The Morning Call
3/16/17
The
Market
Technical
The indices
(DJIA 20850, S&P 2385) popped yesterday. Volume rose, remaining at a high
level; breadth improved. The VIX (11.6)
fell 6 ½ %, ending below its 100 day moving average (now resistance), below its
200 day moving average (now resistance) and in a short term downtrend. While intraday it traded below the lower
boundary of its very short term uptrend, it recovered and closed above that
boundary. As long as this uptrend stays
intact, it leaves open the possibility that the recent high level of
complacency is over.
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 {19039-21294}, [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 {2226-2560},
[d] in an intermediate uptrend {2067-2671} and [e] in a long term uptrend
{881-2561}.
The long
Treasury was up another 1 ¼ %, continuing the rebound off of the lower boundary
of its short term trading range. But it
remains below its 100 and 200 day moving averages and in a very short term
downtrend.
The rest of the fixed income complex rallied strongly.
GLD rose 1 ¾ %, pushing
above its 100 day moving average (now resistance; if it remains there through
the close on Friday, it will revert to support). But it remained below its 200 day moving
average (now resistance) and within a short term downtrend.
The dollar fell
1%, ending back below above the lower boundary of the recently (Monday) reset
very short term uptrend. Judging by
yesterday’s strong follow through, it appears that this trend has been
successfully challenged. Supporting that
notion, UUP also closed below its 100 day moving average (if it remains there
through the close on Friday, it will revert from support to resistance). It also ended below its 200 day moving
average (now support) and in a short term uptrend.
Bottom line: despite
the recent pause in the pin action, the Averages remain in uptrends (including
very short term uptrends) across all time frames. So the assumption continues
to be that they are headed for the upper boundaries of their long term
uptrends. The pin action in the
commodities, oil, gold and bonds also reflected the everything is awesome
scenario. (economy growing---good for stocks; but little risk of rising rates---good
for bonds and gold and bad for the dollar).
Fundamental
Headlines
Lots
of economic data released yesterday: weekly mortgage and purchase applications
were up, the March NY Fed manufacturing index and the March housing market
index were both ahead of forecasts while February retail sales and the January
business inventory/sales were below.
The
big event of the day was the wrap up of the FOMC meeting. As expected, it raised the Fed Funds rate by
25 basis points. The language of the
press release and the Yellen news conference was pretty bland---the message being
that the Fed believes that the economy will continue to grow and will able to
handle its anticipated rate hike with little problem. Importantly, the language was consistent with
public comments of FOMC members over the last couple of weeks---which is
different from their usual ‘on the one hand, on the other hand’ narrative. In short, at the moment, everything is
awesome.
Which,
of course, it isn’t. But here is how
Yellen dealt with that issue.
The
text of the Fed release (medium):
And
the dot plot (short):
***overnight,
Trump released his first budget; and it didn’t disappoint. Whether it gets enacted is another question.
Plus
while the Bank of Japan left rates unchanged,
the
Bank of China raised them for the third month in a row.
Bottom
line: I noted yesterday that in the last
two years, I have continually underestimated the Markets’ willingness to see a
silver lining that was not that obvious to me.
And so it continues to be. Forget
rising oil prices, forget the lack of visibility of Trump’s fiscal plan
(however, positive it may be if enacted), forget that the Fed has created the
gross misallocation of prices and assets.
Today, everything is coming up roses.
So I have to go with my technical bottom line. That said, if I held any stock that had been
a big winner, I would sell a portion of that holding; and I would eliminate all
my losers.
More
on valuation (short):
My
thought for the day: thirty years ago, there was one hour of market TV per day.
Today there's upwards of 18 hours. What changed isn't the volume of news, but
the volume of drivel.
Investing for Survival
Learning
to be a good loser.
News on Stocks in Our Portfolios
Revenue of $9.2B (+2.1%
Y/Y) misses by $60M.
Economics
This Week’s Data
January
business inventories rose 0.3%, in line; however, sales were up just 0.2%.
The
March housing market index was reported at 71 versus consensus of 66.
February
housing starts rose 0.3% versus expectations of up 0.2%.
Weekly
jobless claims fell 2,000 versus estimates of 1,000 decline.
The
March Philadelphia Fed manufacturing index came in at 32.8 versus forecasts of
30.0.
Other
Atlanta
Fed lowers its first quarter GDP growth estimate to 0.9%.
Growing
student loan defaults (short):
Politics
Domestic
International War Against Radical Islam
Saudi
prince says Trump is a friend to muslims; that travel ban targets radicals not
all muslims (short):
http://www.zerohedge.com/news/2017-03-15/saudi-prince-crushes-liberal-meme-trump-true-friend-muslims
***overnight,
the Dutch left the center right party in control.
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for Survival’s website (http://investingforsurvival.com/home)
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