The Morning Call
6/17/15
The
Market
Technical
The Averages
(DJIA 17904, S&P 2096) rebounded yesterday, but finished in very mixed
positions. The S&P traded back above
its 100 day moving average, however, the Dow did not. The Dow ended above the upper boundary of a
very short term uptrend but the S&P did not. So, despite the positive close, the very short
term technical picture is confused. I
continue to think that the most important short term variable is how the indices
trade around their 100 day moving averages.
An inability to recover above these support levels would be another negative
technical divergence.
Longer term, the
Averages remained well within their uptrends across all timeframes: short term
(17398-20204, 2045-3024), intermediate term (17558-23700, 1842-2610) and long
term (5369-19175, 797-2138).
Volume fell; breadth
improved. The VIX declined, finishing
above its 100 day moving average and within a very short term downtrend and a
short term trading range.
Another
divergence (medium):
The long
Treasury was up fractionally, ending below its 100 day moving average and the
upper boundaries of very short term and short term downtrends.
GLD declined, continuing
to wander aimlessly below its 100 day moving average and the neck line of the
head and shoulders pattern. Oil rose
slightly, closing below the upper boundary of its short term trading range. The
dollar was also up, but finished below its 100 day moving average and within a
very short term downtrend and a short term trading range.
Bottom line: yesterday’s
price action in the indices was not as unequivocally positive as it appeared on
the surface, given their close viz a viz their 100 day moving averages and very
short term downtrends. I believe that how
they handle their 100 day moving averages will likely be an important signal on
Market direction.
Fundamental
Headlines
Yesterday’s
economic data was sort of upbeat. The
month to date retail chain store sales fell again. May housing starts fell materially; but (1)
April starts were revised up and (2) building permits were quite strong.
On
the other hand, international stats were lousy: German investor confidence fell
as did EU car sales; Indian exports also disappointed.
However,
the two big items on investors’ minds were:
(1)
the nearing of
the famous final scene in the Greek tragedy
Greece plays the Russian card (again)
(medium):
The latest form Greece (medium):
(2)
anticipation of Fed message following today’s close of
the FOMC meeting---the pin action seemingly indicating that the Fed will continue
to remain noncommittal (dovish) as to an interest rate hike.
I have apparently
been wrong in alluding to the QE’s as unprecedented. It seems that it has happened before. Here is a look at what occurred in its
aftermath, though I would ignore the reference to WWII.
Bottom line: the
economic data continues to show signs of some stabilization. That is a positive in the sense that a
recession may be avoided. On the other hand, the latest international economic
numbers do nothing to help. In addition,
a Greek default or the imposition of capital controls or a Greek deal with
Russia could cause a case of the economic willies within the EU.
That said,
investors apparently continue to believe that the Fed will have their back
whatever happens with Greece. The
potential question being, will an endlessly accommodative Fed do anything to mitigate
the economic fallout from a Grexit or the like?
Gosh only knows that our own economy is closer than I would like to recession
right now and we certainly don’t need a push from EU dislocations. However, I am not sure that I want to bet that
the Fed can save the day were that to happen.
I am also not sure that I want to make any bet on what the Fed may or
may not do given its abysmal history of policy moves.
Soaring
margin debt in China (short):
More
on the red hot Chinese stock market (medium):
Expectations
for second quarter earnings (short):
Economics
This Week’s Data
Weekly
mortgage applications dropped 5.5% while purchase applications were off 4.0%.
Other
The
ill wind of industrial production (medium):
The
argument against supporting the Import/Export Bank (short):
Politics
Domestic
Today the US is
defining by expanding government and retreating economic growth (medium and
today’s must read):
Club for Growth
on Jeb Bush (short):
International
Is
Obama’s proposed trade pact NAFTA on steroids? (medium)
Do
we really want a second cold war with Russia? (medium):
No comments:
Post a Comment