The Morning Call
11/13/17
The
Market
Technical
Despite
Friday’s moonshot in the VIX and the plunge in the long Treasury, the S&P merely
drifted lower on higher volume. There is
nothing in the current performance in equities that points at any disruption in
the relentless move higher.
The
long Treasury got hammered on volume on Friday, reversing much of the positive technical
work TLT accomplished over the past week.
It voided a newly developing very short term uptrend, closed below its
100 day moving average (now support; if it remains there through the close on
Tuesday, it will revert to resistance), though it still finished above its 200
day moving average and the lower boundaries of its short term trading range and
long term uptrend. So in a day, TLT
went from one trend change to its opposite.
What has changed bond investors’ minds?
The
dollar had a calm day on Friday, trading down pennies and remaining caught
between the its 100 day moving average and the upper boundary of its short term
downtrend (resistance) and its 200 day moving average and the lower boundary of
its very short term uptrend (support). I
was a little surprised that TLT’s pin action didn’t have a bigger effect on
UUP.
Friday
was a bit rough on GLD, though it wasn’t dinged as hard as TLT. It reversed itself around its 100 day moving
average for the third time in the week, though it remains above its 200 day
moving average and the lower boundary of its short term uptrend. It continues to struggle in a narrow price
range, suggesting investor uncertainty/confusion.
The
VIX surged over 20% on Thursday and Friday on a less than 200 point (0.1%) decline
in the Dow. Of course, volatility is the
VIX; but that kind of divergence suggests real nervousness in ‘short volatility’
pit. As you can see, it closed above its
100 day moving average (now resistance; if it remains there through the close
on Tuesday, it will revert to support), above its 200 day moving average (now
resistance; if it remains there through the close on Wednesday, it will revert
to support) and above the lower boundary of its long term trading range. The July bottom held.
As
I noted in the Closing Bell, the pin action in the VIX and TLT could be just
noise. But clearly, it warrants
attention. We will know more by week’s
end.
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