Monday, May 4, 2015

Monday Morning Chartology

The Morning Call

5/4/15

The Market
           
    Technical

       Monday Morning Chartology

            The S&P closed right on the trend line connecting the lower highs.  The brief period above that trend line did not meet our time and distance discipline, so it was negated.  Clearly, the close today will be important.



            On Friday, the long Treasury closed below its 100 day moving average, the lower boundary of its short term trading range and the lower boundary of its intermediate term uptrend.  If it remains below the trading range by the close Tuesday, the trend will be negated.  If it remains below the intermediate term uptrend by the close Wednesday, the trend will be negated.  Our muni bond holdings in the ETF Portfolio have not started to challenge comparable trends yet; but they are getting close.



            No change here: head and shoulders formation still intact.  Avoid.



            The VIX is still near lows but also still in a very short term downtrend.  I continue to believe that this represents cheap portfolio insurance.



    Fundamental
   
           
            Friday’s economic data was universal misses versus expectations.  Most were slight misses to the downside: April manufacturing PMI (54.1 versus 54.5), April light vehicle sales (16.5 million versus 16.9 million), April ISM manufacturing index (51.5 versus 52.0) April consumer sentiment (95.9 versus 96.0); with one really lousy number thrown in for good measure: March construction spending (-0.6 versus +0.4%).  So thirteen of the last fourteen weeks have been disappointments.

            ***overnight, April Chinese PMI was reported at 48.9 versus 49.6 in March; April EU PMI was reported at 52.0 versus 52.2 in March; and according to Greek officials, progress is being made in that country’s bail out negotiations with the Troika.

                What bubble?  An up to date look at investor psyche (medium):

            QE and creative destruction (medium and a must read):
               

      Investing for Survival

            12 things I have learned from Morgan Housel: Part 1

1. “’I don’t know’ are three of the most underused words in investing.”
“What’s really interesting about finance – and I think this is true for a lot of fields whether you’re in physics, math, chemistry, history, or whatever it is – the more you learn, the you more you realize how little you know.”
There is nothing more fundamental to investing than understanding that risk comes from not knowing what you are doing.  And as Morgan Housel is saying here: the more you know, the more you know that there is even more that you do not know. If you are not getting more humble as you: 1) get older, 2) grow as a person, or 3) learn, then you are not paying attention. The best investors keep their circle of competence tightly defined and limited in scope. Skills can atrophy or become outdated. New competencies can be developed with time and effort.
What you are doing when you are investing is buying an ownership interest in an actual business. No matter how hard you may work to know everything about that business, the phenomenon effecting that business, and the markets in which it competes, there always be much that you do not know.  Even if you may chose an index-based approach to investing, you are making choices about what types and amounts of assets to buy. The very best investors have been able to develop systems that deal effectively with the fact that investing is probabilistic process. The best systems are designed to enable the investor to buy and sell assets in a way that is “net present value positive” over time after fees and expenses. Systems that do not produce net present value positive results over time after fees and expenses, are speculation and are not investing.

    News on Stocks in Our Portfolios
·         Chevron (NYSE:CVX): Q1 EPS of $1.37 beats by $0.58.
·         Revenue of $34.56B (-35.1% Y/Y) beats by $10.19B.

Economics

   This Week’s Data

   Other

            WSJ slams Bernanke (medium):

Politics

  Domestic

  International War Against Radical Islam







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