The Morning Call
11/14/17
The
Market
Technical
The indices
(DJIA 23439, S&P 2584) fought off early weakness to finish up on the day (the
relentless drive higher). Volume soared,
though breadth was mixed. Both remain
above their 100 and 200 day moving averages and are in uptrends across all time
frames.
The VIX (11.5) continued
to advance, turning in a modest follow through from last Thursday/Friday’s pin
action. Not spectacular, but still
notable for being up on an up Market day.
It finished above the upper boundary of its short term downtrend (if it
remains there through the close on Wednesday, it will reset to a trading range),
above its 100 day moving average (now resistance; if it remains there through
the close on today, 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. As I noted in the Closing Bell,
in a three day span, the VIX has gone from threatening a challenge of its long
term trading range and making a new all-time low to challenging both moving
averages and the upper boundary of its short term downtrend. I am
not sure what the VIX divergence from the equity pin action means. But I take it as a caution signal. More follow through. The July low (8.8) remains the bottom.
The long
Treasury recovered modestly from its shellacking on Friday; though certainly
not sufficiently to suggest Friday was some one-off random occurrence. Technically, it closed at roughly the same
status as on Friday---below its 100 day moving average (now support; if it
remains there through the close today, it will revert to resistance) but above its
200 day moving averages (now support) and above the lower boundaries of its
short term trading range and long term uptrend.
Like the VIX, it seems like
something could be going on beneath the surface. We just need more follow through.
The
chase for yield (medium):
The dollar rose fractionally,
ending below its 200 day moving average (now resistance), below the upper
boundary of its short term downtrend, but above its 100 day moving average (now
support) and continues to develop a very short term uptrend. (Still caught in the narrowing gap between
the upper boundary of its short term downtrend and the lower boundary of its
very short term uptrend).
GLD was up, closing
back below its 100 day moving average, but above its 200 day moving average
(support) and the lower boundary of a 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. The technical assumption has to
be that stocks are going higher.
Trading in UUP,
GLD and TLT remain out of sync with themselves, the VIX and stocks, and seem to
be pointing at a change in trends---but in different directions. I am watching for more follow through in the
TLT and VIX
I remain
uncomfortable with the overall technical picture.
Fundamental
Headlines
One
datapoint released yesterday: the October budget deficit was larger than
anticipated (what else is new). Nothing
overseas.
***overnight,
German third quarter GDP was up 3.3% versus a 2.6% increase in the second
quarter; third quarter UK inflation was below forecasts; October Chinese
industrial production and fixed asset investments were below consensus while
retail sales were above.
Both
the house and senate started marking up their tax reform legislation; the GOP
goal being to have a bill passed by December.
Since this will be a very fluid process, any one day’s news will likely not
be that significant in itself---not that there was anything meaningful done
yesterday. The up to date status:
Bottom
line: I don’t want to make too big a deal about a single datapoint, but the
budget deficit is illustrative of the issue I have been pounding for years---fiscal
policy is a disgrace; by sapping resources to service an increasing level of
debt, it is inhibiting economic growth and that is a mild understatement if
long rates start back towards the unheard, never before seen level of 5%. Meanwhile, investors are getting jiggy about
adding another $1.5 trillion to that debt while getting nothing simpler or
fairer in return.
For
the bulls (medium):
Subscriber Alert
Retail
stocks continue to get abused in an otherwise euphoric market. Many have been cut in half price wise. At the open this morning, the Aggressive
Growth Portfolio will Buy a position in
Tractor Supply (TSCO-$61) and the Dividend Growth and High Yield Portfolios
will Buy a position in Williams-Sonoma (WSM-$51).
Investing for Survival
How
fortunes are made in the stock market.
News on Stocks in Our Portfolios
Revenue of $25B (+8.0% Y/Y) beats by $450M.
Economics
This Week’s Data
The
October budget deficit was $63.2 billion versus estimates of $58.0 billion.
The
October small business confidence index was reported at 103.8 versus
expectations of 105.0.
October
PPI rose 0.4% versus consensus of up 0.1%; ex food and energy, it was up 0.4%
versus forecasts of up 0.2%
Other
US
heavy truck sales up year over year (short):
Japanese government
pension plan now at limit for stock position (medium):
The latest from
UBS (medium):
The
declining savings rate (medium):
Politics
Domestic
International War Against Radical
Islam
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