Tuesday, October 17, 2017

The Morning Call--Nothing Matters but the Market

The Morning Call

10/17/17

The Market
         
    Technical

The indices (DJIA 22956, S&P 2557) were up again. Volume was down and breadth strong.  Both remain above their 100 and 200 day moving averages and are in uptrends across all time frames. 

The VIX (9.9) was up 3%, ending below the upper boundaries of its very short term and short term downtrends, below its 100 and 200 day moving averages, back above the lower boundary of its long term trading range.  In addition, it has now made a second higher low, though the very short term downtrend carries more technical weight.

The long Treasury declined $0.09, but finished back above its 100 day moving average, above its 200 day moving average (support) and the lower boundaries of its short term trading range and its long term uptrend. 

The dollar rose slightly, but remained 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.  However, 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 TLT, UUP and GLD was inconsistent.

I remain uncomfortable with the overall technical picture.

            Odds of John Taylor as Fed chair are rising (medium):

            Odds of a correction anytime soon (medium):

    Fundamental

       Headlines

            There was a single US economic datapoint released yesterday: the October NY Fed manufacturing index was a blow out number on the upside.

            Overseas, the September Chinese CPI was in line while PPI was hotter than anticipated.

            ***overnight, the September UK inflation rate hit a five year high; October German investor sentiment rose slightly; September EU car sales declined.

            We have reached the point that investors are focused almost solely on the Market.  There was some specific news on individual companies and lots of news that in different times would have had a higher profile: North Korean threats of nuclear war, Trump declining to certify the Iranian nuclear deal, Iraqi forces capturing Kirkuk and rising speculation that the ECB will raise rates soon.  But everything now is playing second fiddle to stock prices.

            Investors are ignoring the evidence (medium):

            Bottom line: investor psychology is now interpreting any news as good news and ignoring any potential bad news as irrelevant.  How long that condition exists, I have no idea.  But as long as it does, stocks are going higher.  And to the extent that there is any consolidation, backing and filling will be modest.

            As an investor, I would rather take the risk of selling a stock that has hit its Sell Half Range and missing some additional upside versus the risk of holding on and not being the first out of the door.  

            The cost of delusion (medium and a must read):

            Should we be worried about earnings growth? (medium):

            Who sold all those bonds to the ECB? (medium):

            Risk management for all Markets (medium):

My thought for the day: the planning fallacy is our tendency to underestimate the time, costs and risks of future actions and at the same time to overestimate the benefits thereof. It's at least partly why we underestimate the likelihood of bad results. It's why we think it won't take us as long to accomplish something as it does. It's why projects tend to cost more than we expect. It's why the results we achieve aren't nearly as good as we expect and why they are so often disastrous.

       Investing for Survival
   
            Investing in ETF’s for the long term.
           
    News on Stocks in Our Portfolios
  
Johnson & Johnson (NYSE:JNJ): Q3 EPS of $1.90 beats by $0.10.
Revenue of $19.65B (+10.3% Y/Y) beats by $370M.

Economics

   This Week’s Data

            The October NY Fed manufacturing index came in at 30.2 versus expectations of 20.0.
            September US import prices rose 0.7% versus forecasts of +0.5%; export prices increased 0.8% versus estimates of +0.4%.

   Other

            NAFTA talks heat up (medium):

Politics

  Domestic

  International War Against Radical Islam

            The bogus Iranian threat (medium):

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