The Morning Call
8/23/17
The
Market
Technical
The indices
(DJIA 21899, S&P 2452) staged a major upward reversal yesterday. Volume was down; but breadth was improved. Importantly, the S&P finished back above
the lower boundary of its short term uptrend, negating last Friday’s
break. It remained above its 100 and 200
day moving averages. Assuming more
follow through to the upside, the Market call is that the S&P experienced a
hiccup and both of the indices are back on track to challenge the upper boundaries
of their long term uptrends.
The VIX (11.4) fell
another 14 %, ending below the upper boundary of its short term downtrend and
its 100 day moving average (if it remains there through the close on Thursday,
it will revert to resistance). This
roller coaster pin action leaves 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 the intermediate term from trading range to downtrend.
The long
Treasury was off, 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 and has now made a third short term higher high. That is a lot of support.
The dollar rose,
but closed in a short term downtrend and below its 100 and 200 day moving averages. However, it is now made a second higher low
and second higher high---a potential sign that the trend could be changing.
GLD declined, finishing above the lower
boundary of its very short term uptrend and its 100 and 200 day moving averages
(both support).
Bottom line: the
general read on basis of the Market’s performance yesterday was that Trump
sounded more presidential in his Monday night speech and along with an upbeat
speech by Paul Ryan that increased the odds of tax reform. Color me skeptical. But price is truth and prices were higher for
whatever reason. The pin action in the other
indicators that we follow support the ‘tax reform spurs economic growth’ scenario.
Fundamental
Headlines
The
economic data yesterday was upbeat: month to date retail chain store sales and
the August Richmond Fed manufacturing index were better than anticipated. Overseas, August German investor confidence
fell for the third straight month.
***overnight,
the August Markit EU manufacturing, services and composite PMI’s were all above
expectations.
On
the trade front, the good news was that US and South Korea began negotiations
of revising their free trade agreement.
The bad news was that the US slapped sanctions on Chinese and Russian companies
doing business in North Korea (medium):
The Chinese response:
The
Russian response:
Both
of these situations have the potential for meaningful headlines.
As
I noted above, overnight, investors seemed to find their bullish legs as a
result of a more reasonable sounding Trump (please, Donald keep reading your
speeches and stop tweeting; the results will likely be amazing) plus an optimistic
tax reform speech from Paul Ryan. It
makes sense to me that tax reform would be easier than healthcare reform. But at this point, I think that the burden of
proof is on the GOP to show that they can deliver. To be sure, if a (near) revenue neutral tax reform
bill favoring the middle class can be enacted, it would be a plus for long term
economic growth---‘if’ being the operative word.
***spoiler
alert, in another speech last night, Trump said that (1) the NAFTA negotiations
would end in naught and, if so, he would terminate the agreement and (2) he
would shut down the government if congress didn’t include funding of ‘the wall’
in its upcoming spending bill.
Bottom
line: the recent volatility unquestionably adds excitement to the daily Market
action. However, I am not convinced that
anything fundamental has changed in the last two weeks. True, there is the potential for both positive
and negative outcomes that could take place as a result of recent events. But I think the probability of any one of
them occurring is highly uncertain.
Meaning that what we do know at this point is that little has
changed. In other words, the economy
continues to struggle and stocks continue to be overvalued
For
the bulls (short):
For
the bears (short):
My
thought for the day: all investors are different; so there is no single ‘best’
investment strategy for everyone. They
have to adapt a strategy that fits their own psychology and talents.
Subscriber Alert
WW
Grainger ($164) stock has fallen into its Buy Value Range. This is a stock which had entered its Sell
Half Range back in 2012 and the Dividend Growth Portfolio acted
accordingly. GWW is being placed on the
Dividend Growth Buy List and the Dividend Growth Portfolio will buy sufficient
shares to bring the position back to a full holding. My reasoning on this action is the same as
with Ralph Lauren and Gilead Sciences, i.e. these stocks have experienced their
own bear market (GWW is down from $275) which warrants action on our part.
Investing for Survival
Eight
truths you need face in managing your portfolio.
News on Stocks in Our Portfolios
Economics
This Week’s Data
Month
to date retail chain store sales were much stronger than in the prior week.
The
August Richmond Fed manufacturing index was reported at 14 versus expectations
of 11.
Weekly mortgage
applications fell 0.5% while purchase applications were down 2.0%.
Other
No
matter what Yellen/Draghi say at Jackson Hole, they are just buying time
(medium):
Politics
Domestic
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