The Morning Call
6/5/17
The
Market
Technical
The
S&P rallied again on Friday; but the Dow remained below its former high
(21228)---though just barely. Given that
all news is good news, I can see little reason why the DJIA won’t catch up; and
then we will off to the races, i.e. the upper boundaries of the Averages long
term uptrends circa 24198/2753.
The
long Treasury spiked on Friday, likely the result of the poor nonfarm
employment report. As you can see, it
traded through its 200 day moving average (if remains there through the close
on Wednesday, it will revert to support) and began building a very short term
uptrend. It is also closing in on a
challenge of its short term downtrend.
GLD
is behaving in concert with TLT---strengthening and showing little concern
about rising interest rate. It is
closing in on the upper boundary of its short term trading range.
The
dollar is mirroring TLT and GLD. i.e. trading down, reflecting the increased
likelihood of a weaker economy/lower interest rates.
The
VIX closed last week on all-time lows.
Aside from ending below its 100 and 200 day moving averages (now
resistance) and in a short term downtrend, it also finished below the lower
boundary of its intermediate term trading range for the second day (if it
remains there through the close tomorrow, it will reset to a downtrend) and
below the lower boundary of its long term trading range (if it remains there
through the close on Friday, it will reset to a downtrend.
Fundamental
Headlines
More
on valuation (medium):
Investing for Survival
Reframing
the concept of risk.
Investment/general
biases
Theory induced blindness: we are unwilling to admit when we’re wrong, but rather
try to craft the “best story possible” to make sense of what had occurred by
altering “our image of what we thought earlier”. Rather than admitting a
mistake, we believe we anticipated it in hindsight when we actually hadn’t. Example:
if two football teams are evenly balanced going into a game and one “crushes”
the other, you now perceive one as much stronger. Further, “that perception
gives you the sense that this must have been visible in advance, that one of
them was much stronger than the other”.
Hindsight “allows us to keep a coherent view of the world, it blinds us
to surprises” and “prevents us from learning the right thing”. Even when we do
admit a mistake, we say we won’t do it again when we should really learn from
surprises that “the world is difficult to anticipate”.
News on Stocks in Our Portfolios
Economics
This Week’s Data
Revised
first quarter nonfarm productivity was flat versus expectations of -0.2%; unit
labor costs rose 2.2% versus estimates of up 2.6%.
Other
The
Fed and China (medium):
***overnight,
the May EU Markit composite PMI was unchanged from April; the Chinese services
PMI was better than expected while the UK services PMI was worse; the World
Bank forecast 2017 global growth of 2.7% and for 2018 2.9%
Politics
Domestic
International War Against Radical
Islam
Is
Afghanistan a lost cause? Did someone
whisper Vietnam? (medium):
Visit Investing
for Survival’s website (http://investingforsurvival.com/home)
to learn more about our Investment Strategy, Prices Disciplines and Subscriber
Service.
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