The Morning Call
8/4/17
The
Market
Technical
The indices
(DJIA 22026, S&P 2472) diverged again yesterday (Dow up, S&P down) with
the DJIA pushing further above the 22000 mark.
Volume was down. Breadth remained
strong but is still in overbought territory.
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.
The VIX (10.4) rose
1 ½ %. It finished above the former
lower boundaries of its intermediate and long term trading ranges. 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 it remains a debatable point as
the VIX continues to vacillate above and below those former trading range
boundaries.
The long
Treasury rose on volume, 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.
What if bonds
have it right? (medium and a must read):
The dollar fell
again, closing in a short term downtrend and below its 100 and 200 day moving
averages.
GLD was up yesterday, finishing above its 100 and
200 day moving averages (both support) and the lower boundary of a very short
term uptrend.
Bottom line: divergences
remain. The indices are out of sync
while TLT, UUP and GLD all appear to be in agreement on a struggling economy
and low interest rates/inflation. It seems especially odd to me that investors
would be getting jiggy about US companies’ future earnings but be pessimistic
about the currency that they are valued in. The overall pin action among the
different Markets has me puzzled.
Fundamental
Headlines
Reported
US economic data was slightly to the plus side: weekly jobless claims, the July
Markit services PMI and July factory orders were better than expected while the
July ISM nonmanufacturing index and July retail sales were less than
anticipated.
Overseas,
the July Chinese Caixin services PMI declined from its June reading. In addition, the Bank of England left
monetary policy unchanged and lowered its forecast for 2017 and 2018 GDP growth.
Bottom line: the
Dow making new highs, its divergence from other stock indices and the relative
consistency of the pin action in TLT, GLD and UUP continued to be the
story. I am not going to pretend to tell
you what that means; though until we know the reason, caution seems the
sensible responsible. That is not a
suggestion to get beared up though the economic numbers, the lack of progress
on fiscal policy and the sudden turn by Trump toward trade sanctions aren’t
helping.
More
on this earnings seasons results (medium):
My
thought for the day: it's okay to be wrong as long as
you aren't very wrong for very long. The worst
thing is to be stubborn and override your process because you are emotionally
invested in what you believe.
Subscriber Alert
Teva
Pharmaceutical (TEVA) cut its dividend yesterday. As a result, it is being dropped from the
High Yield Universe and the High Yield Portfolio will Sell its position on the
open this morning.
Investing for Survival
When
risk is not rewarded.
News on Stocks in Our Portfolios
Economics
This Week’s Data
The
July Markit services PMI came in at 54.7 versus expectations of 54.2.
The
July ISM nonmanufacturing index was reported at 53.9 versus forecasts of 56.9.
July
factory orders were up 3.0% versus estimates of up 2.7%.
July
retail chain store sales were flat with June; further through July they are
flat for the year.
July
nonfarm payrolls rose by 209,000 versus consensus of 178,000.
The
June trade deficit was $43.6 billion versus projections of $44.4 billion.
Other
Politics
Domestic
A government
healthcare alternative (medium):
Mueller impanels
Russia probe grand jury (medium):
International War Against Radical
Islam
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