The Morning Call
12/15/17
The
Market
Technical
The indices
(DJIA 24508, S&P 2652) gave a little of their recent gains back yesterday
as a couple of GOP senators expressed objections to the tax bill in its current
form. Volume declined again; breadth weakened. The bottom line remains that both of the
Averages continue to trade above their 100 and 200 day moving averages and are
in uptrends across all time frames---with the assumption being that stock
prices are going higher.
The VIX (10.5)
rose another 3%, closing below its 100 and 200 day moving averages (both
resistance) but above the lower boundary of its long term trading range.
The long
Treasury was up, ending above its 100 and 200 day moving averages and the lower
boundaries of a very short term uptrend, its short term trading range and long
term uptrend. So bond investors are not
worried about higher rates or they are looking for a safety trade.
The dollar rebounded
a tad, but still finished below its 200 day moving average (now resistance) but
above its 100 day moving average (now support) and below the upper boundary of
its short term downtrend. Dollar
investors also aren’t anticipating higher rates/economic strength nor the need
for a safety trade.
Gold
was down slightly, remaining below its 100 and 200 day moving averages and within
a short term trading range.
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. If you own enough cash to sleep at night, lay
back and enjoy it.
Trading in UUP,
GLD and TLT continued to reflect an economy that is less strong and/or less
upward pressure on interest rates. The VIX seemed to be agreeing while stocks
were more neutral in their response. I
remain confused and uncomfortable with the overall technical picture.
Fundamental
Headlines
Yesterday’s
economic data was largely upbeat: weekly jobless claims fell, November retail
sales were very strong, October business inventories fell but sales were up big,
November export/import prices were mixed and the December Markit Composite PMI
was disappointing.
David Stockman
on the current economy (medium):
Overseas,
November UK retail sales were better than anticipated; November Chinese
industrial output and retail sales were below estimates.
***overnight,
the December EU manufacturing and services PMI’s were above forecasts.
The
only other headline was a couple of GOP senators suggesting that they might not
be able to support the tax bill in its current form. I don’t put a lot stock in the likelihood of
any of these objections derailing the tax bill.
First, with the bill on the verge of going back to the house and senate,
this is the point of max leverage for any legislator to try to extract an item
on his/her agenda. So all this is to be
expected. Second, the political necessity
for passage is so powerful, I think the pressure will be intense to relinquish
any personal agenda issue for the common (GOP) good.
Bottom line: stocks
retreated yesterday on what I consider bogus headlines. I continue believe that tax reform is coming
(however, ineffective it may be).
Meanwhile, the global central bank monetary policies will keep the ‘everything
is awesome’ dream alive. In short, the
major fundamental factors driving stocks higher remain in place, however
outlandish current valuations may be.
Enjoy the ride
while it lasts, but be sure your portfolio has some protection like cash.
Stocks
no longer cheap relative to bonds (short):
Investing for Survival
Why
now?
News on Stocks in Our Portfolios
Revenue of $9.63B (+6.2% Y/Y) beats by $60M.
Economics
This Week’s Data
The
December Markit Composite PMI was reported at 53.0 versus expectations of 54.6.
October
business inventories fell 0.1%, in line; but sales rose 0.6%.
The
December NY Fed manufacturing index came in at 18.0, in line.
Other
Minsky
and the Fed (medium):
Odds
of a recession (short):
Student
loan defaults accelerate (medium):
Update
on big four economic indicators (medium):
Why
a 2% inflation goal is so stupid (short):
Fed stated policy and the
money supply numbers (medium):
Politics
Domestic
The FBI isn’t
the only government ‘gang that can’t shoot straight’ (medium):
International War Against Radical
Islam
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for Survival’s website (http://investingforsurvival.com/home)
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