The Morning Call
3/29/17
The
Market
Technical
The indices
(DJIA 20701, S&P 2358) were strong yesterday. Volume rose; breadth improved. The VIX (11.5) fell 8 %, ending right on the
lower boundary of its very short term uptrend, below its 100 day moving average
(reconfirming resistance), below its 200 day moving average (now resistance)
and in a short term downtrend. If it
breaks that very short uptrend, complacency will be back.
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 {19159-21431}, [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 {2242-2575},
[d] in an intermediate uptrend {2077-2681} and [e] in a long term uptrend
{881-2561}.
The long
Treasury was down, but remained above its 100 day moving average (now support),
below its 200 day moving average (now resistance), in a very short term
downtrend and retreated off a minor resistance level
GLD also fell, finishing
above its 100 day moving average (now support), below but near its 200 day
moving average (now resistance) and within a short term downtrend.
The dollar rose,
ending below its 100 day moving average (now resistance), above but near its
200 day moving averages (now support) and in a short term uptrend.
Bottom line: the
indices followed through Monday’s intraday reversal decisively to the upside. However, they remain within developing very
short term downtrends, so the question remains, was the recent downdraft part
of a consolidation move or marked a change of direction. We wait to see.
April
is the best stock performance month of the year (short):
Fundamental
Headlines
There
was flurry of US economic datapoints released yesterday: weekly retail chain
store sales growth fell, home prices rose while the March Richmond Fed
manufacturing survey and March consumer confidence were very strong. Nothing overseas.
The
notable difference in hard and soft data trends (short and a must read):
The
last time investors felt this good about stocks (short):
***overnight,
UK formally started the Brexit process.
In
Washington, Trump continued his deregulation drive by signing executive orders
rolling back Obama’s Clean Power Plan. Much
of the plan is focused on coal as an energy source which is currently being rapidly
replaced by cheaper and abundant natural gas.
That trend is not likely to be reversed. So the overall impact may not be as dramatic
as it sounds. However, this is still another small step in getting government
regulatory burden off the back of business.
In
addition, Paul Ryan held a news conference and stated that (1) plans to repeal
and replace Obamacare are not dead and (2) work is going full steam ahead on
tax reform. That more positive stance
seemed to encourage the devotees of the Trump trade. We can only hope that this not just political
bulls**t.
Finally,
Fed Vice Chair Fischer (a Fed hawk) did an interview in which he seemed to be
in line with hiking rates twice this year rather than his recent statement that
three increases would be appropriate. He
attributed his more dovish stance to the failure to repeal Obamacare. Investors seemed very pleased.
Bottom
line: given yesterday’s positive flow of events (good numbers, less regulation,
upbeat fiscal commentary and dovish Fed), investors seemed to regain some of
their optimism. If I look for a key in
yesterday’s developments, I would say (1) the stat that seemed to get investors
jiggy was the very positive consumer confidence reading; however, this
datapoint has historically been a leading/coincident indicator of market tops/bottoms,
(2) Trump’s deregulation efforts are not new news, (3) neither is an easier Fed,
so (4) what weighs heaviest for me is how much substance there is in the Ryan
statement. If he is signaling that the
house is truly trying to compromise on tax reform and perhaps a re-do of
healthcare reform, then the resurgence in the post-election euphoria may very
well have some legs. Otherwise, I think
that investors are likely jerking themselves off.
A
review of the trend in corporate earnings (medium):
The
latest from Doug Kass (medium):
Happy endings (short):
My thought for the day: the book
Where Are the Customers' Yachts? was written in 1940, and most investors
still haven't figured out that financial advisors don't have their
best interest at heart.
Investing for Survival
For
all you buy and hold advocates.
News on Stocks in Our Portfolios
Economics
This Week’s Data
Weekly
retail chain store sales grew considerably less than in the prior week.
The
January Case Shiller home price index rose 0.9% versus estimates of up 0.8%.
March
consumer confidence was reported at 125.6 versus expectations of 113.8.
The
March Richmond Fed manufacturing index came in at 22 versus forecasts of 15.
Weekly mortgage
applications fell 0.8% while purchase applications rose 1.0%.
Other
The
other side of household debt (short):
More
on auto loans (short):
Expectations
for US GDP growth in the first quarter (medium):
Politics
Domestic
International War Against Radical
Islam
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for Survival’s website (http://investingforsurvival.com/home)
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