The Morning Call
6/9/17
The
Market
Technical
The indices
(DJIA 21182, S&P 2433) were up again but by an even smaller margin than in
recent days. However, the Dow remained below
its recent high; meaning that it is still not confirming the S&P’s break
above its comparable level. So, the near
term technical issue remains which of these divergent trends will change
direction and confirm the other. I still
believe that the Dow will ultimately trade above its high and the Averages will
make a run at the upper boundaries of their long term uptrends (now circa
24198/2753). Volume rose; breadth was mixed.
The VIX (10.1) was
down 2 ½ %, ending back below the lower boundary of its intermediate term
trading range (if it remains there through the close next Tuesday, it reset to
a downtrend) but above the lower boundary of its long term trading range. However, it is still below its 100 and 200
day moving averages and in a short term downtrend.
The long
Treasury was down 0.25%, closing below its 200 day moving average, voiding
Tuesday’s break out but above its 100 day moving average and in a very short
term uptrend. The gap between the upper
boundary of its short term downtrend and lower boundary of its long term
uptrend continues to narrow.
The dollar rallied
fractionally, ending in a very short term downtrend and below its 100 and 200
day moving averages.
After failing to
break above the upper boundary of its short term trading range on Wednesday, GLD
fell further, closing below the lower boundary of its very short term uptrend
(if it remains there through the close today, it will negate that trend). It
remained above its 100 and 200 day moving averages.
Bottom line: the
fireworks many expected as a result of yesterday’s trifecta fizzled, as
investors yawned their way through the day. The pin action followed Wednesday
pattern but in an even more hesitant manner---stocks and the dollar up, safe
havens (TLT and GLD) down.
There
is nothing, technically speaking, to alter my view that the Dow will ultimately
confirm the S&P’s move above its prior high and join in a move towards the
upper boundaries of their long term uptrends---now circa 24198/2753.
Market
bull Ed Yardini is getting a little cautious (medium):
Fundamental
Headlines
One
minor release of data yesterday: weekly jobless claims fell more than
projected.
The
foreign stats were more interesting: the May Chinese import/export numbers were
strong and first quarter Japanese GDP grew less than expected. Though they do nothing to alter our ex-EU ‘muddle
through’ scenario.
***overnight,
May Chinese CPI was in line while PPI was slightly below estimates.
As
far as the ‘big three’ events of the day:
(1)
Comey’s remarks provided something for everyone but
little that was actionable,
(2)
the ECB followed the Fed’s oft used Alfred Hitchcock
strategy---talk up the economy [it raised its growth rate forecast for EU GDP
for 2017, 2018 and 2019, cut its inflation outlook for the same period] and then
[drumroll, please] left QE unchanged.
(3)
in the UK, the conservative party lost its majority in
Parliament, suggesting some political instability [this is the UK, so the
statement is relative] near term. However,
it most likely will not stop Brexit but could change its path.
Other
developments included:
(1)
Qatar’s response to Wednesday’s Gulf States ultimatum
(medium):
(2)
the house passed its version of Dodd Frank reform. The Senate will now have to pass its version
and then it goes through the reconciliation process.
Bottom line: (1)
any thoughts of Trump’s impeachment are likely off the table, at least for the
moment, (2) the ECB money machine will continue unabated, (3) while reform of
Dodd Frank is my least important item on the Trump/GOP agenda [the ‘too big to
fail’ banks are the last group that needs less regulation], the house passage
of its version is still a step forward, (4) this week’s move by the EU on NATO
and the Mexican/US tentative agreement on a first step in reforming NAFTA are signs
of progress in the Trump foreign/trade agenda, in my opinion.
All of the above
are likely to keep investor euphoria on the Trump trade ramped up. My problem is not that I don’t see an
improvement in the long term secular growth potential of the US, because I do. My problems are (1) what is being paid for
that improvement and (2) the impact on asset pricing and allocation of the
unwinding of global QE. However, until
some factor alters current Market psychology, investors will likely continue to
ignore those issues as they have been for the last two years.
Sit back and
enjoy it. Just be sure to be financially
and psychologically prepared for this dream world to end.
The
latest from David Rosenberg (medium):
May’s
dividend report (medium):
http://politicalcalculations.blogspot.com/2017/06/dividends-by-numbers-in-may-2017.html#.WTlrFGjys2w
My
thought for the day: in the last two years, I have spent a lot time worrying
about the damage to my/your Portfolio that a Market downturn could cause. But over the long term, a more insidious
source of Portfolio damage is the too frequent trading, commissions and taxes.
Investing for Survival
In
retrospect, everything is obvious.
News on Stocks in Our Portfolios
Economics
This Week’s Data
Other
Update
on household wealth (medium):
Politics
Domestic
While this is a
politically loaded article by dem sycophant, it does provide a good look at the
debate/problem the GOP will face raising the debt limit (medium):
International War Against Radical
Islam
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