The Morning Call
10/20/17
The
Market
Technical
The indices (DJIA
23163, S&P 2562) were up again, despite a big down opening. Volume was up and breadth continued strong. Both remain above their 100 and 200 day
moving averages and are in uptrends across all time frames.
The VIX (10.0) was
fractionally lower, remaining below the upper boundary of its short term
downtrend and below its 100 and 200 day moving averages. However, it remained above the lower boundary
of its long term trading range. As I noted
yesterday, it has made a second higher low; so it is starting to develop a very
short term uptrend. At the moment, it
appears that the July low was the bottom.
The long
Treasury rose, finishing 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 made a second higher low
and, thus, is developing a very short term uptrend.
The dollar fell,
remaining in its short term downtrend and below its 100 and 200 day moving
averages. It has made a second lower high, so it developing a very short term
downtrend.
GLD was up, ending
above its 100 and 200 day moving averages (support) and the lower boundary of a
short term uptrend. It has made a second
higher low, so it is developing a very short term uptrend.
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.
Yesterday’s pin action (a big sell off at the open and finishing higher
on the day) suggests that the bulls are still control of the board.
The recent
trading in UUP, GLD and TLT appears to be attempting to re-establish the trends
in place in July, i.e. reflecting a weaker economy and low interest rates.
I remain uncomfortable
with the overall technical picture.
Fundamental
Headlines
Yesterday’s
economic stats were weighed to the positive side: weekly jobless claims were
less than anticipated and the Philly Fed business index was stronger than
estimates; on the other hand, the September leading economic indicators were
much weaker than forecast.
Overseas,
the results were not quite as good. Third
quarter Chinese GDP was in line while retail sales, industrial output and fixed
asset investment were slightly ahead of expectations. However, with the Communist Party Congress
now in session; so the numbers may have been fudged to insure no cognitive
dissonance during the gathering. On the
other hand, UK September retail sales were well below estimates and the August
Japanese all activity index was below forecasts.
There
were two other news events that bear mentioning:
(1)
a Bank of China official warned against Market optimism. This really freaked the Asian equity markets
and spilled over into early trading in the US (medium):
(2)
rumors circulated that Powell [dove] was now the leading
candidate for Fed chair. Clearly, the
Market would love another easy money Fed chief; so that provided support for
stocks. On the other hand, a Yellen
repeat would simply make the asset mispricing and misallocation problem all the
worse (short):
***overnight,
the Senate passed a FY2018 budget bill.
The good news is that if the house will now pass its version and the two
can be reconciled, that will set up the GOP to pass tax reform with just a
majority vote. The bad news is that (1)
the cost cutting assumptions in the budget all amount to a Grimes fairy
tale. Indeed under more realistic
assumptions it will propel the debt/GDP ratio ever higher, and (2) the current
version of the tax reform package is for cuts of $1.5 trillion. For the results to be anywhere near revenue
neutral requires the knowing suspension of common sense. In short, our ruling class is digging an ever
deeper debt hole which will require an ever larger share of national productivity
to service.
Bottom line: as I noted above, the bulls still
rule no matter what the headlines. As
long as that is the case, lay back and enjoy it. But I wouldn’t be fully invested; indeed, I want
a decent cash position. Our Portfolios
are now ~50% in cash.
Investing for Survival
So
few winners, so much dead weight.
News on Stocks in Our Portfolios
Revenue of $4.1B (+4.1% Y/Y) in-line.
Genuine
Parts Company (NYSE:GPC) announces separate
acquisitions within its Motion Industries subsidiary and U.S. automotive parts
group.
The company acquired Apache
Hose & Belting Company for the Motions Industries subsidiary. The
Iowa-based company specializes in value-added fabrication of belts, hoses
and cut and molded products used in a wide array of industries and
applications. Genuine Parts expects Apache to generate estimated annual
revenues of $100M.
Genuine Parts also acquired
parts distributor Monroe Motor Products. The company says the addition of
Monroe will fold into its U.S. Automotive operations and is expected to
generate approximate annual revenues of $25M.
Schlumberger (NYSE:SLB): Q3 EPS of $0.42 in-line.
Revenue of $7.91B (+12.7% Y/Y) in-line.
Revenue of $16.65B (+0.8% Y/Y) misses by $50M.
Economics
This Week’s Data
The
September leading economic indicators fell 0.2% versus expectations of a 0.1%
decline.
Other
Central
bankers don’t know how to do their job (medium):
Politics
Domestic
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