The Morning Call
7/26/17
The
Market
Technical
The indices
(DJIA 21613, S&P 2477) had a great day.
Breadth improved but volume remains low.
The upward momentum as defined by their 100 and 200 day moving averages
and uptrends across all timeframes remains intact. At the moment, technically speaking, I see little
except for the VIX, to inhibit the Averages’ challenge of the upper boundaries
of their long term uptrends---now circa 24198/2763.
The VIX (9.4) was
up fractionally, but again finished in downtrends across all timeframes. It is not surprising that it is at all-time
lows at a time when stocks are at all-time highs; but it does suggest that
further highs in stocks will be limited in magnitude---though clearly you
couldn’t tell by yesterday’s pin action.
The long
Treasury fell 1 ½%, ending below the lower boundary of its very short term
uptrend---potentially a sign that bond investors could be adjusting their economic/interest
rate expectations. It remained above its
100 and 200 day moving averages.
Intraday, the
dollar traded below the lower boundary of its short term trading range but
finished back above it. It remains in a
very short term downtrend and below its 100 and 200 day moving averages.
GLD moved lower, but still closed above its
100 day moving average for the third day, reverting to support.
Bottom line: stocks
rose on good news on all fronts; indeed, if they hadn’t moved up, I would have thought
something amiss. Bonds reflected the
positive economic data. The question is
now whether there will be follow through to the downside.
Fundamental
Headlines
The
optimists owned the day. The US economic
news was virtually all positive: month to date retail chain store sales, July
consumer confidence, the July Richmond Fed manufacturing index and the May Case
Shiller home price index (although the Fed may not like the less than
anticipated price rise). Several major
Dow components reported better than expected earnings. Oil bounced hard (but,
but lower oil prices are an unmitigated positive). Overseas, German business
confidence was quite strong.
***overnight,
second quarter UK GDP was slightly ahead of forecast.
On
the fiscal side, the senate passed the measure that would allow the debate on
healthcare to continue. Later, it failed
to pass a straight ‘repeal and replace’ motion; but that was expected. That it took so long and so much effort to
accomplish so little (an agreement to talk) illustrates so well just how ugly the
legislative sausage making can be. Bad; but
it is better than the alternative.
The
house passed a bill imposing sanctions on Russia for interference in the 2016
elections. Sanctimonious a**holes. The US has interfered in more elections than
Carter has liver pills.
Today
will bring the next iteration of the Fed’s Tower of Babel. Gosh, knows how the post meeting statement
will read; but it is sure to be just as confusing as every other communication
out of this group of eggheads for the last three years. And reason is, that the Fed (and the rest of
the central banks) have painted themselves and the global economy into a
corner. The massive mispricing and misallocation
of assets has stifled growth, will continue to do so and will only get worse
the more they foist QEInfinity on the rest of us.
It
is even worse in Europe (medium):
More
signs of the mispricing of assets (short):
The
death cross of central bank credibility (short):
Bottom
line: lots of good news fueled yesterday’s spike. Certainly this earnings season is coming in
better than forecast. It seems to be a
tribute to American business acumen, because, this week’s numbers
notwithstanding, there is nothing in the macroeconomic data to account for the
progress. Perhaps the improved
regulatory environment and the recovering EU economy are starting to have an
impact. We can only hope---because we
are going to need all the help we can get when the central banks get their comeuppance.
As lame as the
legislative process appears at times, the senate vote does keep alive the move
towards reform healthcare and with it, hopefully, taxes cuts and infrastructure
spending. To be sure, this vote was a
baby step. So I am not sounding the trumpets;
but it does seem that the GOP is getting its act together and as I said,
hopefully, our political class will do what is necessary to break the shackles
its predecessors have placed on our economy.
Investing for Survival
Skill
versus luck.
News on Stocks in Our Portfolios
Revenue of C$3.33B (+17.3% Y/Y) beats by C$50M.
Revenue of $39.8B (-1.8% Y/Y) in-line.
Revenue of $7.68B (-1.2% Y/Y) misses by $70M.
Revenue of $22.74B (-8.2% Y/Y) misses by $280M.
Revenue of $9.7B (-15.9% Y/Y) beats by $50M.
Economics
This Week’s Data
The
May Case Shiller home price index rose 0.1% versus consensus of up 0.3%.
Month
to date retail chain store sales grew slightly faster than in the prior week.
July
consumer confidence soared to 121.1 versus expectations of 117.0.
The
July Richmond Fed manufacturing index was reported at 14 versus estimates of 8.
Weekly mortgage
applications were up 0.4%, while purchase applications fell 2.0%.
Other
Update
on the Chinese economy from Stephen Roach (medium):
Politics
Domestic
International War Against Radical
Islam
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