The Morning Call
7/27/17
The
Market
Technical
The indices
(DJIA 21711, S&P 2477) had a so so day (Dow up, S&P flat). Volume declined; breadth was mixed. 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 (9.6) was
up, but still 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 may be limited in magnitude.
The long
Treasury rose, ending right on the lower boundary of its very short term
uptrend---a reversal of Tuesday’s break.
It remained above its 100 and 200 day moving averages.
The dollar finished
below the lower boundary of its short term trading range; if it remains there through
the close on Friday, it will reset to a downtrend. It remains in a very short term downtrend and
below its 100 and 200 day moving averages.
GLD moved higher, ending above its 100 and 200
day moving averages.
Bottom line: additional
positive earnings reports and a more dovish Fed seemed to provide the fuel for
the move up in the Dow. The latter also
appeared to have an impact on TLT, UUP and GLD, all of which moved in a way
that suggests their investors are not expecting a strong economy or higher
interest rates.
Fundamental
Headlines
The
economic data took a turn for the worse as mortgage applications rose
fractionally, purchase applications fell and June new home sales were below
expectations. Overseas, second quarter
UK GDP was slightly ahead of forecasts.
The
highlight of the day was the release of the FOMC minutes; but it was a nothing
burger. The Fed narrative cooed about
economic improvement, left rates unchanged and said that it would start
shrinking its balance sheet ‘relatively soon’. That was slightly more dovish than expected;
but given the latest dovish statements from the Fed, it was right in line with the
usual Fed incongruity: everything is awesome, but we still don’t have the balls
to pull the (normalization) trigger.
Paul
Singer on the Fed and central banks in general (short):
The
primary focus on fiscal policy is now how healthcare reform works its way
through the legislative process. Here is
a primer on what happens next (medium):
The
impact of Trump’s deregulation effort (medium and a must read):
Bottom line: earnings
continue to surprise to the upside, which is a clear plus for stocks. In addition, we received more good news on (1)
the positive impact the Donald’s push for deregulation is having on business
attitudes and activities [see above] and (2) improving numbers out of
Europe. To date, they have seemingly had
little effect; but perhaps that is changing.
The Fed retains
its role as the cowardly lion. It has
created a time bomb that it refuses to acknowledge; and the longer it doesn’t,
the more pain stocks will likely experience either when it finally does or some
exogenous event hits investors between the eyes and they realize the emperor
has no clothes.
Update
on the trend in dividend cuts (short):
Troublesome
facts (short):
My
thoughts for the day: most investors have an aversion to going against the
trend/crowd. Nobody wants to miss a
move. In addition, few institutional
portfolio managers want to risk his/her career by betting against
majority. When I was at Scudder, Stevens
and Clark, the mindset was that it was better to lose money in IBM (an
institutional favorite at that time) than risk being wrong by selling it. The problem is that at valuation extremes,
the crowd is wrong.
Investing for Survival
Money
manager clichés.
News on Stocks in Our Portfolios
Revenue of $3.05B (+13.4% Y/Y) beats by $80M.
Revenue of $15.75B (+7.7% Y/Y) beats by $280M.
Revenue of $3.1B (+6.9% Y/Y) beats by $60M
Revenue of $16.08B (-0.1% Y/Y) beats by $60M.
Revenue of $2.83B (+6.0% Y/Y) in-line
Economics
This Week’s Data
June
new home sales were flat versus expectations of a 1,000 increase; however, May
was revised down 5,000.
June
durable goods orders rose 6.5% versus estimates of up 3.5%; but ex
transportation, they were up 0.2% versus forecasts of up 0.4%. In other words, core capital goods fell 0.1%
versus consensus of +0.3%.
The
June trade deficit came in at $63.9 billion versus projections of $65.0
billion; but May was revised down by making the two months a wash.
Likewise,
the June Chicago national activity index was reported at .13 versus expectations
of .10; but May was revised down making the two months a wash.
Weekly
jobless claims rose 10,000 versus estimates of +7,000.
Other
Politics
Domestic
International War Against Radical
Islam
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