The Morning Call
7/18/17
The
Market
Technical
The indices
(DJIA 21629, S&P 2459) meandered around the flat line most of day, closing
down slightly but still above the upper boundary of their recent one month
trading range. Volume was up
fractionally but remains at a low level and breadth was unimpressive. 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) rose
3 ¼ %, but remained below the lower boundary its intermediate term trading
range for the third day (if it remains there through the close today, it will
reset to a downtrend) and the lower boundary of its long term trading range for
the second day (if it remains there through the close Thursday, it will reset
to a downtrend).
The long
Treasury was up again; this time ending above its 200 day moving average as
well as the lower boundary of its very short term uptrend. As you know, TLT has been toying with both levels
for the last few trading days, giving one false signal after another. There remains too much uncertainty to make a
directional call.
The dollar was
unchanged; meaning that its chart remains ugly.
UUP is below its 100 and 200 day moving averages and within a very short
term downtrend.
GLD was up. It finished above the upper boundary of its
very short term downtrend for a second day (negating that trend) and right on
its 200 day moving average. Could its
pin action possibly be on the verge of improving?
Bottom line: stocks
turned in another snoozer of a day. But importantly
they continue to track higher. And they
will continue to do so until they don’t.
Given the current positive investor psychology, I have no idea when that
will be. In the meantime, sit back and
watch for a potential challenge of the upper boundaries of their long term
uptrends. But be sure to initiate or
build your cash position using a portion of your winners as a source of funds.
Fundamental
Headlines
Only
one US datapoint yesterday: the July NY Fed manufacturing index turned in a
dismal reading. On the other hand, China
continued its string of upbeat numbers, reporting better second quarter GDP,
consumer spending and factory output. If
this trend continues, I will start considering removing it from our ‘muddle
through’ international economic forecast.
China
still facing problems (medium):
Very
little news flow on macroeconomic/political issues; but here are some articles
addressing them:
Yellen has no
idea what she is talking about (short):
Liquidity
conditions still loose (medium):
Fiscal
policy dreaming (medium):
Oil
skeptics a little less skeptical (medium):
But
lots of news overnight:
Senate
scraps healthcare reform. You know, I was
hopeful that they could reach an agreement.
Still, the first try was DOA; the second try had more supporters; I remain
hopeful that this legislation can ultimately be improved to point that
consensus is reached. In the meantime,
Obamacare will remain a burden to the economy.
Trump released his
negotiating strategy for improving NAFTA.
I don’t see anything unreasonable in its proposed reforms.
Ecuador
announced that it would not abide by the OPEC production cut agreement. Who would have thunk?
Second
quarter UK CPI came in flat versus expectations of up 0.2%.
Bottom line: nothing
is happening that would alter our forecast: the NY Fed number was lousy,
healthcare reform is on life support, at least temporarily, tax reform is gleam
in the GOP eye, debt ceiling will soon be an issue and the Fed remains down the
rabbit hole. But nobody cares which means
that as of today our Model is wrong on valuations. But I have been there before. Our Valuation Model is not perfect but once
is starts flashing overvaluation, the worst decision I could have made was
increasing equity exposure or not following our Sell Half discipline.
Remain
aware that we are in earnings season and this week will be a big one.
The
rise of algo trading (medium):
Mirror,
mirror on the wall, who is the biggest buyer of all (medium):
My
thought for the day: there are some unique psychological pitfalls following my
Valuation Model---I feel like an idiot a lot of the time. The good news is that I have years of
experience in the field of idiocy. While
I get somewhat desensitized to that feeling, it is never easy.
Investing for Survival
Ned Davis’ four basic traits of successful investors:
- They
use objective indicators;
- They
are Disciplined;
- They
have Flexibility;
- They
are Risk adverse.
News on Stocks in Our Portfolios
Revenue of $18.84B (+1.9% Y/Y) misses by $110M.
Economics
This Week’s Data
June
import prices fell 0.2%, in line; export prices declined 0.2% versus estimates
of 0.00%.
Other
Update
on auto loans (medium):
Politics
Domestic
Beware of the
upcoming debt ceiling debate (medium):
International War Against Radical
Islam
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for Survival’s website (http://investingforsurvival.com/home)
to learn more about our Investment Strategy, Prices Disciplines and Subscriber
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