The Morning Call
2/8/16
The
Market
Technical
Monday Morning Chartology
As
you can see, the S&P was neither able to best the 2/1/16 high nor hold the
lower boundary of that developing very short term uptrend. Our attention must now go the 1867 support
level and whether or not it can withstand another challenge.
What
the charts say (medium):
For
some reason, the TLT chart did not update Friday’s close. I have marked the closing price with the
short purple line. The bond was unable
to successfully challenge the upper boundary of its short term trading range
and has violated the very short term uptrend.
Given the lousy nonfarm payroll numbers on Friday, which has me at a
loss. Perhaps investors think that the
White House will muscle the Fed to raise rates in March to support the
bulls**t, ‘the economy if doing great’ narrative Obama espoused on Friday; or
perhaps the Fed has finally realized QE hasn’t, isn’t and won’t work and will
pursue the return to normality irrespective of what investors want.
Who
is the guy that was whining that this is an ugly chart? This is a pretty dramatic spike in gold
prices. The short term trend will now
reset to a trading range and barring a big turnaround today, the intermediate
term will reset. Something is clearly
going on in this market and it is not worry about higher interest rates (which
historically are a negative for gold).
Some investors are speculating that with the mad dash by central bankers
to negative interest rates that gold now presents a higher return (0%) than a
negative interest rate bond.
The
only thing about this chart that would argue against higher volatility (lower
stock prices) is the downward sloping trend of the 100 day moving average. If that turns up, then the outlook of equity
prices worsens a bit.
Fundamental
A
brief note on Friday’s nonfarm payrolls report which included (1) slower job
growth, (2) but a lower unemployment rate and (3) higher wage growth. Without getting into an hour lecture on
economics, the task of capitalism to provide for an equitable split of the
income pie, that is, improved profitability and wage growth. But that doesn’t always happen because of the
cyclicality of the economy. When the
economy is on the rise, sales grow, profits grow (assuming efficient
management) and some part of that increased profitability gets passed on as
higher wages. But when the economy
reaches a cyclical peak, sales start to slow (which they are now), so if costs
remain the same, there are pressures on margins. What does management do? They stop hiring (lower job growth, like now)
and they start paying current employees to work overtime (higher wages, like
now). But that lowers productivity and
increases unit labor costs (like now).
In
short, Obama’s self gratulatory, high five news conference was a figment of His
imagination. To be clear, I don’t think
that He has a clue about the economic thesis that He was throwing out. So there was nothing deliberately deceptive
about His presentation. He just doesn’t
know jacks**t about economics and that has been clear since His
inauguration. I have no doubt that His economic
advisors cautioned Him about His statement; but His political advisors clearly
won out and in an attempt of somehow claim another legacy for His presidency,
they persuaded Him to use some questionable data (which again, He has no clue
about) to pronounce a full recovery from the prior administration’s failed
policies that led to recession.
In
my opinion, the data on Friday read as it did because the economy is slowing so
(1) business cut back on hiring [lower job growth], (2) and since there were
fewer jobs available more people dropped out of the labor force [pushing down
the unemployment rate], (3) and industry opted to pay more overtime than hire
new people [higher wage growth], (4) productivity fell and unit labor costs
went up.
An
update on fourth quarter corporate earnings (medium)
Investing for Survival
Questioning
a ‘buy and hold’ strategy:
News on Stocks in Our Portfolios
Economics
This Week’s Data
Other
That
Chinese reserve number discussed on Friday came in right where the harm was
minimized (medium):
Update
on big four economic indicators (medium):
Politics
Domestic
Quote of the day
(short):
International War Against Radical
Islam
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