The Morning Call
3/21/17
The
Market
Technical
The indices
(DJIA 20905, S&P 2373) continued to consolidate. Volume fell; breadth was weaker. The VIX (11.3) was up slightly, ending below
its 100 and 200 day moving averages (now resistance) and in a short term
downtrend. It closed right on the lower boundary
of a very short term uptrend for the third day---having challenged it unsuccessfully
intraday on each day. If it holds above
that boundary, then I have to take the thesis that the period of complacency
could be ending more seriously.
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 {19082-21359}, [c] in an
intermediate term uptrend {11884-24736} 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 {2232-2566},
[d] in an intermediate uptrend {2072-2676} and [e] in a long term uptrend
{881-2561}.
The long
Treasury was up, but ended below its 100 and 200 day moving averages, in a very
short term downtrend and near the lower boundary of its short term trading
range. Much
of the rest of the fixed income complex was down.
GLD rose, closing
above its 100 day moving average (now support).
Nevertheless, it ended below its 200 day moving average (now resistance)
and within a short term downtrend.
The dollar was up
fractionally, ending below its 100 day moving average (now resistance), above its
200 day moving averages (now support) and in a short term uptrend.
Bottom line: the
Averages are holding their losses to a minimum as they continue their
relentless move to the upside. That said
both are close to challenging their very short term uptrends---as long as they
remain within these uptrends, the assumption has to be that they are headed for
the upper boundaries of their long term uptrends.
Fundamental
Headlines
Only
one US economic datapoint was released yesterday: the Chicago Fed national
activity report was ahead of expectations.
No
stats from overseas, but there was some notable announcements: Greece said that
it will likely miss the deadline for achieving results that would provide for
receiving bail out funds; UK PM May triggered Brexit; and the G20 failed to
renew pledge to resist all forms of protectionism. This latter returns investor attention to the
heartburn Trump is causing for free trade advocates of which I am one. Of course, failing to renew a pledge is not the
same as actively pursuing tariffs, taxes and competitive devaluations; but it
is a step closer.
***overnight,
February UK inflation came in hotter than anticipated; in fact, it was above
the Bank of England’s stated goal.
This
week will be another in which we have to endure multiple Fed speakers trying to
put a finer point on last week’s FOMC meeting.
We got off to a roaring start yesterday as Charles Evans struck a slightly
more hawkish tone (short):
The Fed is making it up
as it goes along (short):
Bottom
line: to add to the issue of the timing
and magnitude of healthcare reform, tax reform and infrastructure spending, now
there are (1) at least an initial signal that Trump’s protectionist inclinations
are starting to draw concrete responses from our trading partners. To be sure, the reaction was verbal or lack
thereof [G20 nonrenewal of protectionist pledge] and (2) an indication that the
Fed may not be as dovish as assumed following last week’s FOMC statement. If indeed the Fed is more likely to raise
rates than currently assumed, that is not good for stocks.
GOP makes
changes to its healthcare bill (medium):
Granted there is much unknown about how these
issues will all play out. But the point
is that there is no more reason for the euphoria about them all ending as
currently hoped for than there is that any of the aforementioned problems could
lead to disappointments. In other words,
only the positive assumptions are being discounted.
I am not saying
that Trump’s fiscal program won’t have a positive impact on the economy and I am
definitely not saying that a tighter Fed will lessen that impact. But I am saying that, at the moment, an
element of stock valuation includes a degree of success that ignores any
problems, including but not limited to the aforementioned.
Mohamed
El Erian warns of overconfidence (medium):
My
thought for the day: professional investing is one of the hardest careers to
succeed at, but it has low barriers to entry and requires no credentials. That
creates legions of "experts" who have no idea what they are doing. It doesn’t really matter how much experience
a money manager has. You can
underperform the market for an entire career. And many have.
Investing for Survival
A
watched portfolio never performs.
News on Stocks in Our Portfolios
Revenue of $3.79B (-5.3%
Y/Y) misses by $30M.
Economics
This Week’s Data
The
fourth quarter current account deficit was $112.4 billion versus expectations
of $129.0 billion
Other
Used
car prices down most since 2008 (medium):
Traffic
at retailers continues to slow (short):
OPEC
continues to try to jawbone prices up (short):
Politics
Domestic
International War Against Radical
Islam
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for Survival’s website (http://investingforsurvival.com/home)
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