The Morning Call
2/1/17
The
Market
Technical
The indices
(DJIA 19864, S&P 2278) had another down day, though they recovered nicely
off their lows. Volume increased and
remains at elevated levels; breadth was weak.
The VIX (12) was up 1%, voiding its very short term downtrend but still
closing below its 100 and 200 day moving averages (now resistance) and in a
short term downtrend.
Record short
position in the VIX (short):
Here is another record
(short):
Another
indicator (short):
One last indicator
(short):
Counterpoint:
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 {18617-20657}, [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 {2177-2520},
[d] in an intermediate uptrend {2034-2635} and [e] in a long term uptrend
{881-2500}.
The long
Treasury rose, but still closed 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 1.4%
but ended 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).
The dollar plunged,
but finished above to its 100 day and 200 day moving averages (now support) and
in a short term uptrend. However, it
continues to develop a very short term downtrend and is very near its 100 day
moving average.
Bottom line: the
Averages had another poor day. It is a
negative that they couldn’t break decisively above the 20000/2300 level but a
positive that they remain within their trading ranges dating back to mid-December. A definitive move either way would likely
provide good directional guidance. Patience.
Fundamental
Headlines
Another
not so good day for US data: the fourth quarter employment cost index was below
estimates (which could be good or bad news depending on your perspective),
month to date retail chain store sales growth was below the prior week’s number,
the January Chicago PMI and January consumer confidence were less than
anticipated.
On
the other hand, the Bank of Japan raised its 2017 forecast for GDP growth and
inflation; 2016 EU GDP growth was better than consensus while unemployment was
down and inflation up. The bad news was the
continuing stalemate on the Greek bailout problem.
***overnight, the January
Chinese manufacturing PMI was slightly below expectations while the
nonmanufacturing PMI was above; the January UK manufacturing PMI was in line.
Tuesday
with Trump:
(1)
meets with pharma executives and actually has positive
things to say,
(2)
trade advisor accuses Germany of using undervalued euro
to exploit US and its EU partners He is
right, of course; but I continue to wonder if the strategy of confrontation is
the best way to solving the problem,
(3)
supposed leaked executive order drafts outlines further
crackdown on immigrants.
(4)
cans acting Attorney General.
Bottom
line: the economy is not providing a lot
of upbeat data; and Trump’s early actions (corporate interventions, talking the
dollar down, his anti-free trade policy proposals) or lack thereof (absence of
any visibility of any tax and infrastructure plans) will likely not make conditions
any better. As I have said before, much
of this early currency/trade maneuvering may just be establishing a negotiating
position from which he intends to level a playing field that he believes has
been unfairly tilted against the US. Even
assuming that he gets everything that he wants, the Market issue is how much
damage gets done to the visibility of corporate profits in the interim.
Further, I have
presented a lot of data that argues that the math is against any massive tax
cuts or infrastructure spending measures---which were a primary reason for all
the initial euphoria about the Trump economy.
Don’t get me wrong. The tax code
can be rationalized and made fairer; but without cutting total receipts
dramatically. In addition, many of Trump’s
deregulation executive orders will undoubtedly reduce government spending which
can then be reapplied to more economically beneficial infrastructure investments. But the point here is that, in my opinion,
given the huge federal budget deficit and debt, trillions of dollars in tax
cuts and infrastructure spending is wishful thinking---and that too is apt to
be less than positively received by investors.
The upside to
reducing regulations (short):
Finally, I worry about his name calling and
other acts of incivility. I can’t
imagine that helps in making a deal or moving a controversial policy forward. It certainly does not dignify the
office. Moreover, it tends to cloud those
positive polices that he is implementing---again, not Market friendly.
Small wonder
that investors may be developing heartburn---and at valuation levels that leave
little room for error. I would continue to sell a portion of my successful positions
and get rid of my losers.
The
latest from Doug Kass (medium):
My
thought for the day: investing is risky.
Gold plunged 70% in the 1980’s and 90’s; Treasuries fell 40% from the
1950’s to the 1970’s; stocks fell over 40% in 2008/2009. Bad things happen to all assets classes
eventually. Valuations get out of whack
(2007, today?), industries change (buggy whip, telephone, computer, copier,
camera), managers fail (Ken Lay, Bernie Ebbers, Jimmy Kane) and politicians
make terrible decisions (fill in the blank).
Things just always don’t turn out as expected. Diversification, patience, an open mind and
ignoring the hype are keys to survival.
Investing for Survival
Biggest
myths in investing #1
News on Stocks in Our Portfolios
International Business Machines (NYSE:IBM) declares $1.40/share quarterly dividend, in line
with previous.
Revenue of $3.41B (+6.2%
Y/Y) beats by $80M
Revenue of $2.99B (+6.4%
Y/Y) misses by $30M
Economics
This Week’s Data
The
January Chicago PMI came in at 50.3 versus expectations of 55.3.
January
consumer confidence was reported at 111.8 versus estimates of 112.2.
Weekly
mortgage applications fell 3.2% while purchase applications were down 6.0%.
The
January ADP private payroll reported showed an increase of 246,000 jobs versus
consensus of 168,000.
Other
More
on the border tax (medium):
More
the benefits of imports versus exports (medium):
Historical
look at personal income and spending (short):
Though
there is some disagreement about spending (medium):
Politics
Domestic
The growth in
federal regulations (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.
No comments:
Post a Comment