The Morning Call
9/20/17
The
Market
Technical
The indices
(DJIA 22370, S&P 2506) moved slightly higher yesterday, both closing again on
all-time highs. Volume fell; breadth continued
strong. Both remain above their 100 and
200 day moving averages and are in uptrends across all time frames.
The VIX (10.0)
was up fractionally. It is below the
upper boundary of its short term downtrend, below its 100 day moving average (now
resistance) and below its 200 day moving average (now resistance). It is drawing near its former all-time low;
but the question as to whether or not the VIX has bottomed remains open.
The long
Treasury declined, but still finished above its 100 and 200 day moving averages
(both support) and the lower boundaries of its short term trading range and its
long term uptrend. However, it has
broken its trend of higher lows.
The dollar fell,
remaining in short term and very short term downtrends and below its 100 and
200 day moving averages and in a series of seven lower highs.
GLD gained on
the day, ending above its 100 and 200 day moving averages (both support) and the
lower boundary of a short term uptrend.
However, it closed below the lower boundary of its very short term
uptrend, negating that trend.
Bottom line:
long term, the indices remain strong viz a viz their moving averages and
uptrends across all timeframes. Short term, they closed above the resistance
level marked by their August highs, meaning that there is no resistance between
current price levels and the upper boundaries of the Averages long term
uptrends.
On the other
hand, all those gap openings among the major indices still need to be
closed.
Finally, the yesterday’s
pin action in TLT, GLD and UUP was mixed again viz a viz the current expected more
hawkish Fed scenario---which isn’t surprising given the Fed’s history of saying
one thing and doing another.
I remain
uncomfortable with the overall technical picture.
Fundamental
Headlines
Yesterday’s
data releases were generally negative: the second quarter trade deficit was
greater than expected, August import and export prices were much higher than
estimated, month to date retail chain store sales grew slower than in the prior
week and August housing starts fell versus an anticipated increase; the only
bright spot was a strong rise in building permits. Nothing overseas.
Three
mentionable news items:
(1)
Trump burned the ears of the UN crowd, giving perhaps
the most aggressive speech before that group since Yasser Arafat mounted the
podium with an AK 47. I don’t see
economic consequences to this harangue; though clearly his threats to North
Korea and Iran will keep tensions at an elevated level,
(2)
the current path of Hurricane Jose will just touch the
upper northeast at its outer bands; Hurricane Maria is pounding the Leeward
Island and Puerto Rico which have already suffered mightily from Irma. Nonetheless, at this point, it appears that
the US mainland will escape major damage [or as some would have us believe,
another growth opportunity],
(3)
the GOP is attempting to resurrect healthcare reform. So far, it appears that while this effort may
simplify the system, how much savings will occur is still a question. So far, there has been no budgetary scoring. The verbiage promises some cost savings which
is one of the prime reasons for passage of the initial repeal and replace
effort because it freed money to pay for tax reform. So clearly, if it simplifies, makes the system
fairer and saves money, this would be a plus.
Comments from:
Club for Growth:
Marginal Revolution:
Bottom
line: there remains nothing in the economic data to suggest that the economy is
getting better. Indeed, I would argue
the data stream portrays just the opposite.
And we haven’t begun to see the consequences of Harvey and Irma yet or those
of other hurricanes which seem to be coming at a rapid rate with unusual
ferocity.
Today we will likely
get another dose of Fed ‘on the one hand, on the other hand’, ‘we might, we
might not’ pabulum. The alternative is
for it to announce a firm schedule for monetary normalization. I hope it does. But if so, the unwinding of asset mispricing
and misallocation and the return of price discovery will begin.
For
the bulls (medium):
Update
on dividends in the third quarter (short):
My
thought for the day: one of the best ways of dealing with risk is to pay close
attention to the price paid for a stock.
That was a primary motivation in my developing our pricing model. A benefit is that it makes very conservative
assumptions about the estimated value at which a stock is purchased. I believe
that this will goes a long way towards stacking the odds in my favor of having
successful outcomes over time, and can help relieve the anxiety that comes with
gut wrenching market gyrations and gloomy projections of the future.
Investing for Survival
Advice
for your children and grandchildren.
News on Stocks in Our Portfolios
Revenue of $3.77B (-3.6%
Y/Y) misses by $20M.
Microsoft (NASDAQ:MSFT) declares $0.42/share quarterly dividend, 7.6% increase from
prior dividend of $0.39.
Economics
This Week’s Data
Month
to date retail chain store sales grew at a slower pace than the prior week.
Other
Thoughts
on the economic viability of wind power (medium):
The
September chemical activity barometer held steady (short):
The
next financial crisis and where it could come from (think Reinhart/Rogoff):
The
latest from Mohamed El Erian (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.
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