Wednesday, October 4, 2017

The Morning Call--A Goldilocks atmosphere

The Morning Call

10/4/17

The Market
         
    Technical

The indices (DJIA 22641, S&P 2534) continued their slow, steady climb.  Volume was down but breadth continued to strengthen.  Both remain above their 100 and 200 day moving averages and are in uptrends across all time frames. 

The VIX (9.5) was up fractionally (a second day of unusually positive performance for a big up Market day).  It ended below the upper boundary of its short term downtrend, below its 100 and 200 day moving averages, below the lower boundary of its long term trading range for a fourth day; but it is still above its July low. 

The long Treasury rose, finishing above its 200 day moving average (support) and the lower boundaries of its short term trading range and its long term uptrend.  However, it is below its 100 day (now resistance).

The dollar fell, remaining in its short term downtrend and below its 100 and 200 day moving averages, but is developing a very short term uptrend.
           
GLD traded up, ending right on its 100 moving average, above its 200 day moving averages (both support) and the lower boundary of a short term uptrend.  However, it is developing a 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.  

On the other hand, all those gap openings from three Monday’s ago still need to be closed.  Despite some minor retreats, the nonstock indices continue to point to a slower economy, lower interest rates---seemingly the opposite of the scenario prevalent among the stock boys.

I remain uncomfortable with the overall technical picture.

    Fundamental

       Headlines
            The economic data was again upbeat: month to date retail chain store sales grew fractionally faster than in the prior week and September light vehicle sales were well above estimates.

            Overseas, the stats were not as positive: September EU PPI was hotter than anticipated; September UK construction PMI was below expectations.

            ***overnight, the September EU composite PMI hit a four month high.

            Aside from the continuing coverage of the Las Vegas tragedy, it was a relatively uneventful day.  The narrative continued to focus on tax reform and its expected benefits to the economy.

            Goldman: no sign of recession (short):

However, there remain questions about whether tax reform can get though the legislative process.  For those interested, this is a deep in the weeds look at tax reform (medium):

            Moody’s threatens to cut US credit rating if tax plan is passed in its current form (medium):

            The other item worth noting is the rising speculation on who the next Fed chairman will be and, naturally, his approach to monetary policy.

            Bottom line:  we seem to be in another one of those goldilocks atmospheres where there is no bad news, bad news is seemingly good news or no news and the good news is, well, good news.  The economy is assumed to be growing nicely, tax reform appears assured and everyone believes that the unwind of QE will cause no disruptions in the Markets. 

To which I reply: the economy may be growing but not as steadily or rapidly as in the past and there is nothing on the horizon to suggest that will change; including tax reform, which will have little economic impact if it is revenue neutral and a negative one if it is not; the Fed has never in its entire history successfully managed the transition from tight to normal monetary policy, why would anyone invest on the prospect that it will this time?

            The latest from John Hussman (medium and a must read):

            September’s dividend record (short):

            More on valuation (short):

            What the next crisis will look like (medium):

            My thought for the day: renowned investor, Ned Davis, points to basic traits that make investors great: they remove emotions from the investing process, instead focusing on data and their investment discipline; they are open-minded to new ideas or revisiting prior ones; and they are risk adverse.

       Investing for Survival
   
            How to invest carefully for mom.

    News on Stocks in Our Portfolios
 
Paychex (NASDAQ:PAYX): Q1 EPS of $0.62 beats by $0.02.
Revenue of $816.8M (+4.0% Y/Y) misses by $3.78M.

PepsiCo (NYSE:PEP): Q3 EPS of $1.48 beats by $0.04.
Revenue of $16.24B (+1.3% Y/Y) misses by $70M.


Economics

   This Week’s Data

            Month to date retail chain store sales grew slightly more than in the prior week.

            September light vehicle came in at 18.6 million units versus expectations of 16.7 million units.


            Weekly mortgage applications fell 0.4% while purchase applications rose 1.0%.

            The September ADP private payrolls report showed job a 135,000 increase in jobs versus forecasts of a rise of 140,000.

   Other
           
            Shale production may not be as strong as many suggest (medium):
           
Politics

  Domestic

The tragic incoherence of NFL protests (medium):

  International War Against Radical Islam


Visit Investing for Survival’s website (http://investingforsurvival.com/home) to learn more about our Investment Strategy, Prices Disciplines and Subscriber Service.




No comments:

Post a Comment