The Morning Call
2/8/17
The
Market
Technical
The indices
(DJIA 20090, S&P 2293) inched higher yesterday; and while the Dow closed above
20000, the S&P remained below 2300.
Volume fell again; breadth was modestly better. The VIX (11.3) was down, finishing 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).
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 {18655-20695}, [c] in an
intermediate term uptrend {11740-24592} 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 {2182-2525},
[d] in an intermediate uptrend {2038-2639} and [e] in a long term uptrend
{881-2500}.
The long
Treasury was up slightly, 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 slipped, closing
within a very short term uptrend and above its 100 day moving average (now
resistance; but if it remains there through the end of trading today, it will
revert to support). It finished below its 200 day moving average
(now resistance) and within a short term downtrend.
The dollar rose
fractionally, breaking above the narrowing range bounded by the 100 day moving
average (now support) on the downside and the upper boundary of its very short
term downtrend on the upside. It is
still above 200 day moving averages (now support) and in a short term
uptrend.
Bottom line: the
indices continue to battle the 20000/2300 levels. Until the S&P can cross the 2300 barrier,
I think the upside in stocks in general is limited.
The
dollar joined GLD in challenging resistance levels. Both set up for moves to the upside. However, they tend to move in opposite
directions; so this pin action is a bit confusing. Indeed, it worries me enough that I am going
to wait before taking a GDX position.
Fundamental
Headlines
The US economic
dataflow yesterday was upbeat: the December US trade deficit was slightly less
than expected, month to date retail chain store sales rose dramatically and December
consumer credit grew less than forecast.
Overseas, there
was only one stat released; however, news was aplenty: December German
industrial output fell, French economic uncertainty soared, Chinese foreign exchange
reserves declined and the IMF is fighting internally over the Greek bailout. Clearly, nothing good.
Tuesday with
Trump was another quiet day. Although
the debates continue over many of his new policies.
More on the
‘border adjustment’ tax (medium):
The
Fiscal Times on the economic impact of Trump policies (medium):
And still more (medium):
The
problem with Dodd Frank is not its restraint on lending (medium):
John
Mauldin on tax reform (long but a very good read):
What
the Fed (and Draghi) have accomplished (short):
Bottom
line: the news flow remains dominated by politics (DeVos approval, immigration
ban), the potential economic effects of several of Trump’s proposals (border
tax, Dodd Frank) and the hints of things to come (drug pricing, taxes). Given the many uncertainties associated with
each of these issues, it is amazing that investors are focused solely on the
potential good while ignoring those that would penalize the economy.
Of course, they
have been doing that for the past two years; so why should things change? And the answer is that they won’t until they
do. The Market, fed by a historically
unprecedented expansion in global money supply (i.e. piles of cheap money), has
had the luxury of not worrying about the negatives. As a result, stocks are priced for perfection
where perfection doesn’t exist. That
doesn’t mean this party can’t go on. But
at some point, this fairy tale is going to end.
And when it does, I, for one, will be happy with a 50% cash position,
generated by selling a portion of my winners and all of my losers.
My thought
for the day: legendary trader Jesse
Livermore is quoted as saying
“It never was my thinking that made the big
money for me. It always was my sitting”.
In other words, doing nothing is one of the best strategies for making
money. That is why I have two Sell
Prices (Stop Loss and Sell Half) for each stock in my Portfolios. Unless the stock hits one of those two
prices, I sit. And even if the stock
appreciates sufficiently to meet its Sell Half Price, I only Sell Half (as the
name implies Sell Half)---which allows me to sit even more/longer.
Investing for Survival
This
is why you need an investment process.
News on Stocks in Our Portfolios
3M Company (NYSE:MMM) declares $1.175/share quarterly dividend, 6%
increase from prior dividend of
$1.11.
Economics
This Week’s Data
The
December US trade deficit was $44.3 billion versus expectations of $45.0
billion.
Month
to date retail chain store sales rose dramatically from the prior week.
December
consumer credit grew by $14.2 billion versus estimates of $20.0 billion;
however, student and auto loans continued to soar.
Weekly
mortgage applications rose 2.3% while purchase applications were up 2.0%.
Other
Politics
Domestic
Why we need
school choice (medium):
The latest from
Nassim Taleb (medium and a must read):
Trump now taking
on the judiciary (medium):
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
Service.
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