The Morning Call
10/30/17
The
Market
Technical
Once
again, no comment is required.
Update
on margin debt (medium):
Despite a weak
rally on Friday, the long Treasury finished below its 100 day moving average (now
resistance), below its 200 day moving average for the second day (now support;
if it remains there through the close Tuesday, it will revert to resistance),
is now developing a very short term downtrend, but is still above the lower boundary
of its short term trading range and the lower boundary of its long term
uptrend.
The dollar had
another good day, ending above its 100 day moving average (now resistance; if
it remains there through the close today, it will revert to support), right on
the upper boundary of it short term downtrend, has begun developing a very
short term uptrend but remains below its 200 day moving average.
GLD managed a
small recovery, but finished below its 100 day moving average for the second
day (now support; if it remains there through the close on Monday, it will
revert to resistance), still above its 200 day moving average (support) and the
lower boundary of a short term uptrend.
The VIX (9.8) got
hammered on Friday---re-establishing its historic inverse correlation with
stocks after four days of cognitive dissonance. It closed below the upper
boundary of its short term downtrend but above the lower boundary of its long
term trading range. It is back below its
100 day moving average (which just reverted to support); if it remains there
through the close tomorrow, it will return to resistance), back below its 200
day moving average negating Thursday’s break and closed below the developing
the lower boundary of a very short term uptrend. This suggests that it may be about to
challenge the July low.
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.
This is just a continuation of the ‘everything is awesome’ trade.
Depending on how
one looks at it, a weak bond and gold market along with a strong dollar could
be supporting that scenario. However,
when a primary rationale for buying stocks is that they are a good substitute
for bonds, rising yields should be creating some cognitive dissonance.
Fundamental
Headlines
The
US economic data was weighed to the positive last week as were the primary
indicators. That makes last week’s call
a positive: Score: in the last 106
weeks, thirty-two were positive, fifty-six negative and eighteen neutral. This is the second plus week in a row and the
second week in the last four that the primary indicators have been overwhelmingly
positive. As you know, I have been
doubting my revised forecast of a higher economic growth based on the lack of
confirming stats as well as the prospect for a further increase in the
deficit/debt coming from a non-revenue neutral tax reform. It now appears that we are getting that
confirming data.
I
should note that if there is any hesitation at the Fed about proceeding with
the unwind of QE, the surprisingly ‘hot’ third quarter GDP price index should
satisfy the doves that action is needed.
There
was only a few stats from overseas but they were mostly upbeat and they
continued to confirm the pick-up in growth in the EU. As a result, I have been expecting some
positive impact on our own economy; though until this week, it didn’t seem to
be occurring. With the better economic
numbers and the upbeat earnings reports from some of our major international
industrial firms, this could now be happening.
It is too soon to make that call; but at least the signs are getting
hopeful.
Investing for Survival
The
little market that could (maybe not):
News on Stocks in Our Portfolios
Economics
This Week’s Data
September
personal income grew 0.4%, in line: personal spending was up 1.0% versus
expectations of up 0.9%; the PCE price index rose 0.4%, in line.
Other
Politics
Domestic
For those of you
interested in the JFK assassination---incoming bullet through the windshield of
the limousine (medium):
Quote of the day
(short):
International War Against Radical
Islam
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