The Morning Call
5/11/17
The
Market
Technical
The indices
(DJIA 20943, S&P 2399) were mixed (Dow down, S&P up) and generally
quiet again yesterday. Volume was flat;
breadth was weaker. Both remain above
their 100 and 200 day moving averages and the lower boundaries of uptrends
across all major time frames.
They are both
still hovering near their former highs (21228/2402). My assumption is that they will probably
successfully challenge those highs; though the longer they hang around current
levels and the more unsuccessful challenges they make on their former highs,
the greater the odds that the next move is down. However, I am not suggesting a
Market top. We will only know that when
those support levels start to get violated.
Attention
remains on the VIX (10.1) which was up 2 ¼ %.
However, it remained below the lower boundary of its intermediate term
trading range for the third day (if it remains there through the close today [I
originally mistakenly said Friday], it will reset to a downtrend.)
The long
Treasury was down, GLD was unchanged and the dollar was up. Again their pin action pointed to higher
interest rates---probably a function of hawkish comments this week from
multiple Fed heads.
Bottom line:
investors seemingly remain tranquilized accepting good news as good news and
everything else as either good news or no news.
As I suggested above, the
question right now is, are the indices resting in preparation for an assault on
their former highs or have they shot their wad? Based on the aforementioned eerie calm, I
think the answer is likely the former; but we won’t know until it happens.
Fundamental
Headlines
Yesterday’s
economic news was mixed: weekly mortgage and purchase applications were up
while April import and export prices were up much more than forecast. Whether one classifies the latter as good or
bad news depends on one’s perspective. I
assume the Fed will view it as good news.
Overseas, the
Chinese dataflow remains negative (April CPI and PPI slowed) while EU stats
strengthen (March French and Italian industrial production were stronger than
anticipated). In addition, it now
appears certain that Greece will receive the next round of bailout funds.
***overnight,
the Bank of England left rates and its bond purchase program unchanged but
hinted that rates could be rising soon (medium):
In
addition, April Chinese vehicle sales fell 2.2%; the EU raised its 2017 GDP growth
forecast for the union.
Chinese
commodities continue to plunge (short):
Bottom
line: of course, politicians and the media filled the headlines and airwaves
with commentary on the Comey firing.
Rhetoric aside, the only thing that matters, economically speaking, is
the impact this controversy has on the Trump fiscal reforms. I think it too soon to know. But if you believe the nonchalant response of
the Market, this is much ado about nothing.
More
thoughts on the Fed (medium):
Goldman
on Fed policy (medium and a must read):
More
on valuations (short):
Stats
for the bulls (short):
My
thought for the day: Diversification is
fundamentally a risk-reduction strategy built around the idea of spreading your
portfolio across several different investments. To be clear, it is a strategy
to help manage investment risk, not eliminate risk-no portfolio, no matter how
well diversified, can eliminate entirely the risk of loss of principal.
Rather, diversification holds out the possibility of producing a portfolio with
the same expected return but less risk than a less - diversified alternative.
Or, increasing portfolio diversification may allow an investor to improve
returns for a given level of risk.
Investing for Survival
Playing
to win.
News on Stocks in Our Portfolios
Economics
This Week’s Data
Weekly
jobless claims fell 2,000 versus expectations of a 6,000 rise.
April
PPI was up 0.5% versus estimates of up 0.2%; ex food and energy, it was up 0.4%
versus forecasts of up 0.2%.
Other
The
latest (acknowledgment of failure) from OPEC (medium):
Moody’s
slashes rating on Canadian banks (medium):
Politics
Domestic
International War Against Radical
Islam
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