The Morning Call
8/17/17
The
Market
Technical
The indices
(DJIA 22024, S&P 2468) had a volatile day but ended modestly to the upside. Volume fell; breadth improved. The upward momentum as defined by the
Averages’ 100 and 200 day moving averages and uptrends across all timeframes
remains intact. At the moment,
technically speaking, I see little to inhibit their challenge of the upper
boundaries of their long term uptrends---now circa 24198/2763.
The VIX (11.7) declined
another 2 ¼ %, closing (1) below its 100 day moving average [now support]; if
it remains there through the close on Friday, it will revert back of resistance
but (2) above its 200 day moving average [now support]. If the VIX confirms its descent below the 100
day moving average and further pushes below its 200 day moving average, then clearly,
the next resistance level is the former low.
However, I leave open the questions as to whether the VIX made or is
making some kind of bottom extending back to late July and if I was premature resetting
of the intermediate term from trading range to downtrend.
And:
The long
Treasury rebounded, 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.
The dollar retreated,
closing in a short term downtrend, below its 100 and 200 day moving averages
and failed to make a new higher high.
Let’s see what happens when it challenges its recent higher low.
GLD moved up, finishing above the lower
boundary of its very short term uptrend and its 100 and 200 day moving averages
(both support).
Bottom line: the
indices fought through the hysteria over the Trump gaff and another confusing
set of FOMC minutes---which is a pretty heavy load to overcome. So any thoughts of weakening upside momentum
is probably a waste of time. That said,
volume and the pin action in bonds, the dollar and gold continue to point to
economic weakness.
Fundamental
Headlines
There
were only a couple of datapoints released yesterday: weekly mortgage and purchase applications as
well as July housing starts were disappointing.
Overseas,
second quarter EU GDP grew 0.6%, in line and the IMF raised its estimate for 2017
Chinese GDP growth.
In addition,
rumors are that Draghi will not signal a policy change in his upcoming speech
in Jackson Hole. ***which were
confirmed overnight by the release of dovish ECB meeting minutes.
***overnight,
July UK retail sales were stronger than anticipated.
The
Fed released the minutes from its last FOMC meeting. As usual, there was the obligatory ‘on the
one hand, on the other hand’ dialectic---a veritable smorgasbord of gems for
both hawks and doves to hang on to.
Indeed, reading and listening to the official media analysis of the
minutes, there were both dovish and hawkish conclusions. However, the most important indicator for me is
the futures market; and they were basically unchanged as to the likelihood of
future Fed tightening. In short, nothing
new. My bet is that the Fed will remain
more dovish than generally expected---but that is one man’s guess.
How
central banking increases income inequality (medium):
The
level of negative yielding global debt surges……but, but everything is awesome.
(short):
Of
course, none of this mattered (not that the Fed minutes should have anyway) to
the media which remained focused on Trump’s Wednesday clash with reporters as
well as the disbanding of two presidential advisory councils. I have no idea how long this bull baiting
goes on; but I suspect that as long as it does, it will hamper efforts to
accomplish healthcare and tax reform and infrastructure spending.
Bottom
line: yesterday’s poor data, the Fed’s
indecision and the Draghi rumor of no forthcoming policy change seemed to keep
investors hopeful that QEInfinity will last at least a little bit longer.
The
positive stats out of the EU and Chinese economies apparently left investors
unconcerned, which is understandable since so far any improvement in the global
economy hasn’t shown up in our numbers.
Nor was anyone worried
about the latest episode of the Trump reality TV series. After all, the worst thing that could happen,
economically speaking, is nothing, i.e. gridlock. As you know my preferred legislative scenario
has long been gridlock. God only knows
how much better off this country would be if we had had it the last sixteen years.
To be sure that lowers the odds of
healthcare and tax reform and infrastructure spending. But in the absence of healthcare reform, my
biggest worry has been our political class blowing the budget apart by nonrevenue
neutral taxing and spending measures. So from an economic policy point of view,
while this intensified political acrimony could result in less than hoped from
fiscal policy revisions but it also means our ruling class won’t be able to do
anything stupid.
The one potentially
bothersome outcome would be further degeneration in the political dialogue that
spawns more violence and further rents the social fabric of this country.
Earnings update
(short):
My
thought for the day: sometimes doing nothing is better than doing
something. But nothing is the enemy of
the financial community---it generates no fees or commissions but does generate
taxes and trading frictions. Doing
nothing is bad for business. Doing something because your broker says that you
should is not a good reason. I only do
something when my discipline, which establishes buy and sell prices well in
advance, calls for it. That is why there
are so few times you get a Subscriber Alert announcing any action on my part.
Investing for Survival
This
is a bit long; but it deals with an important issue in investing---not losing
money.
News on Stocks in Our Portfolios
Economics
This Week’s Data
Weekly
mortgage applications rose 0.1% while purchase applications declined 2.0%.
Weekly
jobless claims fell 12,000 versus consensus of down 4,000.
The
August Philadelphia Fed manufacturing index came in at 18.9 versus expectations
of 17.0
Other
More
on auto loans (medium):
Politics
Domestic
Presented with
no comment (short):
International War Against Radical
Islam
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