The Morning Call
1/21/15
The Market
Technical
More intraday volatility
yesterday, though the indices (DJIA 17515, S&P 2022), finished near the
flat line; so they remained within uptrends across all timeframes: short term
(16443-19215, 1905-2886), intermediate term (16447-21612, 1732-2446) and long
term (5369-18860, 783-2083).
The Averages advanced
at the same pace as the ascending lower boundaries of those pennant formations;
so they ended right on those boundaries as they did Friday. I noted on Saturday, that those boundaries
are now acting as resistance. Therefore,
until they break back above those boundaries indicating that last week’s
Wednesday/Thursday’s decline was a false flag, I think this action still has be
labeled as negative.
Thoughts
from TraderFeed (short):
Volume
fell; breadth was mixed to negative. The
VIX was down, remaining within a very short term uptrend, a short term trading
range, an intermediate term downtrend and above its 50 day moving average.
The
long Treasury continued to move up, ending within a very short term uptrend, above
the upper boundaries of both its short and intermediate term uptrends, within
its long term uptrend and above its 50 day moving average. I continue to believe that TLT is getting
stretched to the upside and that some consolidation is likely.
GLD
rose again, closing above the upper boundaries of both its short term trading
range and intermediate term downtrend. Under
our time and distance discipline, the short term trend re-sets to up; and if GLD
remains above the upper boundary of its intermediate term downtrend though the
close today, that trend will re-set to a trading range. This chart looks more and more like a
bottom. That said like TLT, GLD needs a
little consolidation. When that occurs,
our Portfolios will likely start to nibble.
Bottom line: taken
by itself, yesterday’s price action left the indices’ direction in question. On the other hand, the long bond and gold are
experiencing an extraordinary upside move which suggests more global economic/security
instability and the rising probability that the US equity Market will not go
untouched. That said, given the current
level of volatility, forward looking statements have to be taken lightly.
The
latest from Andrew Thrasher (medium):
More
on the January effect (short):
Update
on the dollar chart (short):
Fundamental
Headlines
Only
one economic indicator reported yesterday and it was neutral: the January National
Association Homebuilders index was flat.
Nothing.
On the
economic/political front, we did get an advanced look at Obama’s state of the
union speech tonight. He will proposed
increased a capital gains tax rate and nullifying the capital gains tax exemption
of appreciated assets in estates. Money
to be spent on middle class tax credits and the promise of a free two year
community college education. I would
piss and moan about these proposals if they had a snow ball’s chance in hell of
passing. But they don’t. I will point out that this is more
ideological positioning instead of any well-meaning attempt at real tax reform.
Finally, the
stream of poor disappointing earnings reports (and/or guidance) continue---this
time from Morgan Stanley, Johnson & Johnson and IBM.
Investors also had
a lot of overseas data to digest: the Shanghai Composite was down over 7% as
officials suspended three broker/dealers for margin finance and securities
lending violations; China reporting 2014 GDP growth at the slowest in 24 years,
the IMF lowering its 2015/2016 global GDP estimates; Denmark lowering its
central bank rate and Turkey announcing that its central bank will lower their
rate today; a resumption of the decline in oil prices; and last but not least
renewed violence in Ukraine and an attempted coup in Yemen.
In short
including the poor earnings reports, there was a lot of bad news to work
through. But not to worry because all
eyes are on the ECB meeting on Thursday, anticipating it joining the QEInfinity
crowd---even though, a lot of the guys that I listen to are convinced the ECB
doesn’t have the tools to get close to a US or Japanese style QE. The good news is that we will know tomorrow.
John
Mauldin on the Swiss revaluation and an EU QE (as always a bit long but worth
the read):
The
endgame for central banks (medium):
***overnight,
the Bank of Japan reduced its inflation expectations but still held off
expanding QE further. I thought that the
whole point of its QE was to get inflation up to 2%. (medium):
Bottom
line: the news flow yesterday was pretty
lousy save for Denmark and Turkey joining the QE mania and the anticipation that
tomorrow the ECB will throw in its lot. So apparently the damage done by the
Swiss revaluation to central bank credibility was not enough to squash
enthusiasm for more QE. Nevertheless, I don’t
see how we can ignore the implications of a lousy start to this earnings season,
the poor economic reports from overseas, more instability in oil and
geopolitical flare ups in Ukraine and Yemen.
Of course, the central banks have been papering over problems with aggressive
money printing for six years. I just
worry about it all coming to an end.
I
can’t emphasize strongly enough that I believe that the key investment strategy
today is to take advantage of the current high prices to sell any stock that
has been a disappointment or no longer fits your investment criteria and to
trim the holding of any stock that has doubled or more in price.
Bear in mind, this is not a
recommendation to run for the hills. Our
Portfolios are still 55-60% invested and their cash position is a function of
individual stocks either hitting their Sell Half Prices or their underlying
company failing to meet the requisite minimum financial criteria needed for
inclusion in our Universe.
Investing for Survival
Renouncing
citizenship (Part 1)
http://www.zerohedge.com/news/2014-01-10/guest-post-how-i-renounced-my-us-citizenship-and-why-part-1
News on Stocks in Our Portfolios
·
Revenue of $24.11B (-13.0%
Y/Y) misses by $660M.
·
2015 guidance to be
provided on conference call.
Economics
This Week’s Data
The
National Association of Homebuilders’ January index reading (57) was flat with
December’s and slightly below expectations (58).
Weekly
mortgage applications rose 14.2% but purchase applications fell 3.0%.
December
housing starts increased 4.4% versus estimates of an advance of 1.2%.
Other
Stupid
auto loans vicious cycle (medium):
Dovish
FOMC member thinks that it’s time to raise rates (short):
Politics
Domestic
A review of the
latest House immigration bill (medium):
International
Fighting
continues in Ukraine (medium):
Government
in Yemen in disarray after presidential palace is seized (medium):
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