The Morning Call
6/24/15
The
Market
Technical
The Averages
(DJIA 18144, S&P 2124) inched higher yesterday. Both closed above their 100 day moving
averages, but below their prior highs (18295, 2135). However skimpy the gains, the momentum is
still to the upside. As such, the
targets are those prior highs and the upper boundaries of their long term
uptrends. Downside support remains their
100 day moving averages, which, as I have repeatedly noted, have been formidable
the last two years.
Longer term, the
Averages remained well within their uptrends across all timeframes: short term
(17431-20237, 2053-3032), intermediate term (17618-23760, 1847-2615) and long
term (5369-19175, 797-2138).
Volume sunk even
lower; breadth deteriorated slightly. The
VIX was off another 5%, finishing below its 100 day moving average and within a
very short term downtrend and a short term trading range. At
current levels, I believe that offers value as portfolio insurance.
Retail investor
sentiment (short):
Institutional
sentiment (medium):
The long
Treasury was down again, ending below its 100 day moving average and the upper
boundaries of very short term and short term downtrends.
GLD also
declined, remaining below its 100 day moving average and the neck line of the
head and shoulders pattern. Oil was up slightly,
but still closed below the upper boundary of its short term trading range. The
dollar was up but remained below its 100 day moving average and within a very
short term downtrend and a short term trading range.
Bottom line: upward
momentum continued to decelerate, leaving the indices once again short of challenging
either their former highs or the upper boundaries of their long term uptrends. That said, at this point in the Market, I don’t
expect any definitive movement in either direction until the Greek bailout
situation gains clarity---barring some extraordinary exogenous event.
Stock and bond
prices continue to trade inversely.
Fundamental
Headlines
Yesterday’s
US economic data was weighed to the positive: May durable goods were off
substantially but in fairness, the ex transportation number was right in line;
month to date retail sales, May new home sales and the Richmond Fed June
manufacturing index were all up; the June Markit flash PMI was below
expectations. So the economy continues
to show signs of stabilizing.
Overseas,
the stats were mixed: the June EU composite flash PMI was quite positive while
the comparable Chinese number was equally disappointing. Still, until the Greek bail out dilemma is
resolved, little attention is going to be paid to these figures. Speaking of the Greek bail out, the tone of
the various parties turned a bit more negative than Monday’s hopey, dreamy
narrative.
The
problem with Greece’s latest proposal (medium):
Moral
hazard in Greece (medium):
The
summary as of last night (medium):
***overnight,
IMF rejects Greek bail out proposal (medium0:
Bottom line: the
Greek bail out remains center stage and will probably remain so until a
resolution is reached. While the
headlines yesterday were a bit less positive than Monday’s, but progress is still
being made. Who knows what the odds are
of a successful completion of this deal; but the probability of a Goldilocks
conclusion is sufficiently low that everyone should own some cash.
I don’t think
that we should ignore yesterday’s generally upbeat economic data. It continues the trend away from recession. That is the good news. The bad news is that
full year 2015 growth estimates are still coming down, reflecting our forecast
of a slowing economic growth rate. And in such an environment with either a Fed
rate hike or a Grexit facing us, I see no reason to be chasing stock prices up.
A
good analysis of where we are in the Market (medium):
Another
comment on the effectiveness of the Fed (medium):
Debt
funded stock buybacks (medium):
What
a ‘stock picker’s market’ really means (medium):
Economics
This Week’s Data
The
June Markit flash manufacturing index was reported at 53.4 versus expectations
of 54.2.
May
new home sales rose 2.2% versus estimates of a 1.5% increase.
The
June Richmond Fed manufacturing index came in at 6 versus its prior reading of
1.
Month
to date retail chain store sales were up versus the prior week.
Weekly
mortgage applications rose 1.6% while purchase applications were up 1.0%.
Final
first quarter revised GDP fell 0.2%, down from the initial reading of -0.7% but
in line with consensus; the price deflator was 0% versus expectations of -0.1%.
Other
China’s
US debt holdings (short):
The
world’s economic exposure to China (medium):
Politics
Domestic
Obama’s free
trade agreement passes a procedural vote in senate (medium):
International
More
US/Russian saber rattling (medium):
No comments:
Post a Comment