The Morning Call
9/19/17
The
Market
Technical
The indices
(DJIA 22331, S&P 2503) moved higher yesterday, both closing again on all-time
highs. Volume fell from Friday’s
quadruple expirations spike; 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 down pennies. 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 broke its
trend of higher lows.
The dollar rose,
but remained 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 made a
second gap open to the downside, but still ended 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 (if it remains there through the
end of trading today, that trend will be voided).
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 Monday gap openings among the major indices still need to be
closed.
Finally, the yesterday’s
pin action in TLT, GLD and UUP was counter to recent trends and seemed to be
responding to concerns that the Fed will firm up its plans for unwinding QE
following this week’s FOMC meeting.
I remain
uncomfortable with the overall technical picture.
Fundamental
Headlines
Only
one minor US datapoint yesterday: the September housing market index fell below
estimates.
Overseas, Carney
walked back his hawkish statement of last Friday---as I feared would
happen. As I noted last Friday, all
these central bankers are alike---scared sh*tless that they will bring down the
house of cards that they created and, hence, unwilling to take a stand on
monetary normalization.
And
the ECB follows suit. Can the Fed be far
behind? (medium):
Bottom
line: it was a quiet day all around. This
week will witness Trump at the UN for a speech and an FOMC meeting at which
investors are anticipating more details of the Fed’s plan for unwinding
QE. As I noted above, GLD, TLT and UUP
traded like that process is about to begin (higher interest rates = lower
Treasuries, lower GLD prices and a higher dollar). But the stock boys are either marking equity
prices up on the ‘all news is good news’ thesis or they believe that Yellen et
al have no bigger balls than Carney/BOE and all we are going to get on
Wednesday is more Fed dalliance and obfuscation.
Robert
Shiller on valuations (medium):
Small
investors have never been this bullish (short):
That
‘coordinated global recovery’ isn’t quite what it is cracked up to be (short):
My
thought for the day: the investment industry often operates on the premise that
price volatility equals risk and is something to be minimized or avoided. This
reflects faulty logic because price volatility is independent of risk. Seth
Klarman of the Baupost Group properly defines risk as 1) the size of a
potential loss and 2) the probability of its occurrence. He refers to
losses of a permanent nature (not volatility-related), and I would add that
they need to be measured in real (i.e., after inflation) terms. For example,
cash has lost significant value through time as it is continually debased by
the Fed. Although cash experiences no
price volatility, it is risky.
Investing for Survival
Ways
to stay invisible to society if you have wealth (medium):
News on Stocks in Our Portfolios
Economics
This Week’s Data
The
September housing market index was reported at 64 versus expectations of 66.
August
housing starts fell 0.8% versus estimates of a 1.5% increase; building permits
rose 5.6% versus forecasts of being flat.
The
second quarter trade deficit was $123.0 billion versus consensus of $115.1
billion.
August
import prices were up 0.6% versus projections of up 0.4%; export prices
advanced 0.6% versus an anticipated increase of 0.2%.
Other
A
shift in expectations of a Fed rate hike (short):
$700
billion in unpaid mortgage balances in Harvey and Irma disaster areas (medium):
US steps up ‘trade
war’ rhetoric against China (medium):
Politics
Domestic
International War Against Radical
Islam
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