The Morning Call
2/7/17
The
Market
Technical
The indices
(DJIA 20052, S&P 2292) failed to follow through on Friday’s positive
performance. While the Dow managed to
hold above 20000, the S&P remains below 2300. Volume fell considerably; breadth was mixed. The VIX (11.4) was up 3 ½ %, closing 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 was up 1 ½ %,
reestablishing a very short term uptrend and closing above its 100 day moving
average (now resistance; but if it remains there through the close on
Wednesday, it will revert to support). It ended below its 200 day moving average
(now resistance) and within a short term downtrend.
The dollar rose
fractionally and continues to trade in a 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. A
break above/below one of these levels will likely point to a directional
move. 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.
GLD
is attempting to change the complexion of its chart for the positive. If it can get some positive follow through the
Aggressive Growth Portfolio will likely initiate a one half trading position in
GDX.
Point:
Counterpoint:
Fundamental
Headlines
No
US economic data was released yesterday.
Overseas, the January Chinese Caixin services and composite PMI’s and
Japanese retail sales came in below estimates; December German factory orders
were very strong.
Overnight:
(1)
the IMF splits over Greek bailout
(2)
Chinese foreign exchange reserves drop to the lowest
level since 2011
(3)
French economic uncertainty surges to all time high
(4)
December German industrial output declined by the
largest amount in 8 years.
Aside
from the back and forth on the immigration ban, Monday with Trump was
relatively quiet. However, his critics
were not.
Larry
Summers on trade (medium):
Draghi
on Trump (medium):
Bottom line: equity
valuations remain in nosebleed territory.
The accelerant of late seems to be the possibility of aggressive new
fiscal policies (lower taxes, higher infrastructure spending) from the Trump
administration. Unfortunately, nothing
has been forthcoming of late on these campaign pledges. Even more regrettable, the Donald’s push for
tariffs and a weak dollar is not, in my opinion, good economic policy for the
US. Neither are some of the revisions to
Dodd Frank that he says that he wants which appear to weaken some of the
original rules that curbed banks’ speculative behavior and increased their fiduciary
responsibility.
If that wasn’t
enough, this article suggests that what I considered one of Trump’s best deregulation
moves, the Keystone pipeline, isn’t economically viable at current oil prices.
My point here is
that while Trump’s early days have been a whirlwind of activity, it has not all
been positive, especially those measures that more directly impact the economy
and hence corporate profits and hence stock prices. At the same time, stocks are priced for
perfection.
There is a risk
the Market may tire of aggressive dialogue in the absence of meaningful steps
to improve the economy.
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 uncertainty
president (medium):
Complacency
reigns supreme (medium):
My
thought for the day: manage risk rather than chase reward. If you have quantified the risk (I use a Stop
Loss Price), you are less likely to be panicked out of a position and be there
when the upside materializes.
Investing for Survival
Great
article on asset allocation.
News on Stocks in Our Portfolios
Revenue of $3.2B (-4.2%
Y/Y) beats by $40M.
Economics
This Week’s Data
Other
Loan
demand is declining (medium):
Update
on oil (short):
Politics
Quote
of the day (short):
Domestic
International War Against Radical
Islam
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