The Morning Call
11/8/17
The
Market
Technical
After being in
the red most of the day, the indices (DJIA 23557, S&P 2590) closed
basically flat on the day (DJIA up slightly, S&P down pennies) (no halt to still
the relentless drive higher). Volume was
down; breadth improved. Both remain
above their 100 and 200 day moving averages and are in uptrends across all time
frames.
The VIX (9.9)
was up 5 ¼ %---finishing below the upper boundary of its short term downtrend,
below 100 day moving average (now resistance), below its 200 day moving average
(now resistance) but back above the lower boundary of its long term trading
range, voiding that break. While it is still
on the verge of a directional change, July low 8.8 remains the bottom.
The long
Treasury was up, ending above its 200 day moving average (now support), above
the lower boundaries of its short term trading range and long term uptrend and above
its 100 day moving average for the third day, reverting to support. It is now
building a very short term uptrend.
And:
The dollar rose,
still ending below its 200 day moving average (now resistance), back above the
upper boundary of its short term downtrend (if it remains there through the
close on Thursday, it will reset to a trading range), above its 100 day moving
average (now support) and continues to develop a very short term uptrend.
GLD rose declined,
finishing right on its 100 day moving average (stopping the timetable for a
reversion to support), above but still close to its 200 day moving average
(support) and the lower boundary of a short term uptrend. Again, potential trend change, I just don’t
know which direction.
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 were again out of sync with themselves, the VIX and stocks, but
seem to be pointing at a change in trends---in different directions. As you can deduce from my recent links, the
most concerning divergence is in the bond market. Its rise suggest a weaker economy or a safety
trade, neither of which is a plus for stocks.
I remain
uncomfortable with the overall technical picture.
Fundamental
Headlines
Only
one economic datapoint released yesterday: month to date retail chain store
sales grew at a slower pace than in the prior week. Nothing overseas.
***overnight,
October Chinese trade numbers were in line, though they declined.
In
addition, the IMF actually encouraged the Japanese to continue their massive
bond buying program.
Capturing
much of the ruling class headlines were:
(1)
the ongoing debate in the senate on tax reform as well
as on the Street.
More on tax reform (medium):
This from my favorite optimist
(medium):
This from my favorite pessimist (medium):
I hate being too repetitious, but I want
to reemphasize a point. If non-revenue neutral
tax reform doesn’t pass, that is good news.
The US economy simply can’t afford to service another $1.5 trillion in
debt and grow at the same time.
(2)
the ongoing drama playing out in Saudi Arabia.
The latest out of Saudi Arabia
(medium):
More on the confiscation of assets
(medium):
More on oil (medium):
Why is Lebanon so important? (medium):
Oil breaking out? (short):
Bottom line: as I noted in yesterday’s Morning Call, this
should be a relatively slow week for news, economic and otherwise. Yesterday followed that pattern. Investors seemed to welcome the respite; but
clearly there was no inclination to sell, notwithstanding some cognitive
dissonance on tax reform. Speaking of
which, the senate should present its markup of the tax reform bill tomorrow,
though the deadline has been shifting around a bit. As you know, I am not expecting much. Indeed, based on the current budget busting proposals
on the table, I am hoping that there is not much.
That said, what I
hope doesn’t matter. Valuations are at all-time
highs; and that is not going to change until something dents investor euphoria.
And I don’t know when that happens. The good
news is that our Portfolios are roughly 50% invested, so at least one half of
me is enjoying the ride. The even better
news is that I sleep much better at night knowing that the other half is a huge
cushion when, as and if the downturn comes.
My thought for
the day: When in doubt, choose the investment with
the lowest fee.
Investing for Survival
This should
interest all those that have the decision to either by Obamacare or pay the tax
penalty.
News on Stocks in Our Portfolios
Revenue of $4.44B (+13.0% Y/Y) misses by $10M.
Emerson Electric (NYSE:EMR) declares
$0.485/share quarterly dividend, 1% increase from prior
dividend of $0.48.
Automatic Data Processing (NASDAQ:ADP) declares
$0.63/share quarterly dividend, 10.5% increase from prior dividend of
$0.57.
Economics
This Week’s Data
Month
to date retail chain store sales were grew less than in the prior week.
Weekly
mortgage applications were flat while purchase applications rose 1.0%.
Other
The
latest consumer debt numbers (short):
Must
read article from Jeffrey Snider on the EU recovery (medium):
Politics
Domestic
International War Against Radical
Islam
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for Survival’s website (http://investingforsurvival.com/home)
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Service.
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