The Morning Call
10/13/16
The
Market
Technical
Yesterday, the
indices (DJIA 18144, S&P 2139) edged higher but not nearly enough to undo
the damage done on Tuesday. Volume was
down slightly; breadth negative. The VIX
up another 2%, nearing its 100 day moving average (resistance) and closing in a
short term downtrend. That means that it
is still a net positive for stocks, but getting less so. In addition, it is still in a very short term
uptrend---a negative.
The Dow ended
[a] below its 100 day moving average for
the second day, now support; if it remains there through the close today, it
will revert to resistance, [b] above its 200 day moving average, now support,
[c] below the lower boundary of its short term uptrend {18248-19971}; if it remains
there through the close today, it will reset to a trading range, [c] in an
intermediate term uptrend {11472-24317} and [d] in a long term uptrend
{5541-19431}.
The S&P
finished [a] below its 100 day moving average for the second day, now support; if
it remains there through the close today, it will revert to resistance, [b]
above its 200 day moving average, now support, [c] below the lower boundary of
its short term uptrend {2150-2306}; if it remains there through the close
today, it will reset to a trading range, , [d] in an intermediate uptrend
{1960-2562} and [e] in a long term uptrend {862-2400}.
The long
Treasury was up. It closed below its 100
day moving average (resistance) and below a third Fibonacci level. It remained
within short term, intermediate term and long term uptrends. TLT’s chart is still healthy but getting less
so.
GLD also rose,
ending below a key Fibonacci level, below its 100 day moving average
(resistance), in a short term downtrend and below its 200 day moving average (if
it remains there through the close on Friday, it will revert to
resistance). This chart gets uglier.
The dollar was
up, finishing above its 100 day moving average (now support) and in a short
term trading range.
Bottom line: following
the release of the slightly more dovish FOMC minutes, the Markets reacted as
one would have expected if one assumes that they were concerned about rising
interest rates---though admittedly from a technical standpoint, it was a pretty
pathetic response.
Both of the
Averages are in the midst of challenges of multiple support levels. GLD has already been battered and TLT’s chart
grows weaker every day. So the present
setup seems like a possible inflection point.
I don’t know that yet; but I am on alert. On the other hand, as I suggested yesterday,
we could be in nothing more than another giant Fed led circle jerk.
Fundamental
Headlines
Yesterday
was a carbon copy of Tuesday---only one minor US indicator (weekly mortgage and
purchase applications) which was negative; and several upbeat global numbers---second
quarter EU business investment was up fractionally while August EU industrial
production was above expectations.
***overnight,
the September Chinese trade numbers were terrible.
The
lead headline of the day was the Fed’s release of the minutes from its last
FOMC meeting. Aside from the monotonous
back and forth of the ‘on the one hand, on the other hand’, the bottom line was
that they sounded a tad less hawkish than the narrative that was contained in
the statement following that meeting. As
noted above, all Markets acted as expected to the lower probability of a
December rate hike: stocks up, bonds up, gold up.
With this little
tidbit of information, the uncertainty on Fed policy that I mentioned on
Tuesday and Wednesday becomes less so: the score: have the central bankers
realized their policies have been a failure (score: three no); do they have the
cojones to follow through when Markets throw a tantrum (score: three no); how
will the Markets react if they take QE, NIRP, ZIRP to a new level? (score:
three question marks).
In
short, all that supposed re-thinking of monetary policy was apparently just the
intellectual masturbation of a bunch of bureaucrats with nothing else to do.
Comments
from the BOJ (medium):
http://www.zerohedge.com/news/2016-10-12/kuroda-defends-boj-credibility-mocks-fed-and-imf-economists
Bottom line: there
was some clarity regarding the Fed’s intent regarding a December rate hike,
i.e. it seems less now. That said, if
the bond, gold and dollar markets continue to push prices in the direction of
higher rates, the Fed may be forced to follow or risk sacrificing its
credibility. In addition, the Markets
must still deal with the possibility that this earnings season could be a bust
and chaos on the political front---the major problem being a democrat sweep of
the presidency and both houses of congress, eliminating all the blessings that
come with gridlock.
So there remain ‘a lot of balls in the air right now, which
means heighten uncertainty. And heighten
uncertainty usually means weak Markets.
Until we get some clarity, that weakness could continue short term. For that to continue long term, then a lot of
those uncertainties have be resolved to the negative; and we have no idea
whether or not they will.’
It is not too
late to take some money off the table.
Investing for Survival
Thoughts
on buying a home
News on Stocks in Our Portfolios
Economics
This Week’s Data
Weekly
jobless claims were flat with the prior week versus estimates of a 5,000
increase.
September
import prices rose 0.1%, in line; export prices were up 0.3% versus forecasts
of up 0.1%
Other
Politics
Domestic
More on the
disaster that is Obamacare (medium):
International War Against Radical
Islam
The
‘occupying force in Greece (medium):
Visit Investing
for Survival’s website (http://investingforsurvival.com/home)
to learn more about our Investment Strategy, Prices Disciplines and Subscriber
Service.
No comments:
Post a Comment