The Morning
Call
3/9/17
We leave tomorrow morning for a
wedding. Back on Monday.
The
Market
Technical
The indices
(DJIA 20855, S&P 2362) continued a very tame consolidation. Volume rose again, remaining at a high level;
breadth began a more meaningful unwinding of its overbought condition. The VIX (11.8) was up another 3 ½ %, but
still ended below its 100 and 200 day moving averages (now resistance) and in a
short term downtrend. However, it has
made a second higher low off the mid-February challenge of the lower boundary
of its intermediate term trading range. That could be a sign that the high level of complacency
is over; but it is too soon to tell.
The Dow closed
[a] above its 100 day moving average, now support, [b] above its 200 day moving
average, now support, [c] in a short term uptrend {18927-21232}, [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 {2217-2551}, [d] in an
intermediate uptrend {2061-2665} and [e] in a long term uptrend {881-2561}.
The long Treasury
was down on heavy volume. It is now
below its 100 and 200 day moving averages, in a very short term downtrend and
is nearing the lower boundary of its intermediate term trading range. Adding to this rather negative
performance, the entire fixed income complex took a shellacking
GLD fell, closing
below its 100 day moving average (now support; if it remains there through the
close on Friday, it will revert to resistance).
It also ended 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
average (now support), in a short term uptrend and seems to have set a new very
short term uptrend.
Bottom line: to
all appearances, the Averages are handling the consolidation from an overbought
condition very well. So the assumption continues to be that they are headed for
the upper boundaries of their long term uptrends. However, the whackage in the commodities,
oil, gold and bonds creates a lot of turmoil below the surface of equity
trading. It may mean nothing, but it
focuses the attention until we know.
Fundamental
Headlines
Yesterday’s
economic data was somewhat mixed: weekly mortgage and purchase applications
rose and the February ADP private employment report smoked expectations; on the
other hand, January consumer credit growth slowed dramatically versus
estimates, fourth quarter productivity and unit labor costs were disappointing and
January wholesale inventories and sales were soft. Overseas, fourth quarter Japanese GDP growth was
below projections.
***overnight,
February Chinese CPI and PPI came in below expectations; the ECB left rates
unchanged and said that they would remain so ‘for an extended period of time’.
Bottom
line: there were a lot of cross currents in recent data that are somewhat
confusing. The ADP private payroll
report point to a strong economy. That
is supported by the declining fourth quarter productivity and rising unit labor
cost numbers. Those stats have driven
the odds of a March rate hike to near 100%.
On the other hand, the slowing growth in consumer credit and the lowered
first quarter GDP growth estimate of the Atlanta Fed suggest otherwise. Whether or not this is a one day phenomena is
anyone guess. But as I noted above, it
bears watching.
My
thought for the day: the gulf between a great company and a great investment
can be considerable; it is all a function of price. A great company’s stock can be priced for
perfection. In other words, all that is
great about the company is already priced in.
Buying its stock at that price assumes that nothing goes wrong. But we all know things can and usually to go
wrong. So when you buy the stock of a
company priced for perfection, all you are buying is the risk. The opposite is also true. When you buy the stock of a troubled company at
a price that reflects every bad thing that could occur, all you are buying is
the potential reward.
Investing for Survival
Don’t
drink the Kool Aid.
News on Stocks in Our Portfolios
Economics
This Week’s Data
January
wholesale inventories fell 0.2%, while sales declined 0.1%.
Weekly
jobless claims rose 20,000 versus expectations of 15,000 increase.
February
import prices rose 0.2%, in line: export prices advanced 0.3% versus consensus
of up 0.2%.
Other
Hot
air balloon economy (short):
Politics
Domestic
More on the GOP
revision of Obamacare (medium):
Is Medicaid
responsible for the increase in opioid related deaths? (medium):
International
Trump’s
new nominee for ambassador to Russia (short):
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for Survival’s website (http://investingforsurvival.com/home)
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