The Morning Call
5/9/18
The
Market
Technical
The indices
(DJIA 24360, S&P 2671) turned in a mixed performance yesterday (Dow up,
S&P down). Volume was up; breadth improved. The S&P finished slightly above the
upper boundary of its very short term downtrend. Clearly, this is not the kind of vicious
break that I have expected. That said,
the margin above the trend line is so small, it may mean nothing. Further, on
two prior challenges of the very short term downtrend, the S&P closed above
that boundary for one day and then fell back. On the other hand, maybe I am
wrong, the S&P is breaking to the upside and the violent break was just my
supposition.
Both of the
Averages closed below their 100 day moving averages (now resistance) and above
their 200 day moving averages (now support).
The DJIA closed in a short term trading range but in intermediate and
long term uptrends. The S&P is in
uptrends across all timeframes. The short term technical picture remains
cloudy---but that could be coming to an end.
Longer term, the assumption is that equity prices will continue to rise.
The VIX was down
fractionally for a second day, remaining stuck between its 100 day moving
average on the upside and its 200 day moving average as well as the lower
boundary of its short term trading range on the downside. Its recent weakness suggests higher stock
prices.
The long
Treasury sold off slightly again, leaving it hovering above the lower boundary
to its long term uptrend and facing serious overhead resistance from its 100
and 200 day moving averages and the upper boundary of a short term downtrend.
The dollar
continue its surge, pushing it to within pennies of the upper boundary of its
newly reset intermediate term trading range and holding above its 100 and 200
day moving averages (now support).
GLD ended
higher, finishing above its 200 day moving average (now support) and in a newly
reset short term trading range. However,
it remained below its 100 day moving average (now resistance).
Bottom line: I
clearly have to take note of yesterday’s S&P close above the upper boundary
of its very short term downtrend.
However, this wouldn’t be the first time this boundary was tested
briefly and failed. As always, follow
through is key.
TLT continues to
move nearer another challenge of the lower boundary of its long term
uptrend. A break would point to higher
long term interest rates. At the moment,
the strong pin action in the dollar appears to be driving TLT down. On the other hand, while gold has been
trading near several key support levels, the strong dollar has not pushed it to
any challenges. That is not usual. However, as I have noted every day, the
recent price action in all the indicators suggests a good deal of investor
turmoil/confusion as multiple support/resistance levels are being challenged.
Price
instability/uncertainty remains for the moment.
The question is duration.
Patience. I love my cash.
Fundamental
Headlines
Yesterday’s
economic stats were mixed: the April small business optimism index was below
estimates while month to date retail chain store sales grew faster than in the
prior week.
Overseas,
the April Chinese/US trade deficit increased and March German industrial
production was better than expected.
The
event of the day was Trump’s announcement that the US would withdraw from the
Iran nuclear deal. I will leave to FOX
and CNN to analyze the geopolitical implications. I look at the Market and assume that
investors had already well discounted it or that they didn’t care or both.
OK,
one bit of analysis (medium):
So
much for the Trump/Xi phone call yesterday morning (short):
Bottom
line: my focus remains on the implication of irresponsible fiscal and monetary
policy on the long term effect on earnings, interest rates and long term
economic growth and their impact on Market valuations
David
Stockman fiscal policy (medium and a must read):
The Fed’s
balance sheet strategy (medium):
If
I was fully invested, I would definitely lighten my equity exposure. I continue to appreciate my Price Discipline
which forces me to Sell Half when a stock meets its price objective.
Goldman
on the current positioning of hedge funds (medium):
News on Stocks in Our Portfolios
Revenue of $1.85B (+19.4% Y/Y) beats by $130M.
Economics
This Week’s Data
US
Month
to date retail chain store sales grew faster than in the prior week.
Weekly
mortgage applications fell 0.4% while purchase applications were down 0.2%.
April
PPI was up 0.1% versus consensus of up 0.3%; ex food and energy, it was up
0.2%, in line.
International
Other
Is
the current expansion’s days numbered? (medium):
Counterpoint
(medium):
An
argument that higher production costs won’t lead to inflation (medium):
Updating
money supply stats (medium):
What
I am reading today
Update on Brexit
(medium):
Generating
an investment return (medium):
Arbitraging human behavior (medium):
Visit Investing
for Survival’s website (http://investingforsurvival.com/home)
to learn more about our Investment Strategy, Prices Disciplines and Subscriber
Service.
No comments:
Post a Comment