The Morning Call
7/15/15
The
Market
Technical
The indices
(DJIA 18053, S&P 2108) continued their rally. Both closed above their 100 day moving
average. If they remain there by the close
Thursday, they will change this moving average from resistance to support. Resistance exists at their all-time highs
(18295/2135) and the upper boundaries of their long term uptrends.
Longer term, the
Averages are in uptrends across all timeframes: short term (17571-20395, 2073-3052),
intermediate term (17773-23905, 1861-2629) and long term (5369-19175, 797-2145).
Volume fell,
again; breadth was mixed (though a majority of the indicators were negative). The VIX (13.4) was down 4%, ending below its
100 day moving average. A price below 13.0
represents value as portfolio insurance.
The long
Treasury was up fractionally, but finished below its 100 day moving average and
the upper boundary of its short term downtrend.
GLD declined,
closing below its 100 day moving average and the neckline of the head and
shoulders formation and very near the lower boundary of its intermediate term
trading range.
The dollar fell slightly,
ending right on its 100 day moving average and near the upper boundary of its
very short term downtrend. Oil was up
markedly (apparently on a buy [the bad news] response to the Iranian nuke deal),
but still ended below its 100 day moving average and near the lower boundary of
its short term trading range.
Bottom line: the
good technical news is: (1) the Averages have recovered above all those support
levels that they challenged, (2) so they are free of all resistance standing
between current prices and their all-time highs and (3) investors seem
impervious to bad news [Greece is not over, yesterday’s economic news was not
that great]. The bad news is low volume
and weak breadth.
I expect another
assault on those all-time highs and the upper boundaries of their long term
uptrends, the latter of which I also believe they will fail to challenge
successfully.
Market
performance after a flat first half of the year (short):
Fundamental
Headlines
Yesterday’s
US economic data provide the worse day for stats in a month: the June small
business optimism index, June retail sales, June export and import prices and
month to date retail chain store sales were all disappointing; while May
business inventories and sales were ahead of expectations. I don’t think that this means that recent
trend showing a stabilizing economy is over; but it does illustrate the
dataflow of a very sluggish economy. I
would point out that the those June retail numbers are important in that (1)
they will likely force a reduction in second quarter GDP growth estimates and
(2) it is one of the big four indicators.
***overnight,
the White House budget office lowered its second quarter GDP growth and
inflation estimates.
Overseas,
the June UK inflation rate fell to zero---not a plus sign in a growing economy. In addition:
(1)
Tsipras party was in open rebellion over the bailout
deal, though investors appear to believe that parliament will approve it. More analysis:
Greek deal poisons relationships
with the eurozone (medium):
The IMF doesn’t like it (medium):
***overnight,
the European commission released its own report on Greek debt sustainability
(medium):
And the Greeks don’t like it much
either (medium):
Greek bad loans soar (short):
Highlights from Tsipras’ speech
yesterday afternoon (short):
(2)
China’s market turned to the negative Tuesday [Monday
night]
How China’s stock market problem
could impact its economy (medium):
Cracks in the façade (medium):
***overnight,
second quarter Chinese GDP, retail sales and industrial production all were
reported ahead of expectations; if you believe the numbers. Apparently the Chinese investors weren’t that
enthralled because Chinese stocks are cratering again.
In addition, the Bank of Japan left its (highly expansive) monetary
policy unchanged and lowered its 2015 GDP and inflation forecast.
(3)
the US and allies reached an agreement with Iran on a
nuclear deal. I am not wild about this
from a political/military standpoint.
But economically, this should have a negative influence on oil prices
[another ‘unmitigated’ positive?] and a positive impact on world trade as Iran
exits sanctions.
Thoughts on the Iran deal (medium):
Wednesday morning humor (short):
Bottom
line: investors appear as positive as
they were negative only a week ago---which would be perfectly understandable if
the issues over which they were negative had been resolved/contained. But they are not. (1) the Greeks are headed for the guillotine.
I can’t imagine that being done without incident. Indeed, I am stunned that they are even
considering accepting the terms laid out by the Troika. (2) I think it
imprudent to accept that the Chinese government has in effect successfully converted
a free [stock] market to an unfree one.
May be it will; but I read yesterday about a similar circumstance in
Pakistan and it didn’t work out so well. I also think it a questionable assumption that
any financial/economic problems that have contributed to the recent sell off in
stocks can be contained inside that country, (3) yesterday’s US economic data
reaffirms our forecast for a slowing rate growth, which I don’t believe is
reflected in most Street forecasts.
Of course,
Yellen begins two days of congressional testimony today; and if history is any
guide, she will feed legislators (and investors) with the usual dose of feel
good pabulum. So I am sure investors are feeling comfortable
in the sure knowledge that she will continue to have their back. What’s not to like?
I continue to
believe that any price strength should be used to Sell stocks that have reached
your profit objective or whose underlying company no longer meets your
standards for financial strength.
More
on valuation (short):
Economics
This Week’s Data
Month
to date retail chain store sales dropped off considerably from the prior week.
June
export prices fell 0.2% versus expectations of a rise of 0.1%; import prices
declined 0.1% versus estimates of an increase of 0.1%.
May
business inventories were up 0.3% versus forecasts of up 0.2%; sales were up
0.4%.
Weekly
mortgage applications fell 1.9% while purchase applications were down 8.0%.
June
PPI was up 0.4% versus estimates of up 0.3%; ex food and energy, they were up
0.3% versus forecasts of up 0.1%.
The
June New York Fed manufacturing index came in at 3.86 versus consensus of 3.5
Other
The
good news about the federal deficit (medium):
The probability
of a global recession (medium):
Analysts
expect another weak quarter for S&P revenue growth (short):
Politics
Domestic
International War Against Radical
Islam
No comments:
Post a Comment