The Morning Call
2/10/17
The
Market
Technical
The indices
(DJIA 20172, S&P 2307) spiked yesterday presumably on Trump’s promise of a coming
tax proposal. Volume rose, remaining at
a high level; breadth improved. The VIX
(10.9) fell 5%, 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)---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 {18708-20750}, [c] in an
intermediate term uptrend {11745-24597} 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 {2188-2531},
[d] in an intermediate uptrend {2042-2643} and [e] in a long term uptrend
{881-2500}.
The long
Treasury declined 1%, giving up much of Wednesday’s gain and hampering its
attempt to reestablish the recent two week recovery. 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 down, 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 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: the
S&P finally finished above the 2300 level.
If it remains there through the close on Monday, we have to set our eyes
on the upper boundaries of the Averages long term uptrends. While I remain skeptical that they can be
successfully challenged, it nonetheless means another possible 6-8% increase on
the upside.
The
dollar and GLD continue to push against resistance levels. But the sharp setback in TLT raises the
question as whether it can keep up.
Certainly, if the Trumpflation trade reasserts itself as a result of the
tax cut promise, one would expect higher interest rates. (By the way, yesterday I mistakenly stated
that the Trumpflation was bad for stocks which, at least at the outset, is not
true. It would be good.)
Bloomberg’s consumer comfort index is at near
record levels (short):
Fundamental
Headlines
This
week’s US dataflow remains upbeat: weekly jobless claims declined versus
expectations of an increase and while December wholesale inventories were flat,
sales were strong. Overseas, January
Chinese car sales were down 9.8%.
***overnight,
fourth quarter UK industrial output was better than consensus; January Chinese
exports and imports were much stronger than estimates, though many believe that
they were impacted by an early lunar new year holiday.
Again
politics were front and center in the investment world.
Thursday
with Trump:
(1)
signs three executive orders to strengthen law enforcement
http://www.zerohedge.com/news/2017-02-09/trump-signs-three-executive-orders-crush-crime-drug-cartels
(2)
promises aviation infrastructure spending and
deregulation http://www.zerohedge.com/news/2017-02-09/trump-effect-action
(3)
and best of all, promises something ‘phenomenal’ on
taxes---soon. As you know, tax cuts were
one of the most economically significant of Trump’s campaign pledges; and to
date amidst all the racket he is causing about other less important issues, he
has failed to address this one. So I think
that the Donald was feeling some pressure to say something.
Trump’s problem is that congressional republicans have
already made clear that big cuts weren’t likely because of the current budget
deficit and the magnitude of federal debt---which by way I agree with.
Donald’s solution appears to be to make a statement virtually
devoid of any details of a plan save its characterization as ‘phenomenal’ and
that it would be forthcoming in ‘two or three weeks’---with the knowledge that
it may go nowhere because of the aforementioned congressional resistance.
That said, I could be wrong. Trump may put forth a well-developed plan
that congress is willing to pass on a timely basis irrespective of its
budget/debt impact. Certainly, yesterday’s
pin action suggests that scenario. If I am
wrong, it won’t be the first time. But it’s
my story and I am sticking with it.
In
other political/economic news:
(1)
push back on the
border tax (short):
(2)
more of it from David Stockman (medium):
(3)
on NAFTA (medium):
And, facts about NAFTA (medium/long):
(4)
on how much political risk the Market can tolerate
(medium):
***overnight,
Trump spoke with the Chinese president and said that the US would honor the ‘one
China’ policy.
Bottom line: so
much for the Market’s growing realization that nothing gets done rapidly in
congress. Trump says that he will have a
phenomenal tax plan ready in two to three weeks and everybody gets jiggy with
it---the legislative process notwithstanding.
However, as I continue to observe, the only thing that gets discounted
these days is the good news. As long as
that remains the state of affairs, stock prices are going up; and as I pointed out
above, the upside is unobstructed by technical resistance points.
That said with
stocks priced for perfection, I believe that there is too much risk to justify
not taking some profits and getting rid of your losers.
My
thought for the day: it is a misconception to think of your stock portfolio as
an investment. An investment is when an
individual gives his money directly to a company to be used for its
growth. However, when that individual
gives money to the NY Stock Exchange for a stock certificate, they are just
swapping pieces of paper (dollars for a certificate) and that really is an act
of savings---just like giving dollars to a bank for a time deposit.
This
difference is critical because Wall Street characterizes this savings process
with the same sexy language associated with investing and conjuring up the visions
of fabulous returns which can occur in investing. Worse, it includes excessive fees, excessive
portfolio churn and historical subpar performance. However, if a portfolio is thought of as
saving, it puts the proper focus on protecting against the potential for
permanent loss and reducing the risk of purchasing power loss.
Investing for Survival
Lessons
from 2016 (part 2).
News on Stocks in Our Portfolios
C.H. Robinson Worldwide (NASDAQ:CHRW) declares $0.45/share quarterly dividend, in line
with previous.
Economics
This Week’s Data
December
wholesale inventories were up 1.0%, in line; but sales soared 2.6%.
January
import prices were up 0.4% versus expectations of up 0.2%; export prices rose
0.1%, in line.
Other
The
coming cuts in pension benefits (medium):
Why Greece is
suddenly back in the news (medium):
A
slowdown coming in China? (short):
Politics
Domestic
A conservative
case for climate change (medium):
Trump’s game of
chess---think about this (medium and a must read):
International War Against Radical
Islam
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for Survival’s website (http://investingforsurvival.com/home)
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