The Morning Call
10/19/17
The
Market
Technical
The indices (DJIA
23157, S&P 2561) were up again, with the Dow closing above 23000. Volume was flat and breadth continued strong. Both remain above their 100 and 200 day
moving averages and are in uptrends across all time frames.
The VIX (10.1) was
down 2 ¼ %, but is still below the upper boundary of its short term downtrend,
below its 100 and 200 day moving averages.
However, it remained above the lower boundary of its long term trading
range. In addition, it closed above the
upper boundary of a very short term downtrend and has now made a second higher
low. So far, it failed to make a new low
and has to all the appearances has made a higher bottom.
The long
Treasury declined, but finished above its 100 and 200 day moving averages
(support) and the lower boundaries of its short term trading range and its long
term uptrend. It has also broken a very
short term downtrend.
The dollar fell,
remaining in its short term downtrend and below its 100 and 200 day moving
averages. Last week, it is successfully challenged a developing very short term
uptrend.
GLD fell, ending
above its 100 and 200 day moving averages (support) and the lower boundary of a
short term uptrend. Last week, it
successfully challenged a developing 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.
Trading in UUP,
GLD and TLT was inconsistent and of little informative value.
I remain uncomfortable
with the overall technical picture.
Fundamental
Headlines
Yesterday’s
economic data releases were mixed: weekly mortgage and purchase applications
were up but September housing starts were awful as were building
permits---though they were slightly better than expected.
Overseas, the
September UK jobless rate hit a 42 year low.
***overnight,
third quarter Chinese GDP was in line while retail sales, industrial output and
fixed asset investment were slightly ahead of expectations; UK September retail
sales were well below estimates; the August Japanese all activity index was
below forecasts.
In political
developments, North Korea upped the ante, threatening the US; Spain moved
forward with the process of suspending the Catalonian regional government.
There was also
news from the central banks:
(1)
The Fed released its latest Beige Book which showed
growth in all regions including those impacted by Harvey, Irma and Maria. If that is true then the underlying growth in
those areas has to have been explosive to adsorb those hits and still be
up. Color me skeptical. The report also suggested some upward price
pressure but nothing that it was concerned about. That I believe.
(2)
BOE head Carney raised the problem of the continuity of
derivative contracts as a result of Brexit.
Brexit isn’t
the only risk to derivative contracts (medium):
Bottom line:
yesterday’s economic stats remind us that the economy is still struggling. The mystery is the Fed’s Beige Book statement
that economic activity improved in the areas hit by hurricanes which means
either the actual numbers haven’t caught up the reported numbers or the Fed is
talking its book. Either way, I believe
that it lacks any credibility.
Meanwhile, financial
types at long last seem to be starting to focus on the enormous derivative
portfolio on the global banking system’s balance sheet. These contracts (failure) were a major
contributing factor to the financial crash; and the only reason that they were
even bigger was that accounting rules were changed so that they didn’t have to
be marked to market. Now they are once
again being recognized as risk to bank solvency.
I
continue to lighten up on holdings that have reached their Sell Half Range and
believe that cash is currently a valuable asset.
More
on valuations (medium):
Investing for Survival
Value
investing.
News on Stocks in Our Portfolios
Johnson & Johnson's (NYSE:JNJ) German device unit Johnson & Johnson GmbH inks an
agreement to acquire German software firm Surgical Process Institute (SPI), a
specialist in standardizing and digitizing surgical workflows in the surgical
theater. It has developed a way of standardizing surgery via a detailed
step-by-step checklist that follows best-in-class standards.
Economics
This Week’s Data
Weekly
jobless claims fell 22,000 versus consensus of down 3,000.
The
October Philadelphia Fed business outlook index was reported at 27.9 versus
expectations of 20.2.
Other
More
on the problem of unfunded state pension liabilities (medium):
Politics
Domestic
Quote of the day
(short):
International War Against Radical
Islam
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