The Morning Call
6/8/17
The
Market
Technical
The indices
(DJIA 21173, S&P 2433) lifted yesterday, though, for a third day, the move
was small. 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 fell slightly; breadth was mixed.
The VIX (10.4) was
down pennies, ending above the lower boundary of its intermediate term trading
range and 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 slightly, closing right on its 200 day moving average (if it
remains there through the close on Friday, it will revert to support) and
finishing above its 100 day moving average and in a very short term uptrend.
The dollar rallied
fractionally, ending in a very short term downtrend and below its 100 and 200
day moving averages.
GLD was down
pushing down off the upper boundary of its short term trading range. This is the second unsuccessful test of that
boundary; clearly it needs break above that boundary to keep its current rally
in effect. It remained above its 100 and 200 day moving averages and in a very
short term uptrend.
Oil took a major
hit after a big build in crude inventories (short):
Bottom line:
investors of all stripes seemed to take heart from the (nonsmoking gun) narrative
in Comey’s prepared remarks for his congressional testimony today---stocks and
the dollar were up and safe havens (TLT and GLD) down. That said, that was just the appetizer for
today’s trifecta---Comey testimony, ECB meeting and UK election.
For
the bulls (medium):
http://ciovaccocapital.com/wordpress/index.php/stock-market-us/low-volatility-and-stock-market-risk/
Fundamental
Headlines
Yesterday’s
economic datapoints were mixed: weekly mortgage and purchase applications were
up while April consumer credit grew much less than anticipated.
***overnight,
the May Chinese import/export numbers were strong; first quarter Japanese GDP
Grew less than expected.
Overseas,
there were no economic releases; but there was lots political news, most of
which was positive:
(1)
the failing Spanish bank was bailed out, lowering the
risk of any disruption in the EU financial system,
(2)
the EU is apparently set to unveil proposals for a new
defense union in which it will, at a minimum, assume more financial
responsibility for its defense,
(3)
the US and Mexico reached an ‘agreement in principle’
to avert a trade war over sugar,
The latter two
are indications that Trump’s goal of making the US a partner but not a chump
for international agreements could be working.
As you know, I believe that this country’s first obligation is to
itself, including living within its means.
We can only hope that the Donald will pursue that policy domestically.
(4)
the Saudi’s issued an ultimatum to Qatar. Plus there was a terrorist bombing in Iran
[ironically, the globe’s largest state sponsor of terror]. Both of these incidents are examples of the
surfacing of the historical Sunni/Shi’a rift, which adds yet another tub of
dynamite to the explosive Middle East powder keg.
***overnight, Qatar’s foreign minister
will visit Moscow this weekend (short):
And
Qatar puts its military on high alert (medium):
The
day’s top political event was Comey’s release of his prepared remarks to
Congress. I leave it to you to interpret
his comments as you wish (medium):
Bottom
line: there was plenty about which to be encouraged in yesterday’s news flow:
signs that Trump’s foreign/trade policy could be having a positive impact,
there is apparently no obstruction of justice charges likely to be brought
against Trump and any concerns about turmoil in the Spanish financial system
have been stilled. The first two support
our recent increase in the long term economic secular growth rate assumption in
our forecast. The latter keeps the risk
to the EU financial system at a tolerable level.
The
mounting problems in the Middle East, especially when they appear to be a part
of a much deeper historical sectarian conflict, do raise the risk of and the
potential magnitude of conflict in there region.
The
latest from Doug Kass (medium):
My
thought for the day: following on yesterday’s thought about not averaging down,
this short article from a trader emphasizes that point.
Investing for Survival
Five
universal laws of human stupidity.
News on Stocks in Our Portfolios
Economics
This Week’s Data
April
consumer credit grew $8.2 billion versus estimates of up $17 billion.
Weekly jobless claims
fell 10,000 versus forecasts of down 7,000.
Other
Politics
Domestic
International War Against Radical
Islam
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