The Morning Call
1/4/18
The
Market
Technical
The indices
(DJIA 24922, S&P 2713) had another good day. Volume was up substantially;
breadth strong. 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 (9.1) was
pounded down 6 ½ %, closing below its 100 and 200 day moving averages (both
resistance), in a very short term downtrend but above the lower boundary of its
long term trading range.
The long
Treasury was up, ending back above the lower boundary its very short term
uptrend, above its 100 and 200 day moving averages and the lower boundaries of its
short term trading range and long term uptrend. So bond investors remain unconvinced that
rates are rising or they are looking for a safety trade.
The dollar rebounded
a tad, but still finished below its 100 and 200 day moving averages (now
resistance), in a short term downtrend and near the lower boundary of its long
term trading range. Dollar investors
also aren’t anticipating higher rates/economic strength nor the need for a
safety trade.
Gold
was down slightly, but remained above its 100 and 200 day moving averages (now
support) 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.
Fueling
the bull market (short):
Trading in UUP,
GLD and TLT continued to reflect the belief that the economy that is less
strong and/or that there is less upward pressure on interest rates than
consensus. I remain confused and uncomfortable with the
overall technical picture.
Taking
stock of a weird year (medium):
Fundamental
Headlines
Yesterday’s
economic data were generally upbeat: the December ISM manufacturing index,
November construction spending, the December Markit PMI manufacturing index and
weekly purchase applications were above consensus while month to date retail
chain store sales and weekly mortgage applications were below---in line with
our improving economy scenario.
Overseas,
the German unemployment rate hit a record low.
***overnight,
the December EU composite PMI, the UK services PMI and the Chinese Caixin
services PMI were all above forecasts.
The
FOMC released the minutes of its latest meeting; the bottom line is that the
narrative has not changed that much---the tax increase should stimulate
consumer and business spending, inflation should continue to work its way
higher, we should expect at least three rate hikes in 2018 with the stipulation
that the Fed will so nothing to upset the Market apple cart. I will say that both the hawks and the doves
were more aggressive in stating their positions; but I suspect that they felt
more comfortable upping their rhetoric knowing that the meeting meant nothing
in the scheme of things given regime change is imminent, so any real policy
decisions weren’t going to be made.
Bottom line: everything
remains awesome. Certainly, in the short
term, a number of factors support that notion---the economic data, the forecast
impact of the tax bill and the assumption that the Fed will not risk disturbing
the Markets. As long as those theses
are willingly accepted by investors, stock prices are going up. And to be clear they may all work out exactly
as anticipated. I don’t believe that
they will but they could. That said, equity
prices are now discounting everything short of the second coming. So my position remains that at some point,
reality, however positive it may be will reflected in those prices.
Enjoy the ride
while it lasts, but be sure your portfolio has some protection like cash.
Some
perspective on 2017 Market action (short):
Fourth
quarter dividend growth (short):
The
latest from SocGen (medium):
Update
on valuations (medium):
ETF Highlight
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Stocks that make the cut are weighted by market cap rather than dividends, an
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ETF.
Investing for Survival
Doug Kass’s 15
predictions for 2018---Part 1:
News on Stocks in Our Portfolios
Economics
This Week’s Data
Month
to date retail chain store sales growth were less than in the prior week.
The
December ISM manufacturing index came in at 59.7 versus expectations of 58.1.
November
construction spending rose 0.8% versus estimates of +0.6%.
December
light vehicle sales were slightly above forecasts.
The
December ADP private payroll report showed job increases of 250,000 versus
consensus of 188,000.
Weekly
jobless claims rose 3,000 versus projections of a 5,000 decrease.
Other
More
criticism on the tax bill; this from a firm dem supporter (medium):
And
this from David Stockman (medium):
Some
thoughts on inflation (medium):
The
rising debt problem (medium):
The
missing ingredient to growth (medium):
Politics
Domestic
Quote of the day
(short):
International War Against Radical
Islam
Inside Iran (medium):
Visit Investing
for Survival’s website (http://investingforsurvival.com/home)
to learn more about our Investment Strategy, Prices Disciplines and Subscriber
Service.
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