The Morning Call
8/14/17
The
Market
Technical
The
selloff in the S&P took it below its former high (the Dow did not). That is a very minor negative in the scheme
of things---it remains above its moving averages and in uptrends across all
timeframes.
The
long Treasury continued its upward march, undoubtedly aided by the weak PPI and
CPI numbers (lower inflation means lower interest rates, a weaker economy and
likely an easier Fed). Notice it made a
higher low and a higher high last week---a good sign of trend momentum.
The
dollar continued its downward track. As
you can see, it made another lower high, keeping the momentum lower.
Gold’s
chart further improved last week---bouncing of its 100 day moving average and
resetting its very short term uptrend.
However, it has reached a critical technical level---the upper boundary
of its short term trading range. GLD
challenged it once before, unsuccessfully.
If it can make a clear break, that probably means that the S&P and
the dollar will continue to fall, while the VIX and TLT will rise.
Reflecting
the drop in the S&P, the VIX soared last week. It closed above its 100 day moving average (if
it remains there through the close today, it will revert to support), its 200
day moving average (if it remains there through the close tomorrow, it will
revert to support) and the upper boundary of its short term downtrend (if it
remains there through the close tomorrow, it will reset to a trading
range). Notice that I added a minor
resistance level (green line), which the VIX penetrated on Friday, but couldn’t
hold above. That is the best short term
guidepost that we have, that is, if the VIX busts through it, the next
resistance level is considerably higher (circa 23). If it retreats from here, that likely means
that the Market sell off is over.
Fundamental
Headlines
Last week’s
economic data was tough to interpret: it was slightly weighed to the upside and
that included one primary indicator (productivity). However, the lower PPI and CPI numbers are
subject to one’s own bias. On the one
hand, they clearly give the Fed room to stay easier longer (a plus for the
Market?) and keeps inflation out of our lives.
On the other hand, they point to a weaker economy, suggesting slower
corporate profit growth and an excuse for the Fed to perpetuate QE (a negative
for the economy). Since (1) I am
measuring the economy and not the Market in this exercise and (2) the Market
did not respond positively to those stats, I am going to rate them as negative
which makes the week a wash: in the last 96 weeks, twenty-nine were positive, fifty-two
negative and fifteen neutral.
The
political news was dominated by the school boy, ‘mine is bigger than yours
rhetoric’ between North Korea and US, i.e. the Donald. As you know, I think this a very dangerous
strategy for Trump in the sense that it could spawn a ‘Branch Davidian’ type
response from Un, i.e. ‘f**k it, we are all going to die sooner or later, I am
ready to go down in a blaze of glory’.
Bottom
line, nothing in the numbers to alter our ‘struggling economy’ forecast. Trump needs to shut up. I am pleased with our Portfolios’ cash
position.
More
fodder for the bulls (short):
Investing for Survival
The
math problem with buy and hold.
News on Stocks in Our Portfolios
VF
Corporation (NYSE:VFC) acquires global
workwear company Williamson-Dickie Mfg. for ~$820M.
Economics
This Week’s Data
Other
Politics
Domestic
International
China imposes sanctions on North
Korea (short):
Afghanistan = Vietnam?
Visit Investing
for Survival’s website (http://investingforsurvival.com/home)
to learn more about our Investment Strategy, Prices Disciplines and Subscriber
Service.
No comments:
Post a Comment