The Morning Call
8/2/17
The
Market
Technical
The indices
(DJIA 21963, S&P 2476) moved higher yesterday. Volume rose; breadth improved. 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.
Where
Elliott Wave analysis has the Market (short):
Update
on margin debt (medium):
The VIX (10.) declined
1 ½ %. It finished above the former
lower boundary of the long term trading range but back below the former lower boundary
of its intermediate term trading range. As
you know, I reset these trends to down but raised the question as to whether
the VIX had made some kind of bottom. I
think that is still a debatable point though clearly yesterday’s pin action
suggests that resetting the trends was the right move.
=
The long
Treasury rose, ending above its 100 and 200 day moving averages (both support),
the lower boundaries of its short term trading range and its long term
uptrend. That is a lot of support. So unless TLT starts breaking those support
levels, I am assuming that last week’s soft price performance is not something
about which to be concerned.
The dollar
rallied weakly, remaining below the lower boundary of its short term trading
range for a third day, resetting to a downtrend. This is an ugly chart.
GLD continues to rise, ending above its 100 and
200 day moving averages (both support) and the lower boundary of a new
developing very short term uptrend.
Bottom line: the
indices got back in sync yesterday though that doesn’t correct the much longer
period of divergent price performance. TLT,
UUP and GLD investors seemed to have reembraced the weak economy, low inflation/interest
scenario. I would think that this deviant
pin action would create a little heartburn for equity investors but that has
not been case so far.
Fundamental
Headlines
Lots
of data yesterday; the overall results were mixed: month to date retail store
sales, the July manufacturing PMI and the July ISM manufacturing index were
better than anticipated; June personal income, July light vehicle sales and June
construction spending were worse; and June personal spending was in line. However, June personal income and spending
along with June construction spending are primary indicators; so the weight of
the stats were negative.
Overseas,
the international data was upbeat: the July Chinese Caixin manufacturing PMI was
better than expected; and the July EU and UK manufacturing PMI’s were above
forecasts.
The
only news coming out of the political class is more concern about rising risk
of armed confrontation with North Korea.
I can’t imagine why we would want to take on North Korea but our
political class seems eager for a fight.
That makes me nervous but clearly, the Market isn’t worried.
***overnight,
Trump finally decides to take on the Chinese theft of US intellectual
property. Score another for the good
guys. (medium):
http://www.zerohedge.com/news/2017-08-02/us-launch-broad-based-investigation-chinese-trade-practices
Bottom
line: the US economic numbers aren’t
improving; though this earnings season is coming in better than had been anticipated. I have addressed this seeming contradiction
in the past---one possible explanation being the difference between what
corporations report to the Street versus what they report to the government for
tax purposes. Here is an update on that
point:
The
combative rhetoric between the US and North Korea continues. Why the US is giving this fat kid from one of
the most primitive countries on the planet any public attention at all is
beyond me. Costa Rico has a better
chance of defeating the US than North Korea and it doesn’t have an army. Yes, North Korea has nukes; but the US engaging
in threats just gives a lunatic an excuse to commit suicide. What worries me is not what North Korea is
doing but the saber rattling by the US. To
be sure, the US has to be prepared for any contingency, but Trump needs to
worry about healthcare not the equivalent of a gnat on goat’s ass. (must read):
In this
uncertain atmosphere, I would be scaling out of my winners and all my losers. Sell high, buy low.
The
value of stock buybacks (medium):
My thought for the day: courtesy of Warren Buffett: If you've got 160 IQ, sell 30
points to somebody else because you won't need it in investing. What you do
need is the right temperament. You need to be able to detach yourself from the
views of others or the opinions of others.
Investing for Survival
The
truth about how money really works.
News on Stocks in Our Portfolios
Revenue of $4.04B (+10.1% Y/Y) beats by $10M.
Revenue of $45.4B (+7.2% Y/Y) beats by $510M
Revenue of $2.61B (+46.6% Y/Y) beats by $40M.
Automatic Data Processing (NASDAQ:ADP) declares $0.57/share quarterly dividend, in line with
previous.
Economics
This Week’s Data
The
July Markit manufacturing PMI was reported at 53.3 versus expectations of 53.2.
The
July ISM manufacturing index came in at 56.3 versus estimates of 56.2.
June
construction spending fell 1.3% versus forecasts of up 0.5%.
July light vehicle sales
were 16.7 million versus consensus of 16.8 million.
Weekly mortgage
applications fell 2.8% while purchase applications declined 2.0%.
The
July ADP private payrolls report showed an increase 178,000 jobs versus
projections of a rise of 173,000 jobs.
Other
The
latest inflation data (short):
Revisions
in consumer income and spending (short):
Politics
Domestic
Russian
interference in US elections (medium):
NCAA
discrimination against athletes (short):
International War Against Radical
Islam
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