complacency at a near record high level.
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 {18804-20862}, [c] in an
intermediate term uptrend {11788-24632} and [d] in a long term uptrend {5751-23298}.
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 {2198-2541},
[d] in an intermediate uptrend {2050-2651} and [e] in a long term uptrend
{881-2561}.
The long
Treasury rose, continuing the process of building a pennant formation, but remained
in a very short term downtrend, near the lower boundary of its short term
trading range and below the 100 day moving average (now resistance), falling
further below its 200 day moving average (now resistance).
GLD was up
fractionally, but closed within a very short term uptrend and above its 100 day
moving average (now support). It
finished below its 200 day moving average (now resistance) and within a short
term downtrend.
The dollar fell,
ending above its 100 day moving average (now support), its 200 day moving
averages (now support) and in a short term uptrend.
Bottom line: yesterday’s
rest by the Averages was pretty benign in the midst of a very overbought
condition. Remember that they did
exactly the same thing the last time this occurred; that is, prices
consolidated by going sideways in a very narrow range for a time instead declining. That suggests to me that there remains
underlying strength in the Market and that the assumption has to be that the
Averages are on their way to challenging the upper boundaries of their long
term uptrends.
This
week in charts (medium):
Fundamental
Headlines
Yesterday’s
US economic data releases were upbeat: January existing home sales were well
ahead of forecast, month to date retail chain store sales growth was above the
prior week but weekly mortgage and purchase applications were disappointing.
Overseas,
the stats are bouncing back from last week’s lousy numbers: fourth quarter UK
GDP growth was revised higher; February German business confidence was better
than expected; January EU inflation was less than anticipated.
***overnight,
EU and ECB are at odds over Monti Dei Paschi rescue; IMF told Greece that it
must make further structural changes before assistance can be provided.
Under
the Wednesday with Trump category, the Donald stated that the budget deficit
was out of control. While I wholeheartedly
support that notion, it also reinforces the ‘math’ problem which I have been
discussing for months, i.e. you can’t cut taxes, increase spending and reduce
the deficit simultaneously. There are,
of course, ways of dealing with the issue like cutting taxes for one constituency
while raising them for another (think border tax), reducing current government
spending in order to pay for new spending measures or the time proven strategy
of saying one thing (cutting taxes, increasing spending and balancing the
budget) and doing another (pretend that you are cutting taxes and increasing
spending but you don’t or cut taxes, increase spending and vastly expand the
deficit). Any combination of the above
could happen but I don’t see the kind of positive economic results about which
investors are so jiggy.
The
minutes from the last FOMC minutes were released. Again, the Fed did its usual masterful job of
its ‘on the one hand, on the other hand’ dialectic but reaching no
conclusion. The media read those minutes
as being more hawkish. But those with money
at stake had a different take: TLT was up, the dollar was down and gold was
up---all indicative of lower not higher interest rates. In short, no one with skin in the game
believes a word out of the Fed because it has no idea what to do. This is a good summary of the minutes:
Bottom line: we
wait for an economic plan, an Obamacare repeal and replace plan, a possible re-do
of Dodd Frank and multiple re-sets of trade treaties. At this moment, investors are basing their
buy/sell decisions on leaks, rumors and suppositions. Not that possible positive outcomes shouldn’t
be taken into consideration in valuing equities. But stocks are at all-time highs, suggesting
that they are priced for perfection.
Read the below links carefully.
Mnuchin
throws cold water on tax plan happy talk (short):
Update
on expected S&P earnings (short):
The
economy, earnings and stock prices---another must read from Jeffrey Snider (medium):
My
thought for the day: a stock doesn’t know you own it, any more than Jennifer
Lawrence knows that you think that she is hot.
Successful investors maintain an emotional detachment from what they
own. If you love a stock, it will not
love you back and will not reward you for loving it. That is the whole point of having a Stop Loss
Price for every stock in your portfolio---a specific price, written down on paper
that you look at every day.
Investing for Survival
Consistency
and self-delusion
News on Stocks in Our Portfolios
Revenue of $2.28B (-0.4%
Y/Y) in-line.
Economics
This Week’s Data
Weekly
mortgage applications were down 2.0% while purchase applications fell 3%.
January
existing home sales rose 3.3% versus expectations of up 1.1%.
Month
to date retail chain store sales growth was slightly faster than in the prior week.
Weekly
jobless claims rose 6,000 versus forecasts of a 5,000 increase.
The
January Chicago Fed national activity index came in at -0.5 versus the December
reading of +0.18.
Other
Lies,
damn lies and statistics (short):
Will
China’s housing bubble pop? (medium):
The cost of a
complete crackdown on immigration (short):
Politics
Domestic
The Dodd Frank
fiduciary rule (medium):
Why governments
leak information (short):
International War Against Radical
Islam
Visit Investing
for Survival’s website (http://investingforsurvival.com/home)
to learn more about our Investment Strategy, Prices Disciplines and Subscriber
Service.
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