The Morning Call
5/15/17
The
Market
Technical
The
S&P (and the Dow) has been languishing just below its former high for the
last three weeks, having tried unsuccessfully on one occasion to break to the
upside. On the other hand, there is a
gravitational pull from those two gaps immediately below. As I have been saying for some time now, the
question is, are investors resting before another assault to the upside or are
they exhausted and holding on by their fingernails?
The Morning Call
5/15/17
The
Market
Technical
The
S&P (and the Dow) has been languishing just below its former high for the
last three weeks, having tried unsuccessfully on one occasion to break to the
upside. On the other hand, there is a
gravitational pull from those two gaps immediately below. As I have been saying for some time now, the
question is, are investors resting before another assault to the upside or are
they exhausted and holding on by their fingernails?
Despite
a generally poor week, TLT managed to lift enough on Friday to break a
developing very short term downtrend. The
key now, as always, is follow through.
Nevertheless, it remains within a trading range going back to November
2016 and in a narrowing pennant formation (technicians hold that the break of
one of those boundaries presages a move in the direction of the break) defined
by the upper boundary of its short term downtrend on the upside and the lower boundary
of its long term uptrend on the downside.
While
GLD broke a very short term uptrend, it nonetheless managed to hold above its
100 day moving average and remains within a short term trading range. This is not a great looking chart; but it
could be worse.
The
dollar did a round trip last week, ending right on its 200 day moving average
(now support). Like TLT, it is in a
narrowing pennant pattern defined by the upper boundary of a very short term
downtrend on the upside and the lower boundary of its short term uptrend on the
downside. It is also getting squeezed
between its 100 and 200 day moving averages.
The
VIX clearly bad a rough week. However,
it did manage to void the breaks of both its intermediate and long term trading
ranges. Also, notice that huge price gap
overhead. Not to repetitious, historically,
those get filled.
And:
Fundamental
Headlines
US economic data
last week was slightly weighed to the negative side; but (1) all the positive
indicators were tertiary numbers, (2) while the negative stats included
business and wholesale inventories and sales, (3) with the only primary
indicator [March/April retail sales] was neutral. Bottom line, I am scoring this a weak
negative: in the last 84 weeks, twenty-six were positive, forty-seven negative
and eleven neutral. I am a short hair
away from revising our short term economic growth forecast back down.
Overseas,
the economic patterns that have been developing persisted: (1) the EU economy
showed further progress which included Greece getting is next round of bailout
funding, while (2) the news flow out of the rest of the world wasn’t so hot:
[a] Chinese data was really bad and included further declines in commodity
prices and an inverted yield curve {a classic sign of recession}, [b] Japanese
numbers weren’t any better and [c] OPEC acknowledged that global oil supplies
continue to grow.
In
addition, several regional Fed chiefs spoke and reinforced the notion of a June
rate hike.
On
the political front, I needn’t tell you that it was everything Comey last week. I think the wrangling a colossal waste of
time; but if it impacts the timing or magnitude of the Trump/GOP fiscal agenda,
it will prove to be a negative to the economy.
Still the Donald managed a minor success, announcing a new trade deal
with China. While many observers poo pooed
the deal as overly vague, I still believe that it a plus because (1) if nothing
else, it is yet another sign that Trump’s trade objective is making deals not
blowing up relationships, (2) the Chinese, historically, approach change at a
snail’s pace; so I think it unrealistic to expect a massive single step
forward.
The
economic and investment strategy bottom lines are unchanged: the economy is in
increasing danger of reverting to very sluggish growth if not recession and
stocks are way too expensive even under the most optimistic scenario.
The
four most dangerous words in investing, part deux (medium):
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News on Stocks in Our Portfolios
Economics
This Week’s Data
The
May NY Fed manufacturing index came in at -1.0 versus expectations of +8.0.
Other
Update
on big four economic indicators (medium):
More
on auto loans (medium):
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Domestic
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