The Morning Call
7/20/17
The
Market
Technical
The indices
(DJIA 21640, S&P 2473) had a strong up day.
Volume was up slightly, but remained at a low level; and breadth continued
weak. They remain firmly in uptrends
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.
The VIX (9.8) was
down 1%, finishing below the lower boundary of its long term trading range for
the fourth day (if it remains there through the close today, it will reset to a
downtrend). It is now in a short term
and intermediate term downtrend.
The long
Treasury was up fractionally, ending well above its 200 day moving average as
well as the lower boundary of its very short term uptrend.
The dollar rebounded
modestly, but did little to correct an ugly chart. UUP is below its 100 and 200 day moving
averages, within a very short term downtrend and is nearing the lower boundary
of its short term trading range.
GLD was down
slightly, but still closed above its 200 day moving average (if it remains
there through the close on Friday, it will revert to support) and is nearing its
100 day moving average. So clearly, this
chart is improving.
Bottom line: stocks
resumed their upside momentum despite continuing disappointing news. Relax and watch for a potential challenge of
the upper boundaries of the Averages long term uptrends. But be sure to initiate or build your cash
position using a portion of your winners as a source of funds (remember sell
high, buy low).
Fundamental
Headlines
Wednesday’s
economic data releases finally provided some upbeat numbers: weekly mortgage
and purchase applications rose and housing/permits were strong. There were no global data points; but
officials from both the Bank of Japan and the ECB provided some commentary
ahead of their meetings today. The ECB’s
narrative had a dovish tone to it which followed earlier more hawkish comments
(sound familiar?); ***overnight, indeed, it left all policies in place and offered
to keep them in place until its inflation objective is met (which maybe never).
; while the BOJ remarks suggested
that it would abandon its 2% inflation objective. ***overnight, it didn’t abandon the
objective, but simply delayed the date to achieve it---likely meaning more QE
longer.
The GOP was out
in force providing hopeful rhetoric about:
(1) the
continuing effort to repeal and replace with Trump pressing members of the senate
and McConnell promising a vote on outright repeal next week. However, the CBO weighted in with a scoring
of that [outright repeal] effort; the highlights being [a] over the next ten
years, it will result in a $473 billion savings but it will double premiums and [b] 32 million insureds will lose
coverage.
***overnight, another
attempt at compromise failed.
(2) talking up
tax reform and infrastructure spending. Of
course, if the GOP can’t come together, then no more progress will be made on
these issues than has been made on healthcare.
However, it does seem likely that there is more consensus on those
issues. Unfortunately, the GOP leadership
spent the time and capital on healthcare in order to create tax savings that
could be used on tax reform. Without
that savings, my principal concern remains any nonrevenue neutral tax
reform/infrastructure spending will exacerbate the already out of control growth
in the deficit/debt. My hope is on hold.
More
problems for the house budget proposal (medium):
The good, the
bad and the ugly of Trumponomics (medium):
***overnight,
the US and China ended trade talks on steel without issuing a statement,
suggesting that problems remain and the odds of a US tariff imposition is high.
Bottom line: we learned
a lot today about one of the sources of stock euphoria---liquidity provided by
the ECB and BOJ will continue apace. Sooner
or later, the price is going to be paid for the gross mispricing and
misallocation of assets. I just don’t
know when. I do know that I want to own
cash when it happens.
Thoughts
from an optimist. Note two things: (1)
he gives four presumably invalid reasons for the Market nearing a top but only
addresses one and (2) the one he does address is valuation but [a] his metric
is forward earnings which have never been a good measure of valuation and [b]
he then gives two examples where he says there is overvaluation, ascribes it to
analysts not being able to get a handle on the right valuation but somehow
assumes all the other analysts in all the other industries/companies are
correct in their judgments.
Investing for Survival
Lessons
from the financial crisis.
News on Stocks in Our Portfolios
Revenue of $3.74B (+16.1% Y/Y) beats by $70M.
Revenue of $3.7B (+12.1% Y/Y) beats by $70M.
Revenue of $5.3B (-12.1% Y/Y) beats by $40M.
Economics
This Week’s Data
Weekly
jobless claims fell 15,000 versus expectations of a 1,000 drop.
The
July Philadelphia Fed manufacturing index came in at 19.5 versus estimates of
22.0.
Other
Private
debt growth and GDP (short):
Politics
Domestic
Trade war games
(and he never mentions Smoot Hawley) medium:
US military
study on the American ‘empire’ (medium and today’s must read):
International War Against Radical
Islam
Apropos
of the above link, here is another example of the quagmire our political class
has gotten us in (medium):
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for Survival’s website (http://investingforsurvival.com/home)
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