The Morning Call--Animal spirits

The Morning Call

3/3/17

The Market

         

    Technical

The indices (DJIA 21002, S&P 2381) retreated yesterday, not particularly surprising following Wednesday’s Titan III formation into an already overbought condition. Volume fell but remained at a high level; breadth weakened.   The VIX (11.8) fell another 6 %, finishing below its 100 and 200 day moving averages (now resistance), in a short term downtrend, in the trading range dating back to mid-January and again nearing the lower boundary of its intermediate term trading range (10.3).   It continues to signal 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 {18874-21182}, [c] in an intermediate term uptrend {11837-24689} and [d] in a long term uptrend {5751-23298}.

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 {2209-2543}, [d] in an intermediate uptrend {2055-2659} and [e] in a long term uptrend {881-2561}.

The long Treasury dropped below the lower boundary of the developing pennant formation; if it remains there through the close today, it will suggest that the bond gurus are back on the Trumpflation (a stronger economy, higher interest rates and higher inflation) bandwagon.  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 declined on volume, closing below the lower boundary of its very short term uptrend; if it remains there through the close today, that trend will be voided.  It stayed above its 100 day moving average (now support).  However, it remained below its 200 day moving average (now resistance) and within a short term downtrend. 

The dollar was up, ending above its 100 day moving average (now support), its 200 day moving averages (now support), in a short term uptrend and is attempting to establish a very short term uptrend.  

Bottom line: yesterday’s hiccup notwithstanding, there is little reason to doubt that the Averages will challenge the upper boundaries of their long term uptrends.  Bonds, gold and the dollar all seem to be pointing at an improving economy and rising interest rates.

            Peak animal spirits (short)

            http://www.zerohedge.com/news/2017-03-01/peak-animal-spirits

            More on the influx of ‘retail’ money into the Market (short):

            http://www.zerohedge.com/news/2017-03-02/retail-buying-panic-sp-etf-saw-biggest-inflow-27-months-yesterday

    Fundamental

       Headlines

            The dataflow slowed down yesterday with only two stats: weekly jobless claims were better than expected while February retail sales were lower versus January.  Overseas, both EU CPI and PPI were higher than anticipated.

            ***overnight, January Japanese CPI rose for the first time in over a year; the February UK services PMI was below estimates.

            The rest of the day was also slow and short of news events.  Television and internet media focused on digesting Wednesday’s pin action and getting jiggy over the Snap IPO.

Bottom line: Trump is pushing economic policy in a positive direction.  Deregulations, check.  Tax reform, probably good but still uncertain. Infrastructure spending, still little more than a gleam in his eye.  Obamacare reform, even more uncertain.  So we are moving in the right direction but the how fast and how far is debatable.  And that ignores potential negatives that could flow from the Donald’s trade policy.  That makes valuing any changes a very iffy business at the moment.  Not that the net result won’t be positive; the question is the order of magnitude and how much of it is already reflected in stock prices.

            Wilbur Ross reintroducing a little statesmanship in NAFTA discussions? (short):

            http://www.zerohedge.com/news/2017-03-03/peso-surges-dollar-tumbles-after-wilbur-ross-comments

            Update on the trend in dividends (medium):

            http://politicalcalculations.blogspot.com/2017/03/positive-and-negative-trends-in-us.html#.WLhwF_krI2w

            The next market break (medium):

            http://www.marketanthropology.com/2017/03/the-next-market-to-break-should-be.html

            My thought for the day: finance professors Odean and Barber studied 66,000+ investment accounts and concluded: “The more you trade, the less you earn.” The returns of passive investors (2% annual turnover) actually beat active investors (258% turnover) by 50%.

       Investing for Survival

            Fatal flaws in your retirement plans   

            https://www.advisorperspectives.com/commentaries/2017/02/21/the-fatal-flaws-in-your-financial-plan-1

           

    News on Stocks in Our Portfolios

  

Economics

   This Week’s Data

            February retail chain store sales were weaker than in January.

   Other

            Correcting some facts about all the ‘jobless Americans’ (medium):

            http://www.aei.org/publication/correcting-the-alternative-facts-about-the-silent-nation-of-jobless-americans-who-arent-part-of-our-economy/

Politics

  Domestic

More problems for retirees (medium):

http://www.zerohedge.com/news/2017-03-02/next-ponzi-46bn-long-term-care-insurer-liquidate-pa-biggest-healthcare-failure-ever

Quote of the day (short):

http://cafehayek.com/2017/03/bonus-quotation-of-the-day-223.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+CafeHayek+%28Cafe+Hayek%29

  International

            Europe votes to impose visa requirements on US citizens (medium):

            http://www.zerohedge.com/news/2017-03-02/europe-votes-impose-visas-americans

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