The Morning Call
10/24/17
The
Market
Technical
The indices (DJIA
23273, S&P 2564) turned down yesterday, on high volume and weaker breadth. Both remain above their 100 and 200 day
moving averages and are in uptrends across all time frames.
And:
And:
The VIX (11.1) was
up 11%. It remained below the upper
boundary of its short term downtrend and its 200 day moving averages. However, it is above the lower boundary of
its long term trading range, above its 100 day moving average (if it remains
there through the close on Wednesday, it will revert to support) and continues to
develop a very short term uptrend. At
the moment, it appears that the July low was the bottom.
The long
Treasury was up fractionally, but still finished below its 100 day moving
average (if it remains there through the close today, it will revert to
resistance). However, it continued to
trade above its 200 day moving averages (support) and the lower boundaries of
its short term trading range and its long term uptrend.
The dollar rose,
but ended in its short term downtrend and below its 100 and 200 day moving
averages. However, it negated a very short term downtrend.
GLD was up, finishing
above its 100 and 200 day moving averages (support) and the lower boundary of a
short term uptrend. However, it voided 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 weakness is hardly surprising. Given their recent price strength, some
consolidation is to be expected.
Trading in UUP,
GLD and TLT remains inconsistent, providing little directional information.
I remain uncomfortable
with the overall technical picture.
Fundamental
Headlines
One
economic datapoint was released yesterday: the Chicago Fed national activity
index was much stronger than anticipated. Another sign that either the post hurricane
economic reality has not caught up with economic reporting or that the economy
is a lot stronger than is reflected in our forecast. Notice below the earnings reports from yesterday
and this morning. They are all
industrial companies (except MCD) and they all had upbeat earnings, suggesting
that perhaps the economy is (getting) better than I expect.
This
will be a major week for corporate earnings releases. To date, 70% of S&P companies have beat
profit expectations while 72% have reported better than estimated sales
growth. On the other hand, the net overall
earnings increase is not that impressive---up 3.8%.
We
will also get some big economic numbers: durable goods, new home sales and
GDP. In addition, the ECB meets on
Thursday and is expected to keep its bond buying program intact, though it
could raise lending rates slightly.
Also
favoring a continuation of QEInfinity, Japanese PM Abe scored a major election
victory, likely assuring more of his version of QE.
***overnight,
the Bank of Japan said that it was considering lowering its inflation forecast
for 2018, likely making more QE a lock.
On the other
hand, China released its new economic plan to wide (internal) acclaim, removing
the need for the recent excessive monetary ease and the tendency to shade
economic data to the upside.
Bottom
line: yesterday’s pin action notwithstanding, the bulls still rule. 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.
When
the music stops (medium):
Collateralized
loan obligations are booming again (medium):
My thought for the day: avoid errors. Sadly, errors
cost us more than good decisions help. When nearly everyone is smart together,
nobody wins. When nearly everyone screws up together, nearly everyone loses and
loses much more than they otherwise would have. The more universal the error,
the greater the loss will be. Because this tragedy of errors is such a major
problem, dealing with risk first is absolutely essential for good investing.
Thus learning what not to do is more important than learning what to do. As
Charley Ellis famously established, investing is a loser's game much of the
time—with outcomes dominated by luck rather than skill and high transaction
costs. If we avoid mistakes we will generally win.
Investing for Survival
Market
myths that could hurt investors.
News on Stocks in Our Portfolios
Revenue of $3.62B (+3.4% Y/Y) beats by $50M.
Revenue of $5.75B (-10.4% Y/Y) beats by $10M
Revenue of $11.4B (+24.5% Y/Y) beats by $770M.
Revenue of $8.17B (+6.0% Y/Y) beats by $240M.
Revenue of $4.51B (+37.5% Y/Y) beats by $70M.
Revenue of $15.45B (+6.3% Y/Y) beats by $470M
Economics
This Week’s Data
Other
The
economic indicator Goldman is watching the closest (medium):
Quote
of the day (short):
Politics
Domestic
The two US
economies (medium):
International War Against Radical
Islam
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for Survival’s website (http://investingforsurvival.com/home)
to learn more about our Investment Strategy, Prices Disciplines and Subscriber
Service.
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