The Morning Call
5/17/17
The
Market
Technical
The indices
(DJIA 20979, S&P 2400) were down fractionally yesterday, but still enough
that the S&P backed off its all-time high for a second time. Volume was
flat; breadth weakened. Nonetheless, both
remain above their 100 and 200 day moving averages and the lower boundaries of
uptrends across all major time frames.
The VIX (10.7) was
up 2 ¼ %, leaving it above the lower boundaries of its intermediate and long term
trading ranges. While it remains below
its 100 and 200 day moving averages, it still has a gap overhead that would
require it to trade at 12.2 to be filled.
The long
Treasury (up), the dollar (down) and gold (up) pin action suggested that their
investors are either (1) looking for a weakening economy/more dovish Fed or (2)
worried about a deteriorating Trump presidency.
Bottom line: while the S&P failed a second challenge of
its all-time high, the retreat was very mild.
That suggests that a third time remains likely. But I go back to the question, will the
Averages fill those gaps below current levels or push through their all-time
highs and cover them later?
Forget
what you know (medium):
Fundamental
Headlines
Yesterday’s
economic releases were mixed. Two
primary indicators were in contradiction: April housing starts were terrible
while April industrial production was much better than anticipated. In addition, month to date retail chain store
sales grew faster than in the prior week.
Overseas, April UK CPI and PPI were above consensus.
***overnight,
April EU inflation rose, in line. As an
aside, with the EU economic data improving and now inflation rising to near ECB
objectives, the pressure is sure to start building for the ECB to begin
tightening.
Of
course, the news flow is all about the media and the dems smelling (Trump’s) blood
in the water. How anything can get
accomplished on his fiscal agenda in this atmosphere seems most
unlikely---whatever his degree of guilt, if any, related to the growing number
of allegations.
Bottom line: investors
seem impervious to anything in the news flow.
All that seems to matter is the Market pin action, in particular, to the
high tech stocks. It is amazing to me
that the Averages could rally 15% post-election on the notion that Trump’s
fiscal agenda would be a major plus for the economy, then completely ignore
what is transpiring in the political arena today. Nonetheless, this ignorance argues that the
indices will successfully challenge their all-time highs and go on to test the
upper boundaries of their long term uptrends.
Stocks
are overvalued. The economy continues to slip back toward zero growth. And somebody needs to take the gun out of the
Donald’s hand before he shoots off both feet.
The
CAPE ratio and Market performance (short):
More
on valuations (medium):
A
good summation of where we are in the Market (short):
My thought for the day: don't assume you are the smartest investor in the
Market. When stocks meet your objectives (Sell Half Price), be
willing to trim; when they begin to break down (Stop Loss Price), become
defensive; when your reasons for buying have changed and no longer exist
(Quality Criteria), be willing call it a day and remove your risk.
Investing for Survival
Getting
what you need versus what you want.
News on Stocks in Our Portfolios
Economics
This Week’s Data
Month
to date retail chain store sales grew faster than in the prior week.
April
industrial production rose 1.0% versus forecasts of up 0.4%.
Weekly
mortgage applications were down 4.1% while purchase applications were down 3.0%
Other
Update
on big four economic indicators (medium):
The
other side of the Fed’s balance sheet (medium):
Update
on the derivative holdings in US banks (medium and a must read):
Economic
weakness and oil prices (medium):
More
on oil and that OPEC production agreement (medium):
The
Bank of China takes its foot off the brakes (medium):
How
accurate are the government’s stats? (medium):
Politics
Domestic
Offered without
comment (medium):
The H1-B scam
(short):
International War Against Radical
Islam
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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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