The Morning Call
2/15/17
The
Market
Technical
The indices
(DJIA 24893, S&P 2698) blew off a couple of concerning economic datapoints
and surged higher. They negated their
very short term downtrends, leaving them in a trading range with their former
highs serving as the upper boundary.
They remain above both moving averages and within uptrends across all
major timeframes. Volume rose but was
still relatively low; breadth improved.
The technical assumption is that long term stocks are going higher.
The VIX plunged
23%, but is still at elevated levels, remaining well above a support
level. Of course, if yesterday’s
volatility continues, it wouldn’t be there very long.
The long
Treasury also fell sharply (1%+), finishing below both moving averages, in very
short term and short term downtrends and less than a point away from the lower
boundary of its long term uptrend, a breach of which would clearly intensify
investors’ concern about rising interest rates/inflation
The dollar was
hammered, leaving it below both moving averages and in an intermediate term
downtrend. This remains an ugly chart.
GLD spiked 1 ¾ %
on heavy volume, continuing the bounce off a minor support level and leaving
its chart in relatively good shape.
Bottom line: equity
investors were clearly not concerned about either higher inflation or poor
retail sales yesterday. The dollar
pointed at lower rates or higher inflation, gold was all-in for both and bond
investors were very worried about inflation.
Confused? Me, too. Follow
through; but at the moment, stock prices appear likely to go higher.
Yesterday
in charts (short):
Bonus
charts (short):
Update
on margin debt (medium):
Fundamental
Headlines
Yesterday
economic data couldn’t have been worse---higher than expected CPI, lower than
expected retail sales.
That
combo describes stagflation to a tee. Of
course, it is too early to be scare mongering such a scenario. On the other hand, it seems a stretch to get
jiggy with it.
That
said, the consensus among the chattering class was that the higher than
anticipated CPI number was not a concern and the shortfall in retail sales
means an easier Fed for longer. In other
words, a return to good news is good news and bad news is good news.
A
new measure of inflation from the NY Fed (medium):
Bottom line: there
wasn’t a lot (rumored senate deal on DACA and trade action against China) to
drive stock prices yesterday other than the aforementioned stats. Of course, a lot of times stocks don’t need a
reason to do what they do.
My concern
remains an expanding deficit/debt at a high in economic activity in combination
with a Fed that has been too easy and is late to the tightening process.
The
long term insolvency of the US government (medium):
The growing
deficit/debt (medium):
Counterpoint
(medium):
Of
course, it appears that I am wrong about the impact of the tax bill; so I could
be equally wrong on this score.
The
myth of America’s crumbling infrastructure (medium):
***overnight, Trump
proposed an increase in the gasoline tax.
Since this is essentially a ‘user’ tax, it makes a lot of sense---more
so than his infrastructure bill. (medium):
Axel
Merk on risk parity (medium):
News on Stocks in Our Portfolios
Sherwin Williams (NYSE:SHW)
declares $0.86/share quarterly dividend, 1.2% increase from prior dividend
of $0.85.
Economics
This Week’s Data
US
December
business inventories rose 0.4% versus expectations of up 0.3%; business sales
rose 0.4%.
Weekly
jobless claims rose 7,000 versus estimates of an increase of 8,000.
The
February Philadelphia Fed manufacturing index was reported at 25.8 versus
forecasts of 21.0.
The
February NY Fed manufacturing index came in at 13.1 versus consensus of 17.5.
January
PPI rose 0.4%, in line; ex food and energy, it was up 0.4% versus projections
of up 0.2%.
International
Other
The Bloomberg
consumer comfort index soared to 17 year high (short):
Update
on big four economic indicators (medium):
Trade
data shows strength in US and China economies (short):
US
starts trade action against China for dumping cast iron soil pipe fittings
(short):
Foreign
trade is not bad for America (medium):
Financial
markets have taken over the economy (long but a good read):
What
I am reading today
The cost of retirement
(medium):
IRS issues warning on new tax refund
scam (medium):
Senate
group says they have a deal on DACA (short):
Yellowstone
super volcano under strain (medium):
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