The Morning Call
12/10/15
I have a family emergency that
will take me away tomorrow and Saturday.
See you on Monday.
The
Market
Technical
After a huge
intraday swing, the indices (DJIA 17492, S&P 2047) extended their losing
streak and began the challenge of support levels. The Dow ended [a] above its 100 moving
average, which represents support, [b] below its 200 day moving average, now
support; if it remains there through the close next Monday, it will revert to
resistance, [c] within a short term trading range {16919-18148}, [c] in an
intermediate term trading range {15842-18295}, [d] in a long term uptrend
{5471-19343}, [e] and still within a series of lower highs.
The S&P
finished [a] above its 100 moving average, which represents support, [b] below
its 200 day moving average, now support; if it remains there through the close
next Monday, it will revert to resistance, [c] in a short term trading range
{2016-2104}, [d] in an intermediate term uptrend {1975-2768}, [e] a long term
uptrend {800-2161}, [f] still within a series of lower highs [g] and yesterday
broke its trend of higher lows.
Volume rose;
breadth was negative. The VIX (19.6) was
up 10%, ending [a] above its 100 day moving average, now resistance; if it
closes there through the close on Friday, it will revert to support, [b] above
the upper boundary of its short term downtrend for a second day; if it remains
there through the close today, the trend will re-set to a trading range, and
[c] in intermediate term and long term trading ranges.
The long Treasury
was down fractionally, closing above its 100 day moving, now support and within
very short term, short term and intermediate term trading ranges.
Oil fell again,
ending below the lower boundary of its short term trading range for the third day;
re-setting to a downtrend. It is also in intermediate and long term downtrends. The dollar has been clipped for three percent
so far this week and is now challenging its 100 day moving average.
GLD was declined,
finishing [a] below its 100 day moving average, now resistance and [b] within
short, intermediate and long term downtrends.
Bottom line: the
Averages are now challenging their 200 day moving averages and the S&P is
challenging its series of higher lows, either of which, if successful would be
a technical negative. That said, all the
major trends remain intact. True, the
lower boundary of the S&P’s short term trading range is only 1.5% away, but
its 100 day moving average has be to overcome first.
Near term, I believe
that year-end tax selling, next week’s Fed meeting and quadruple expiration have
investors skittish; and while there may be more downside between now and next
Friday, it is likely to be limited and recouped during the run to the New Year.
Longer term, the
numerous divergences below the Market surface along with our assessment that
stocks are very richly valued I believe argues against a successful challenge of
the upper boundaries of the indices long term uptrends and for a decline to
significantly lower levels.
Fundamental
Headlines
Yesterday’s
US economic data consisted of two secondary indicators: weekly mortgage and purchase applications
were up fractionally while wholesale inventories were below estimates. Again, not much significance taken alone but
as part of a trend, a negative.
More anecdotal
evidence (short):
Still
more (short):
There
were no overseas stats, though the Chinese government allowed the yuan to drop
to a four year low. If one were
concerned about a slowing global economy and governments pursuing competitive devaluation
in an attempt to counter its impact on their respective countries, this would
not relieve that worry.
Bottom line: the
fundamentals are not improving---and that is just in the official numbers. Add in the anecdotal evidence, plunging oil
prices and the likelihood of an interest rate hike, GDP and corporate profit
forecasts should be being revised down and discount factors (P/E’s) should be
being revised up (down). Not the fuel
for overcoming all-time highs.
I am not
suggesting that investors run for the hills.
I am suggesting that they use the Market strength to take some profits
in winners and/or eliminating investments that have been a disappointment.
Economics
This Week’s Data
October
wholesale inventories fell 0.1% versus expectations of an increase of 0.2%;
sales were unchanged.
Weekly
jobless claims rose 13,000 versus estimates of a 1,000 increase.
November
import prices fell 0.4% versus forecasts of a 0.8% drop; export prices declined
0.6% versus consensus of -0.3%. So what
we buy didn’t fall in price as much as projected and what we sell decreased
more in price. Neither good.
Other
What
will China do about its ‘zombie’ companies? (medium):
Despite
all the Fed’s efforts, systematic risk still exists in the banking sector
(medium and a must read):
Politics
Domestic
The right to
bear arms (medium):
For those
calling out Trump on islamic emigrants, this from Jimmy Carter during the Iran
hostage crisis: (short)
Presented
without comment (medium):
International
IMF
enters the Cold War (medium):
China inches further toward
involvement in the Middle East conflict (medium):
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