The Morning Call
6/20/17
The
Market
Technical
The indices
(DJIA 21528, S&P 2453) had a great day.
They actually gapped up. The last
time this happened, the gap got closed within a week but there was no follow
through to the downside. They clearly retain
their upward momentum as defined by their 100 and 200 day moving averages and
uptrends across all timeframes. At the
moment, I see nothing, technically speaking, to inhibit the Averages’ challenge
of the upper boundaries of their long term uptrends---now circa 24198/2763. Volume fell but breadth was quite strong.
The VIX (10.3) declined
fractionally---a bit unusual for big up price move. It would seem that the lower boundaries of
its intermediate and long term trading ranges are providing decent support. On the other hand, it remains below its 100
and 200 day moving averages.
The long
Treasury fell slightly but still finished above its 200 day moving average for
the fourth day, reverting to support and the upper boundary of its short term
downtrend for the third day, resetting to a trading range. In doing so, it also breaks out of the
developing pennant formation---a positive, technically speaking. I think that the initial objective is circa
$139.
The dollar was up
but still ended in a very short term downtrend and below its 100 and 200 day
moving averages.
GLD was off .75%,
closing below the upper boundary of its short term trading range and its 100
day moving average (if it remains there through the close on Wednesday, it will
revert to resistance). However, it is
still above its 200 day moving average---but just barely. This chart keeps getting uglier.
Bottom line: the
euphoria in equities continues impervious to the news flow, valuations and
cognitive dissonance coming from the pin action in the bond and dollar markets. Enjoy it while it lasts; just be sure to take
some money off the table, peeling back a portion of your biggest winners.
Oil
plunges back to its November low (medium):
Fundamental
Headlines
There
were no data releases yesterday, either here or abroad.
***overnight,
BOE chief said that now it is not the time to raise rates; Chinese yield curve
inverts.
We
did get some hawkish comments from NY Fed head Dudley---to no lasting effect. However, he is just the first of many this
week. (medium):
Though Mohamed El Erian
thinks maybe the Market should be paying closer attention (medium):
Plus there were lots
going on in the Middle East---none of it good.
Saudi’s
foil an Iranian attack of offshore production facilities (medium):
US
and Russia now eyeball to eyeball.
Israel
funding Syrian rebels (medium):
Bottom line: aside from
the news of Amazon buying Whole Foods which has the Market all atwitter, the
economic and political news flow is not what I would call upbeat. I have said this before; but at some point,
bad news will be bad news. Clearly, I have
no idea when.
Lots
of rationalizations/explanations for the Market strength. Here is another one. Any or all of these theories could be
right. I don’t think so; but I will
continue to present them so that you can decide.
On
the other hand (short):
My
thought for the day: we are currently in one of those periods in which there is
a reality gap between the results of fundamental analysis and ‘what is’ which
makes those results of fundamental analysis difficult to exploit.
Investing for Survival
The
formula behind buy low/sell high.
News on Stocks in Our Portfolios
Economics
This Week’s Data
The
first quarter US trade deficit was $116.8 billion versus expectations of $122.6
billion.
Other
How
the financial system keeps skirting Dodd Frank (medium):
The
illusion of declining debt to income ratios (medium);
Trump
and the debt ceiling (medium):
More
on auto loans (medium):
Politics
Domestic
International War Against Radical
Islam
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