The Morning Call
9/13/17
The
Market
Technical
The indices
(DJIA 22118, S&P 2496) had another good day. Volume rose and breadth remained strong. Both remain above their 100 and 200 day
moving averages and are in uptrends across all time frames. The S&P is above the resistance offered
by its former all-time high, though the Dow once again fell short.
The VIX (10.6) was
off fractionally, leaving it below the upper boundary of its short term
downtrend, below its 100 day moving average (it reverted to resistance on two Friday’s
ago, then traded back above it last Tuesday, back below it on Thursday, back above
it on Friday and now is back below; so this MA is acting more like a magnet
than resistance or support), below its 200 day moving average for a second day (if
it remains there through the close on Thursday, it will revert to resistance) and
below the lower boundary of a developing very short term uptrend. The question
as to whether or not the VIX has bottomed clearly remains open.
The long
Treasury fell slightly, 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 but below the resistance level marked by its
August high.
The dollar was down,
remaining in short term and very short term downtrends and below its 100 and
200 day moving averages and in a series of six lower lows.
GLD rose, ending
above the lower boundaries of its short term and very short term uptrends and
above its 100 and 200 day moving averages (both support).
Bottom line: long
term, the indices remain strong viz a viz their moving averages and uptrends
across all timeframes. Short term, the
Dow was again unable to close above the resistance level marked by its August
high; but more important, all those Monday gap openings among the major indices
still need to be closed. Finally, the unambiguous
performances of TLT, GLD and UUP continue to point at a weakening economy.
I continue to be
uncomfortable with the overall technical picture.
Fundamental
Headlines
Yesterday
was more quiet than Monday. Two minor US
datapoints: month to date retail sales grew slightly faster than in the prior
week and the August small business optimism index was above forecasts. Overseas, August UK CPI was a bit hotter than
anticipated.
We
did get notice that the US national debt has reached $20 trillion, continuing
to grow as a percent of GDP; in addition, the FY2017 deficit will be approximately
$700 billion and continues to grow as a percent of government spending.
How the US got
$20 trillion in debt (medium):
Bottom line: ‘the economy is….slowing and will be made
worse not better by Harvey/Irma. The Fed
has…..inflated asset prices to obscene levels and the hurricanes will only make
matters worse as they are likely to give Yellen et al the excuse they need to
not do what ultimately has to be done---normalize monetary policy. Of
course, as long as the global central banks stay easy, the distortions in asset
pricing and allocation can continue.
That is unless a flattening yield curve or a plunging dollar force the
Fed to do the unthinkable.’
Former
BIS chief economist is concerned (short):
My
thought for the day: legendary John Bogle is quoted as saying “Betting on value
is an intelligent way to own property as compared to trading in stocks.” By that he meant that too many people speculate
on price and very few focus on value. Value is the future earnings from dividends
discounted to the present. Price is what
investors are willing to pay today. When
those two numbers are at major variance, the smart investor takes advantage of
the disparity.
Investing for Survival
Let
the ball come to you.
News on Stocks in Our Portfolios
Economics
This Week’s Data
Month
to date retail chain store sales grew slightly faster than in the prior week.
Weekly
mortgage applications rose 9.9% while purchase applications were up 11.0%.
August
PPI was up 0.2% versus expectations of up 0.3%; ex food and energy, it was up
0.1% versus estimates of up 0.2%.
Other
Why
the debt ceiling is a bad idea (medium):
Counterpoint
(medium):
Update
on the Chinese economy (medium):
Home
prices to median household income (short):
Job openings increased slightly
in July (short):
Politics
Domestic
International War Against Radical
Islam
Everybody
seems to be shining the pistols (medium):
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