The Morning Call
11/10/17
The
Market
Technical
The indices
(DJIA 23461, S&P 2584) suffered some severe whackage yesterday, though they
closed well off their lows (a hitch in the relentless drive higher? probably
not.). Volume rose; breadth weakened. Both remain above their 100 and 200 day
moving averages and are in uptrends across all time frames.
The VIX (10.5) jumped
7 ¼ %---but still finished below the upper boundary of its short term
downtrend, below 100 day moving average (now resistance), below its 200 day moving
average (now resistance). However, it
ended back above the lower boundary of its long term trading range, voiding a
second break in the last week. While it
is still on the verge of a directional change, the July low 8.8 remains the
bottom.
The long
Treasury was down, ending above its 100 and 200 day moving averages (now support)
and above the lower boundaries of its short term trading range and long term
uptrend. It is now building a very short term uptrend.
And:
The dollar declined,
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 basically trendless).
GLD rose, closing
above its 100 day moving average for the second day (if it remains there
through the close today, it will revert to support), above its 200 day moving
average (support) and the lower boundary of a short term uptrend. (Gaining strength)
Bottom line: yesterday’s pin action
notwithstanding, 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
Not
one but two minor datapoints were released yesterday: weekly jobless claims
rose more than expected; September wholesale inventories were in line while
wholesale sales were a touch better anticipated. Nothing overseas. ZZZZZZZZ
***overnight,
September UK industrial output was better than estimates while construction
spending was worse.
Both
the senate and the house released their amended versions of tax reform. I am linking to them and an analysis that
outlines each bills major provisions and how they differ from each other; so I won’t
waste your or my time on the details.
House
bill:
Senate bill:
My bottom line remains
that this is an effort in futility.
Neither version is all that great.
I discussed last week at length (the
11/3 Morning Call and 11/4 Closing Bell) how this (these) plans were not
simpler, not fairer and because of the budget blowing deficits they create,
wouldn’t contribute to economic growth---or if they did, only marginally
so.
For
those of you that want a review of why they aren’t simpler, fairer or pro-growth,
see below. I would disagree with the
author that the motivation for pushing the tax bill has more to do with
politics than personal wealth; but the results are still the same (medium):
Hence, discussing
either version or comparing and contrasting them is akin to arguing about the
number of angels that can dance on a pin head.
It is a useless exercise. This
whole effort is a desperate attempt by the GOP to deliver on a campaign promise
which shouldn’t have been given in the first place in order to justify their place
in the ruling class. In my opinion, if
either version or some compromise is enacted, it will do more harm than good.
That
said, it would seem that the odds that a tax reform bill will be passed are
rising. The fact that both versions are
out, that they aren’t that far apart on most issues suggests that the nation
will get a tax bill. So the GOP will
likely get its tax reform that they can tout during the 2018 elections; but the
nation, in my opinion, will hardly be better off.
In
other news, Saudi Arabia orders its citizens to leave Lebanon (medium):
Kuwait
orders its citizens to leave Lebanon (medium):
Bottom
line: however, happy or unhappy investors are about the house/senate tax reform
bills, in my opinion, has little relevance; at least with respect to the
economy. As you know in my opinion, both
measures’ economic impact in their current form are a neutral at best. However, given the anticipation of reform,
passage would almost surely be a boon to Market psychology---whatever the final
product looks like. So the rising
prospect of passage is likely to keep alive the current relentless move higher
in stock prices---all other things being equal.
The
only issue is how long it takes to appreciate the emperor’s new clothes.
My
thought for the day: Singer Rihanna nearly went
broke and fired her financial advisor, who described her situation well:
"Was it really necessary to tell her that if you spend money on things,
you will end up with the things and not the money?"
Investing for Survival
Considerations
for cashing out of the Market.
News on Stocks in Our Portfolios
Economics
This Week’s Data
September
wholesale inventories rose 0.3%, in line, while wholesale sales edged higher.
Other
Politics
Domestic
International War Against Radical
Islam
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