The Morning Call
2/22/17
The
Market
Technical
The indices
(DJIA 20743, S&P 2365) continue their relentless advance. Volume fell, but remained at a high level;
breadth was very strong and is now in overbought territory. The VIX (11.5) 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.
Hedge
find liquidity plunges (medium):
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 {5730-23298}.
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 declined and is in the process of building a pennant formation,
meaning a near term directional issue is in the process of being resolved. That said, the majority of its technical levels
point down. It 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. As I pointed out
yesterday, it is trying reverse what has been a lousy chart for the last six months
The dollar rose,
ending above its 100 day moving average (now support), its 200 day moving
averages (now support) and in a short term uptrend.
Bottom line: with
the S&P’s successful challenge of its 2300 level, the assumption has to be
that the Averages are on their way to challenging the upper boundaries of their
long term uptrends.
A positive January
indicator trifecta produces excellent results (short):
The long bond
and the dollar trade as though the economy will see a significant pickup in
growth and the Fed will have to adopt a tighter stance on monetary policy. I am not quite there given the economy’s
erratic progress along with the fact that the Fed is in a perpetual state of
confusion and indecision. In addition,
GLD seems to be telling a different story (higher interest rates and a strong
dollar usually are negative for GLD).
Fundamental
Headlines
Only
one US economic datapoint was released yesterday: the February Market flash
manufacturing PMI came in below estimates.
On the other hand, the February EU Markit composite, manufacturing and
services PMI’s were ahead of expectations.
***overnight,
fourth quarter UK GDP growth was revised higher; February Geman business
confidence was better than expected; January EU inflation was less than
anticipated.
There
wasn’t much on the political front either save for the continuing uncertainty
about tax and spending policies which get more muddled daily as every member of
the ruling class tries to weigh on the six o’clock news. I know that this is just politics as usual;
but deadlock is also politics as usual.
Bottom
line: none of the above matters. All
that matters is that investors believe that they can fall in a bucket of sh*t
and come up with a rose in their mouth.
Until that mentality ends, stocks are going higher. But caution, overvalued stocks can be
hazardous to your financial health.
More
on valuation (short):
My thought for
the day: Discipline always trumps
conviction. No matter how certain you
are a particular investment, never fall into the trap of believing that you are
smarter than the Market. If you don’t
stay humble, the Market will do it for you.
Investing for Survival
The
biggest myths in investing, part 4.
News on Stocks in Our Portfolios
Revenue of $3.78B (+2.7%
Y/Y) in-line.
Economics
This Week’s Data
The
February Markit flash manufacturing PMI was reported at 54.3 versus
expectations of 55.5.
Other
Corporate
profits and interest rates (medium):
The
misunderstood accounting for trade (short):
Financial
engineering has masked the global economy’s precarious health (medium):
Politics
Domestic
International
Split in the administration over
foreign policy? (medium):
Who is contributing how much to
NATO? (medium):
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for Survival’s website (http://investingforsurvival.com/home)
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