The Morning Call
10/2/17
The
Market
Technical
There
remains little to be said by way of analysis about this chart. The S&P continues to move higher with
little resistance between the current level and the upper boundary of its long
term uptrend.
The
long Treasury has not had a good couple of weeks as the unwinding of QE and the
prospects of tax reform have weighted on TLT prices. That said, the only real technical damage
that has been done is to the 100 day moving average (I know, I said earlier
that it was the 200 day moving average.
My bad.) I don’t think that this is
necessarily a signal that bond investors now believe that the economy is
strengthening and rates will move higher; though clearly, doubts are rising.
A
weaker TLT and stronger dollar go hand in hand if the accepted economic
scenario is higher economic growth and higher interest rates. So the improvement in UUP recently is to be
expected. However, like TLT, its
technical performance is not all that convincing. The only resistance level it has successfully
challenged is its very short term downtrend and that was not that impressive.
Of
TLT, UUP and GLD, the latter has clearly experienced the most dramatic trend
reversal; though to be fair, it is historically the most volatile of the three,
so that is to be expected. Still like
the other two indices, it has successfully challenged only a single support
level.
The
VIX is on the verge of challenging its prior low (bottom). Complacency seems all pervasive; so the
assumption has to be that the challenge will occur.
Fundamental
Headlines
***overnight,
August EU unemployment remained at 2009 levels; the September UK manufacturing
PMI was below estimates; however, the Chinese manufacturing PMI was highest
since 2012 and the Japanese large manufacturing index was the highest since
2007.
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