The Morning Call
12/4/17
The
Market
Technical
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.
Fundamental
Headlines
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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