The Morning Call
8/16/17
The
Market
Technical
The indices
(DJIA 21998, S&P 2464) were mixed yesterday, failing to follow through with
Monday’s pop. Volume was up slightly; breadth
was mixed. Nonetheless, 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 (12.0) fell
2 ½ %, but still closed above (1) its 100 day moving average [now support] and
(2) its 200 day moving average for the fourth day, reverting to support. The absence of follow through was a bit
surprising; though clearly it could happen anytime. Still the key levels to watch for a hint of a
change in momentum are the 100/200 day moving averages on the downside and the
upper boundary of its short term downtrend on the upside. I leave open the questions as to whether the
VIX made some kind of bottom back in late July and if I was premature resetting
of the intermediate term from trading range to downtrend.
The long
Treasury declined a second day, but ended 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 was
up, but still closed in a short term downtrend and below its 100 and 200 day
moving averages. Nonetheless, it has
made a lower high after bouncing off the lower boundary of a short term trading
range. That said, it tried to make a
higher high yesterday but failed.
GLD declined, but still finished above the lower
boundary of its very short term uptrend and its 100 and 200 day moving averages
(both support).
Bottom line: the
indices lost most of Monday’s momentum while volume, breadth and the pin action
in bonds, the dollar and gold mildly followed through with Monday’s pin action. But they did so with little conviction. Follow through.
Fundamental
Headlines
Yesterday’s
economic stats were mixed: on the positive side, the August housing market
index, the August NY Fed manufacturing index (a blowout number), July
import/export prices and most importantly, July retail sales (primary
indicator) which were strong; the negatives were month to date retail chain store
sales and the June business inventories/sales.
Update
on big four economic indicators (medium):
***overnight,
the ECB floated a trial balloon that suggested that in his upcoming Jackson Hole
speech would not mention in monetary policy changes.
Politics
held the headlines:
(1)
Un seemingly altered the direction of the North
Korea/US saber rattling. Any lessening
in tensions is clearly a plus for the economy and the Market. Let’s hope this nonsense is over; though I wouldn’t
bet money on it,
(2)
Trump held, what turned out to be, a bombastic press
conference. Most of the press ignored
the announcement of reductions in regulations, in this case, easing the
permitting process for infrastructure projects.
I have made a point of praising the Donald’s deregulation emphasis and
even raised my long term secular economic growth rate assumption because of
it. This latest move is yet another
step.
Unfortunately, this was all drowned out by a heated
exchange over who is to blame for the tragic incident in Charlottesville and the
timing related to Trump’s response. I am
having flashbacks to Nixon and the press after the Watergate break in. That
was not a pleasant time in this country.
Little got done by way of legislation [think healthcare and tax reform
and infrastructure legislation] and the overall mood of the country was as dark
as it has been in my lifetime. If this
dog fight continues, there will be no winner.
***starting today, representatives of
NAFTA nations convene to begin modernizing the trade treaty.
Bottom line: Trump’s
move to speed up infrastructure spending by streamlining the regulatory process
that was subsumed by the fireworks over what happened at and following events
in Charlottesville. While the latter won’t change the positive
economic impact of the former, it only adds to the contentious political
dialogue in this country which I fear will have an effect on the Trump/GOP
fiscal reform program. And frankly, I am
less worried about that than I am about the increasingly poisonous political
atmosphere in this country. Whoever you
want to blame, it is not a plus for the economy or the Market.
My
thought for the day: I haven’t discussed diversification of late. This is one of the most important investing
disciplines because it is a primary avenue to risk reduction. In short, an investor shouldn’t have his/her
net worth overly exposed to a single stock/bond, etc. It is best accomplished by including stocks,
bonds and cash in the portfolio. Then
further, there should be a group of securities within the first two categories;
and those securities should be diversified by industries. I try to keep an initial position size to 3%
of the portfolio, though there are studies that show a ten holdings (10%
positions) provides most of the diversification one needs. Finally, if a portfolio is too small to make
such diversification economic, there are many, many exchange traded funds that
can provide it at a very low cost.
Investing for Survival
The
price of being all in or all out.
News on Stocks in Our Portfolios
Economics
This Week’s Data
Month
to date retail chain store sales advanced slower than the prior week.
June
business inventories rose 0.5% versus expectations of up 0.4%; however, sales
only grew 0.3%.
The
August housing market index came in at 68 versus estimates of 65.
July
housing starts fell 4.7% versus forecasts of a 0.8% rise while building permits
declined 4.0% versus projections of down 0.6%.
Other
Household
debt and credit report (medium):
On
the other hand (short):
More
on theft of US intellectual property by the Chinese (medium):
Politics
Domestic
International War Against Radical
Islam
The
head of Mossad on Iran (medium):
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for Survival’s website (http://investingforsurvival.com/home)
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