The Morning Call
8/15/17
The
Market
Technical
The indices
(DJIA 21993, S&P 2465) regained some of their lost euphoria yesterday. However, volume was flat; breadth improved
but not as much as the price move in the Averages would suggest. 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 (12.3) plunged
20%, closing back below the upper boundary of its short term downtrend,
negating last Thursday’s break. However,
it remained (1) above its 100 day moving average for the third day, reverting
to support and (2) above its 200 day moving average for the third day [if
remains above it at today’s close, it will revert to support]. That said, given the magnitude of yesterday’s
decline, there is probably better than even odds that there is more downside to
come. I leave open the question as to
whether the VIX has made some kind of bottom and the resetting of the
intermediate term from trading range to downtrend was premature.
The long
Treasury declined slightly, 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 inched
higher, but still closed in a short term downtrend and below its 100 and 200
day moving averages.
GLD was up fractionally, finishing above the lower
boundary of its very short term uptrend and its 100 and 200 day moving averages
(both support).
Bottom line: while
the indices bounced hard, volume, breadth and the pin action in bonds, the
dollar and gold did not reflect the same degree of enthusiasm. Maybe they will catch up or…………maybe they
won’t. Follow through.
If
you think last week’s decline was a disaster, you are in the wrong line of work
(medium):
Yesterday
in charts (short):
Broadening
internal dispersions (medium):
Fundamental
Headlines
There
was no economic datapoints released. But
there will be a number of primary indicators reported this week---retail sales,
housing starts and industrial production.
So it will an informative week, economically speaking.
With
respect to fiscal policy, Trump signed a China trade memorandum; the gist of
which was to appoint someone to investigate whether or not China is violating
trade agreements. So this was a baby
step, but a step nonetheless. I have
already opined that while I am concerned about an overly eager pursuit of
adjusting our trade balance, I have been concerned for a long time about the
Chinese theft of American intellectual property. So some good can come of pressing the Chinese
on this issue.
On
the monetary front, we got these somewhat hawkish comments from the normally
dovish NY Fed head (medium):
Overseas,
the data was mixed:
(1) Japan
reported second quarter GDP, business spending and private consumption above
expectations,
(2) while China
announced retail sales and industrial production below estimates,
(3) in addition,
four Arab countries imposed sanctions on Qatar,
(4) the US/North
Korean rhetoric cooled a bit which apparently brought some relief to Market
participants. However, I would point out
that overvalued equities are still overvalued whether somebody lobs a missile
or Un and Trump kiss and make up. All
the Korean/US confrontation represented was a potential spark. It had nothing to do with the tender---which
is a grossly overvalued Market. (medium):
***overnight:
Bottom
line: Trump continues to use his mouth create obstacles to successfully
accomplish his healthcare and tax reforms as well as infrastructure
spending. In other words, the hopes of
lifting the long term secular economic growth rate of this country is
fading.
Meanwhile, the
Fed doesn’t know whether to s**t or go blind.
All its happy talk about how great the economy is, is belied by its own
dovish policy. The excesses of its
QEInfinity policy will sooner or later have to accounted for. When that occurs, I have no clue.
Finally,
equities are overvalued. I am very happy
with the cash in my Portfolios.
More on
valuation (medium):
Corporate
buybacks shrinking (medium):
The
latest from Doug Kass (medium):
My
thought for the day: just because your portfolio is performing well, investing
is still a battle---everyday. Investors
have to have a strict investment discipline that remains in place whether the
investor is winning or losing---which will happen inevitably. When he/she does so, the outcomes will take
care of themselves.
Investing for Survival
You
don’t have to play.
News on Stocks in Our Portfolios
Revenue of $28.1B (+6.2% Y/Y) beats by $300M.
Economics
This Week’s Data
July
retail sales rose 0.6% versus expectations of up 0.3%.
The
August NY Fed manufacturing index came in at 25.2 versus estimates of 9.8.
July
import prices increased 0.1%, in line; export prices were up 0.4% versus
forecasts of up 0.2%.
Other
Quote
of the day (short):
Update
on auto loans (medium);
Politics
Domestic
International War Against Radical
Islam
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for Survival’s website (http://investingforsurvival.com/home)
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