The Morning Call
4/28/17
The
Market
Technical
The indices
(DJIA 20975, S&P 2387) turned in another muted performance as they work off
the excesses of the Monday/Tuesday moonshot---which, again, is not surprising
after two huge up days. Volume fell; breadth
was mixed. The VIX (10.3) was down 4 ¼ %,
closing below its 100 day moving average (now resistance), below its 200 day
moving average for a fourth day (reverting to resistance) and closed right on
the lower boundaries of its short and intermediate term trading ranges.
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 {19458-21635}, [c] in an
intermediate term uptrend {11994-24843} and [d] in a long term uptrend
{5751-23390}.
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 {2275-2608},
[d] in an intermediate uptrend {2098-2702} and [e] in a long term uptrend
{905-2591}.
The long
Treasury fell fractionally, ending above its 100 day moving average (now
support), below its 200 day moving average (now resistance), in a very short
term downtrend and in a short term trading range. It seems to have found support right on the
upper boundary of the former trading range dating back to November 2016.
GLD declined,
closing above its 100 day moving average (now support), above its 200 day moving
average (now support), in a very short term uptrend and in a short term
downtrend.
The dollar was up,
ending back above its 100 day moving average voiding Tuesday’s break (now
support), below its 200 day moving averages (now resistance), below the upper
boundary of its very short term downtrend and in a short term uptrend.
Bottom line: the
indices continued to rest after the strong Monday/Tuesday performance, which is
normal and suggests nothing directionally.
Their upside is now being marked by their former highs [21228/2402] and
the upper boundaries of their long term uptrends while support on the downside exists
at their 100 and 200 day moving averages and the lower boundaries of their
short term uptrends.
While I would
expect a challenge of the old highs, the big question in my mind is, will those
gap openings which I have mentioned get closed as part of a near term correction
(which would clearly be the more positive alternative) or will the Averages
continue to rise and it occur on the way down following a Market top?
Fundamental
Headlines
Not
a good day for the economic stats: March durable goods orders, weekly jobless
claims, March pending home sales and the April Kansas City Fed manufacturing
index came in below estimates; and while
the March trade deficit was below consensus but largely the result of declining
exports and imports. Nothing overseas.
***overnight,
first quarter UK and French GDP growth were below estimates; April EU inflation
rose to 1.9%, just shy of the ECB’s 2% goal.
On
the other hand, earnings season is coming in better than many anticipated,
continuing the curious dichotomy of the whole economy underperforming while
corporate profits over perform. While
part of this can be explained by accounting, sooner or later one of these
trends has to reverse.
A
potential source of an improving economy is the implementation of the Trump/GOP
fiscal program which continues to face problems. The tax plan introduced on Wednesday has been
met with some skepticism.
Five facts about
tax reform (medium):
Plus, the hope
that the vote on government funding today and an imminent presentation of a new
repeal and replace bill are now caught in Washington meat grinder, to wit, the Dems
are threatening to vote against government funding extension if GOP passes
repeal and replace. What a clusterf**k
(medium):
Trump calls bulls**t of
dems (short):
***overnight, but still repeal
and replace failed/delayed for a second time (short):
Bottom line: this
earnings season is coming in better than expected which is giving investors something
to cling to as the ruling class continues to do its best to do nothing. In addition, Trump is providing positive
impetus as his deregulation initiative will almost surely add to the long term
secular growth rate of the economy.
The problem is
short term. If the economy is losing is
post-election-improved-sentiment boost and Trump/GOP disappoint in the delivery
of their fiscal policies, that could leave investors searching for new reasons
to justify current high valuations. Again, there are a number of reasons to be
positive about improved economic growth.
The issue is the order of magnitude.
How
the Market responds to tax cuts (medium):
For
the more sanguine: overvalued but not a bubble (medium):
http://www.mauldineconomics.com/editorial/the-stock-market-is-overvalued-but-its-not-in-a-bubble-yet
Global
liquidity and stock prices (medium):
The
staying power of the current Market (medium):
Is
the increasing popularity of ETF’s becoming a problem? (medium):
My
thought for the day comes from Paul Tudor Jones: ‘I believe the very best money is made at the market turns. Everyone
says you get killed trying to pick tops and bottoms and you make all your money
by playing the trend in the middle. Well for twelve years I have been missing
the meat in the middle but I have made a lot of money at tops and bottoms.’
Investing for Survival
Financial
insecurity.
News on Stocks in Our Portfolios
Revenue of $23.56B (+6.3% Y/Y) misses
by $60M.
V.F. (NYSE:VFC): Q1 EPS of $0.55 in-line.
Revenue of $2.58B (-1.9% Y/Y) misses
by $140M.
Revenue of $63.3B (+30.0% Y/Y) misses
by $1.48B.
Economics
This Week’s Data
March
pending homes fell 0.8% versus expectations of -0.5%.
The
April Kansas City Fed manufacturing index came in at 7 versus March’s reading
of 20.
First quarter GDP
rose 0.7% versus estimates of up 1.1%; the price index was up 2.3% versus
consensus of up 2.0%; and the employment cost index was up 0.8% versus
forecasts of up 0.6%
Other
The
latest from Van Hoisington (a little long but a must read):
Another
rate hike in June? (medium):
More
on auto loans (medium):
Politics
Domestic
Reagan on campus
protests (short):
The staggering
administrative bloat at universities (short):
International War Against Radical
Islam
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for Survival’s website (http://investingforsurvival.com/home)
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