The Morning Call
5/9/17
The
Market
Technical
The indices
(DJIA 21012, S&P 2399) were very quiet yesterday, though volume was up. Breadth was mixed. Both remain
above their 100 and 200 day moving averages and the lower boundaries of
uptrends across all major time frames---all of which act as support. Of more immediate importance, they are a
short hair away from challenging their former highs (21228/2402). My assumption is that they will probably make
that challenge successful and set their sights on the upper boundaries of their
long term uptrend (23500/2620)---which I continue to believe that they will not
surpass.
Yesterday’s technical
story was the VIX (9.8) getting hammered, closing below its 100 and 200 day
moving averages as well as the lower boundary of its intermediate term trading
range (if it remains there through the close on Friday, it will reset to a downtrend)
and long term trading range (if it remains there through the close next Monday,
it will reset to a downtrend).
Counterpoint:
The pin action
of the long Treasury and the dollar since January has defied the seeming equity
thesis of an improving economy and rising rates. On the other hand, GLD investors are worrying
about either higher rates or that it is caught up in current decline in
commodity prices. However, its chart
since November (the election) belies the former; so I will be watching to see
if this is a leading indicator for TLT/UUP or a false flag.
Bottom line: investors
were apparently at ease with the French elections. The question right now is, are the indices resting
in preparation for an assault on their former highs or have they shot their
wad? I think the answer is likely the
former, but we won’t know until it happens.
An
Elliott wave practitioner analyzes the current Market (medium):
Fundamental
Headlines
There
were no economic data releases yesterday; and it will remain a slow week up until
Friday.
Overseas, the
stats out of Europe continue positive---March German industrial orders were
strong---and out of China continue negative---April exports and imports were
below expectations.
***overnight,
March German industrial production was better than expected while its trade
surplus was slightly less; March Japanese real wages were the lowest since 2015
(how is that ZIRP working for you, Mr. Abe?)
Bottom
line: in short, it was a quiet day for all in what will likely be a quiet week---helped
I am sure by congress being on vacation.
We will get load of Fed speak this week, which makes my hair hurt. The Monday edition featured the Cleveland Fed
who echoed the hawkish statement from the last FOMC meeting. If the rest do the same, the odds of a June
rate hike will likely approach 100%. ‘If’
being the operative word.
We are in one of
those situations where technicals will hold center stage because the news flow will
be so scant. (Of course, for saying that
Iran will nuke Saudi Arabia.) So go buy your Mom a great gift and sit back and
enjoy the calm.
My thought for the day: I often talk about the importance
of diversification to lowering the risk and improving the long term return of a
portfolio. Without getting into the math
behind this statement, it is sufficient to say that compound returns over time
are a function of average annual returns and the volatility of those
returns. If two portfolios have the same average returns, the lower
volatility portfolio will accumulate more wealth over time, other things
equal. Said differently, broad diversification can lead to more
consistent returns with lower volatility and greater wealth accumulation.
Investing for Survival
Stocks
are overvalued. Now what?
News on Stocks in Our Portfolios
EOG Resources (NYSE:EOG):
Q1 EPS of $0.15 in-line.
Revenue of $2.61B (+93.3% Y/Y) beats
by $200M.
FactSet Research Systems (NYSE:FDS) declares $0.56/share quarterly dividend, 12% increase from prior dividend of $0.50.
Economics
This Week’s Data
The
April small business optimism index came in at 104.5 versus estimates of 103.8.
Other
That
Canadian mortgage lender continues to lose deposits (medium):
Politics
Domestic
International War Against Radical
Islam
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