The Morning Call
9/29/17
The
Market
Technical
The indices
(DJIA 22381, S&P 2510) had another good day. Volume was down; breadth strengthened. Both remain above their 100 and 200 day
moving averages and are in uptrends across all time frames.
The VIX (9.6) fell
another 3 %. It ended below the upper
boundary of its short term downtrend, below its 100 and 200 day moving averages
and below the lower boundary of its long term trading range for a second day. The question remains, did the VIX bottom in
July?
The long
Treasury declined, but still finished above its 100 day moving average (both
support) and the lower boundaries of its short term trading range and its long
term uptrend. But it ended below its 200
day moving average (now support) for a second day; if it remains there through
the close next Monday, it will revert to resistance
The dollar was down,
remaining in its short term downtrend and below its 100 and 200 day moving
averages. However, it has negated its
very short term downtrend.
GLD was up, ending
above its 100 and 200 day moving averages (both support) and the lower boundary
of a short term uptrend. However, it is
developing a very short term downtrend.
Bottom line: long term, the indices remain
strong viz a viz their moving averages and uptrends across all timeframes. Short
term, they are 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 from two Monday’s ago still need to be
closed. Plus nonstock indices’ pin action was
confusing, given the equity market’s focus on the positives to be derived from
tax reform.
I remain
uncomfortable with the overall technical picture.
Fundamental
Headlines
Yesterday’s
economic stats were generally upbeat: the August trade deficit, weekly jobless
claims and the Kansas City Fed manufacturing index were better than anticipated;
the revised second quarter GDP was in line
though corporate profits were below.
Again, nothing overseas.
***overnight,
an ECB official said that it should slow the pace of asset purchases, the Bank
of England’s Carney said that he was considering ‘taking his foot off the
accelerator’, the Fed’s Fischer said that it was important to reverse QE;
August German inflation was below expectations while unemployment declined, UK
GDP growth was below estimates, August Japanese CPI was above forecasts, but
core inflation was in line, industrial product was above consensus while retail
sales were below; Iran said that it may abandon the nuclear deal.
The
Market remained focused on the new Trump/GOP tax proposal as top officials were
out in force talking up the plan. There
was little newsworthy in terms of any new information or details on the already
released provisions. My only observation
is that most of the ‘experts’ either on the live news channels or in the print (1)
made the odds of passage, as the proposal in currently outlined, quite low, (2)
believed that any bill that did pass would be near revenue neutral and (3) if
so, would take a long time to work through the legislative process.
UBS weighs in on
the tax cut (medium):
Bottom
line: as you can probably guess, I don’t consider the ‘experts’ incredulous
response to the Trump/GOP tax plan a negative.
To be sure, I would like to see a simpler, fairer tax code, but not at
the price of expanding the national debt.
Which means that any positive stock price action based on the current
proposal will likely be reversed. Of
course, the recent advance in prices may be reflecting a final bill that is
simpler, fairer and revenue neutral.
My
thought for the day: renown investor, Peter Lynch, was a prolific writer. He had a number of favorite sayings, one of
the most widely quoted was ‘invest in what you know’. In other words, if you like the iPhone, buy
Apple. What is missed in this small bit
of wisdom is that while Mr. Lynch may have started with things he knew but he
also did a lot of research before making an investment decision.
Investing for Survival
Keeping
it simple:
News on Stocks in Our Portfolios
Economics
This Week’s Data
The
September Kansas City Fed manufacturing index came in at 17 versus its prior
reading of 16.
August
personal income rose 0.2%, in line: personal spending was up 0.1% also in line.
Other
Softer
GDP growth expected for third quarter (short):
Update
on household income and wealth (medium):
Update
on oil (medium):
Digging
into the GDP growth number (medium):
Politics
Domestic
International War Against Radical
Islam
China
orders all North Korean businesses to close (medium):
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