Monday, December 4, 2017

Monday Morning Chartology

The Morning Call


The Market

            I thought that I would put in a longer term S&P chart just to provide some perspective on the duration and order of magnitude of the current run.  Of course, it really doesn’t change the bottom line.  The indices are in uptrends across all technical factors.  The presumption has to be that this continues.

The long Treasury shook off the Wednesday/Thursday weakness, closing back above its 100 day moving average and the lower boundary of a very short term uptrend.  It continues to trade above its 200 day moving average and the lower boundaries of its short term trading range and its long term uptrend.  In other words, whatever doubts bond investors may have had about a weak economy/lower interest rate seems to have been assuaged but not the need for a safety trade.

            The dollar remains in negative trends viz a viz all our technical indicators, suggesting questions about an improving economy and the need for a safety trade.  (just the opposite of TLT).

            GLD continues to hold its short term uptrend; though it also seems unable to escape the gravitational pull of its 100 day moving average.  Of course, that moving average is trending up albeit at a slow pace; so I have to assume the trend will remain up with a leisurely bias, giving weak support to a weak economy/need for safety trade.

            The VIX once again couldn’t hold below the lower boundary of it long term trading range.  Meaning once it gets there, there are enough investors that believe that it is not properly reflecting the potential risks in the Market.  At the least, it will serve to slow the rate of advance in equity prices.



            There was a lot of data released last week and while it was not overwhelmingly positive or negative, in sum it was weighed to the upbeat side. Further, the primary indicators were almost positive.  So the call is easy.  Score: in the last 112 weeks, thirty-five were positive, fifty-six negative and twenty neutral.  More important, this continues the recent trend of roughly two months during which the economy is on a clear path to improvement.  I attribute this to multiple sources: the Trump regulatory agenda, the increasing growth in the EU economy and a rising level of consumer and business sentiment as congress continues to make progress on the tax bill.

            As you know, I don’t have a lot of positive things to say about the latter; and I haven’t changed my opinion one bit.  But as long as the electorate/investors consider this a plus and that translates into economic decisions that increase the level of economic activity, it is a positive, at least in the short term

            Early Saturday morning, the senate passed its tax bill.  Here is what’s in it:

            And here is David Stockman’s analysis (medium):

            Bottom line: at long last, the economy seems to be improving---not returning to it historical secular growth rate---but improving.  Hopefully that will provide a base for the middle class, when the investor class realizes that it owns assets that are so grossly overvalued, no amount of economic growth is going to get the net present value of future cash flows remotely close to current prices.  Be sure that you have enough cash to sleep at night.

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