The Morning Call
4/19/17
The
Market
Technical
The indices
(DJIA 20523, S&P 2342) declined yesterday on a mostly bad news day---something
new and different for a change. Volume
rose, breadth deteriorated. Both of the
Averages again ended below the upper boundaries of their very short term
downtrends. The VIX (14.4) dropped 1 ½ %,
but remained above the lower boundary of its very short term uptrend, above its
100 day moving average (now support), above its 200 day moving average (now
support) and in a short term trading range (it closed above the upper boundary of
its former short term downtrend).
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 {19350-21635}, [c] in an
intermediate term uptrend {11942-24791} 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 {2265-2598},
[d] in an intermediate uptrend {2092-2696} and [e] in a long term uptrend
{905-2591}.
The long
Treasury jumped 1 ¼% on volume, ending above its 100 day moving average (now
support), below, but nearing, its 200 day moving average (now resistance), in a
very short term downtrend and in a short term trading range.
Counterpoint:
GLD rose on
volume, closing above its 100 day moving average (now support), above its 200
day moving average (now support), in a very short term uptrend and above the
upper boundary of its short term downtrend for a second time (if it remains
there through the close on Friday, it will reset to a trading range.
The dollar was
down, ending above its 100 day moving average (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
bulls made a very weak comeback in the face of bad news---the first time this
has happened in the last three weeks trading.
Whether they were just a sleep at the switch or this is the sign that
they may be losing enthusiasm/buying power is the big question. As usual, I don’t know the answer. I do know that, at the moment, there is still
no directional bias to the Market short term.
Long term, the weight of the technical evidence (moving averages and
major trends) favors the bulls.
Watch
Fridays and Mondays for a sign of direction (short):
Fundamental
Headlines
Yesterday’s
data was mixed: March housing starts and permits were below estimates while
month to date retail chain store sales growth picked up and March industrial
production was slightly ahead of expectations.
There
was also a couple of earnings disappointments (Goldman and JNJ). We are now going into the heart of first
quarter earnings reports. General
consensus had been for an upbeat season.
Overseas,
March Chinese housing prices rose but at a slower pace than in the prior month.
Other
news included:
(1)
more saber rattling, with the Pentagon said to be
considering shooting down North Korean missiles and the US having to scramble
jets as Russian bombers neared Kodiak Island,
(2)
the Donald issuing another executive orders that calls
for the review of the US’s H1-B visa program which gives priority to high skill
labor to fill job openings. The purpose
is to insure that US companies aren’t bringing in talent to replace current US
workers at a lower wage.
This is apt to be a bit more controversial than other orders
because one of the historic complaints with our immigration system was that the
US was letting in millions of illegal, low skill workers who were taking jobs from
low/middle income citizens while restricting the entry of ‘needed’ high skill workers.
However, recently it appears that US businesses have been gaming
the system by bringing in skilled workers under H1-B program and instead of
using them to fill ‘needed’ slots instead using them to replace US workers for
lower pay. The controversy being how
much truth there is to either case.
(3)
Mnuchin: Trump ‘absolutely not’ trying to talk down the
dollar. Let’s hope that he is right.
Bottom line: as I
noted above, the pattern in sentiment seemed to change a tad yesterday. The bulls did make an attempt to rally after
a big down move on bad news; but it was a poor try. However, one day’s trading doesn’t provide sufficient
clarity to alter my point that short term the technicals are more important
than the fundamentals is giving clarity to Market direction. Clearly that could change and indeed almost
assuredly will change. But until we get
out of the current tight trading range characterized by bulls buying the dips
and bears shorting the rips, I think that the technicals will likely provide
the directional information before the fundamentals become obvious.
The
latest from David Stockman (medium):
My thought for the day: with the
explosion of information on the Internet, there is an illusion that there is an
explanation for everything and that the primary task is simply to find that explanation. As a result, technical analysis is at the
bottom of the study list for investors, particularly since the skill often
requires them to close their eyes and trust price action.
Investing for Survival
Preparing
for a bear market.
News on Stocks in Our Portfolios
Revenue of $2.82B (+7.6% Y/Y) misses
by $30M.
Revenue of $18.16B (-2.8% Y/Y) misses
by $230M
Economics
This Week’s Data
Month
to date retail chain store sales grew faster than in the prior week.
March
industrial production rose 0.5% versus expectations of up 0.4%; capacity
utilization came in at 76.1% estimates of 76.0%.
Weekly
mortgage applications fell 1.8% while purchase applications were off 3.0%.
Other
Who
pays taxes? (short):
More
on auto loans (short):
http://www.zerohedge.com/news/2017-04-18/plunging-used-car-prices-wreak-havoc-rental-car-bondholders
Goldman
on Trump’s fiscal stimulus plans (medium):
Politics
Domestic
International War Against Radical
Islam
More on the Syrian gas attack
(medium):
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for Survival’s website (http://investingforsurvival.com/home)
to learn more about our Investment Strategy, Prices Disciplines and Subscriber
Service.
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