The Morning Call
6/13/16
The
Market
Technical
The Averages
(DJIA 25320, S&P 2785) were mixed (Dow down, S&P up) yesterday. Volume declined; breadth deteriorated. Both finished above their 100 and 200 day
moving averages (now support). The Dow
is in a short term trading range, the S&P in a short term uptrend. Longer term, the assumption is that stocks
are moving higher.
The VIX fell slightly,
ending below its 100 and 200 day moving averages (now resistance) and below the
upper boundary of its short term downtrend.
This continues to point to higher stock prices; though it is at a level
at which institutions start buying it as portfolio insurance.
The long
Treasury was up pennies. It finished
above its 100 day moving average and the lower boundary of its long term
uptrend; but it is below its 200 day moving average, it a short term downtrend
and is developing a very short term downtrend.
So current momentum is the downside (higher yields).
The dollar rose
¼ %. It closed well above both moving
averages and it is in a short term uptrend, confirming TLT’s message of higher
rates.
GLD was down
slightly, remaining below its 100 and 200 day moving averages. However, it closed above the upper boundary
of its short term downtrend for a third day, resetting to a trading range---but
the pattern in which it accomplished
this feat (trading flat as the trend declined) was weak (as opposed to trading
higher).
Bottom
line: the indices appear headed for
their all-time highs (26656/2874) which I am assuming that they will at least
challenge. Both TLT and UUP are pointing
at an improving economy and higher interest rates. GLD isn’t really telling us much.
Fundamental
Headlines
The
economic data yesterday was slightly positive: month to date retail chain store
sales and the May small business optimism index were a plus, May CPI was in
line and the May budget deficit negative.
Overseas,
June German investor sentiment was much worse than projected.
I
would characterize the day as debating the consequences of the G7 and Singapore
meetings and anticipating the upcoming central bank meetings.
Thoughts
on the G7 meeting:
Another
way of viewing trade (medium):
Thoughts
on the North Korean summit:
Thoughts on the FOMC meeting:
The
Fed and inflation (medium):
Bottom line: so
far this event filled week seems to have been well discounted. We still face three central bank meetings in
which the outcomes seem set (Fed raises rates but the ECB and BOJ do
nothing). Nevertheless, the subsequent
narratives are important as they provide some guidance on future moves. That said, the primary motive of all these guys
is to do nothing that would disrupt the Markets. So I believe that those narratives will be
measured with a lot of caveats that provide an out for any further
tightening. However, ultimately, I think
that asset mispricing and misallocation will be rectified with or without
central bank consent.
China
continues to curtail ‘shadow bank’ lending (medium):
The ECB has an
even larger asset mispricing and misallocation problem than the US (medium):
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
The
May budget deficit was $146.8 billion versus consensus of $144.0 billion. Don’t forget, we are supposed to be running
surpluses or at least shrinking the deficit during periods of economic growth.
Weekly mortgage
applications fell 1.5% while pusrchase applications declined 2.0%.
May
PPI rose 0.5% versus estimates of up 0.3%; ex food and energy, it was up 0.3%
versus consensus of +0.2%. Remember PPI
tends to lead CPI.
International
The
April EU industrial production fell 0.9% versus the March reading of +0.6%.
May
UK CPI hit a one year low.
Other
The
world is headed for a cyclical slowdown (short):
Update
on auto loans (medium):
Update
on Brexit (medium):
What
I am reading today
SEC frets about corporate
stock buybacks (medium and a must read):
Intangible assets
and equity valuation (medium):
Three social security myths (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