The Morning Call
8/30/17
The
Market
Technical
The indices
(DJIA 21865, S&P 2446) staged another major intraday move, starting off
with big losses but closing up for the day.
Volume was up slightly, but remained at a low level; breadth was mixed. The S&P remains in focus; yesterday, it (1)
closed back above the lower boundary of its short term uptrend, negating Monday’s
break, (2) continues to develop a very short term downtrend (3) indeed, the
S&P is right at the point of the pennant formation that I pointed out in
Monday’s Morning Chartology; technically speaking, that means that the
direction of move out of the pennant points at the future course of prices and
(4) also could potentially be forming a head and shoulders pattern. To be clear, the index is above its 100 and
200 day moving averages and, at the moment, in uptrends across all
timeframes. So the aforementioned
potential negatives are just that---potential negatives. Meanwhile, the Dow isn’t close to challenging
any support level.
The VIX (11.7) rose
3 ¼ % (unusual for it to be up on a Market up day), leaving it below the upper
boundary of its short term downtrend but back above its 100 day moving average
(negating Monday’s break), above its 200 day moving average and finished above
the lower boundary of a developing very short term uptrend. I am left questioning whether or not the VIX
has bottomed.
The long
Treasury was up, 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 and has now made a third short term higher high. That is a lot of support.
The dollar rose
slightly, closing in a short term downtrend, below its 100 and 200 day moving averages
and below the lower boundary of its short term trading range for a second day---if
it remains there through the close today, it will reset to a downtrend.
GLD declined, but still finished above the lower
boundary of its very short term uptrend, above its 100 and 200 day moving
averages (both support) and above the upper boundary of its short term trading
range for a second day (if it remains there through the close today, it will
reset to an uptrend).
Bottom line: the
S&P continues to struggle, technically speaking, over the short term. Whether or not this pin action turns into
something negative remains to be seen. In the meantime, long term its uptrend
remains intact supported by a less technically challenged DJIA. TLT, GLD and UUP are also are challenging or
near challenging support/resistance levels.
It seems like all these markets are near inflection points. I have no insight as to what that means directionally,
but it seems like the next move will be big whichever route it takes.
Fundamental
Headlines
Yesterday’s
economic data was weighed to the upside: month to date retail chain store sales
improved from the prior week, August consumer confidence was ahead of forecast
while the June Case Shiller home price index rose less than expected. Nothing from overseas.
***overnight,
EU economic confidence rose to its highest level in a decade.
Monday’s
headlines remained front and center:
(1)
the lion’s share of media coverage continued to focus
on the flooding in Texas. The only good
news was that Trump had a decent day acting presidential. Plus a lot of market participants are [a] looking
at the inevitable rebuilding effort as an economic plus {to which I take
exception. If rebuilding from a disaster
is such an economic plus, why not nuke the whole country?}, [b] less concerned
about the looming debt ceiling legislation since the disaster relief funding
will likely be part of that legislation and [c] assuming this event will slow down
any tightening move by the Fed.
(2)
reaction to the North Korean missile launch that flew
over a northern Japanese island. Here
again, the optics were positive in that there was little to no response [at
least not yet]---nothing threatening from Trump and the right amount of outrage
from other world leaders, including China and Russia.
Bottom line: the
economic news is not nearly as positive as the ruling class would have you
believe---and Hurricane Harvey’s effect will not help, all that rebuilding
elation notwithstanding. The central
bankers are threatening to tighten monetary policy, which I doubt. And as I noted above, Harvey gives them the
perfect excuse to continue to do nothing; but if they do start unwinding
QEInfinity, I don’t believe that will be a plus for stock prices.
Trump continues
to persist in making the achievement of his own agenda more difficult by
insulting and threatening the very people he needs to accomplish it. Though to be fair, he did manage to have at
least one good day---looking presidential in Texas and avoiding provocative statements
on North Korea. On the other hand,
something has to be done to corral this clown running that country. Of course, this could all end well, despite
the drama. It better because that is the
way stocks are priced.
TBTF
bank executives are net sellers of their own shares (medium):
My thought for
the day: investors have a tendency to overweight information that is easy to
remember. They remember dramatic,
colorful information and ignore statistics which are abstract and boring. This is especially harmful when markets are
at extremes: at tops, the stories about investors making it big are more
emotionally satisfying than valuations measure; conversely at bottoms, the
horror stories describing stocks as the worst possible investments are easier
to accept than valuations.
Investing for Survival
Eleven
ways to protect your money.
News on Stocks in Our Portfolios
Revenue of $723M (+9.4% Y/Y) beats by $33.42M.
Economics
This Week’s Data
August
consumer confidence was reported at 122.9 versus expectations of 120.6.
Weekly
mortgage applications fell 2.3% while purchase applications were down 3.0%.
The
August ADP private payroll report showed an increase of 237,000 jobs versus
estimates of a rise of 185,000.
The
second revision of second quarter GDP indicated growth of 5.0% versus forecasts
of 2.8%; corporate profits advanced 8.1% versus the initial number of up 11.5%.
Other
There
will be another financial crisis (medium):
The
fallacy of Draghi’s happy talk (medium):
Economists
as astrologists (medium):
Politics
Domestic
International War Against Radical
Islam
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for Survival’s website (http://investingforsurvival.com/home)
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