Monday, May 15, 2017

Monday Morning Chartology

The Morning Call

5/15/17

The Market
         
    Technical

            The S&P (and the Dow) has been languishing just below its former high for the last three weeks, having tried unsuccessfully on one occasion to break to the upside.  On the other hand, there is a gravitational pull from those two gaps immediately below.  As I have been saying for some time now, the question is, are investors resting before another assault to the upside or are they exhausted and holding on by their fingernails?

The Morning Call

5/15/17

The Market
         
    Technical

            The S&P (and the Dow) has been languishing just below its former high for the last three weeks, having tried unsuccessfully on one occasion to break to the upside.  On the other hand, there is a gravitational pull from those two gaps immediately below.  As I have been saying for some time now, the question is, are investors resting before another assault to the upside or are they exhausted and holding on by their fingernails?



            Despite a generally poor week, TLT managed to lift enough on Friday to break a developing very short term downtrend.  The key now, as always, is follow through.  Nevertheless, it remains within a trading range going back to November 2016 and in a narrowing pennant formation (technicians hold that the break of one of those boundaries presages a move in the direction of the break) defined by the upper boundary of its short term downtrend on the upside and the lower boundary of its long term uptrend on the downside.



            While GLD broke a very short term uptrend, it nonetheless managed to hold above its 100 day moving average and remains within a short term trading range.  This is not a great looking chart; but it could be worse.



            The dollar did a round trip last week, ending right on its 200 day moving average (now support).  Like TLT, it is in a narrowing pennant pattern defined by the upper boundary of a very short term downtrend on the upside and the lower boundary of its short term uptrend on the downside.  It is also getting squeezed between its 100 and 200 day moving averages.



            The VIX clearly bad a rough week.  However, it did manage to void the breaks of both its intermediate and long term trading ranges.  Also, notice that huge price gap overhead.  Not to repetitious, historically, those get filled.

            And:



    Fundamental

       Headlines

US economic data last week was slightly weighed to the negative side; but (1) all the positive indicators were tertiary numbers, (2) while the negative stats included business and wholesale inventories and sales, (3) with the only primary indicator [March/April retail sales] was neutral.  Bottom line, I am scoring this a weak negative: in the last 84 weeks, twenty-six were positive, forty-seven negative and eleven neutral.  I am a short hair away from revising our short term economic growth forecast back down.

            Overseas, the economic patterns that have been developing persisted: (1) the EU economy showed further progress which included Greece getting is next round of bailout funding, while (2) the news flow out of the rest of the world wasn’t so hot: [a] Chinese data was really bad and included further declines in commodity prices and an inverted yield curve {a classic sign of recession}, [b] Japanese numbers weren’t any better and [c] OPEC acknowledged that global oil supplies continue to grow.

            In addition, several regional Fed chiefs spoke and reinforced the notion of a June rate hike.

            On the political front, I needn’t tell you that it was everything Comey last week.  I think the wrangling a colossal waste of time; but if it impacts the timing or magnitude of the Trump/GOP fiscal agenda, it will prove to be a negative to the economy.  Still the Donald managed a minor success, announcing a new trade deal with China.  While many observers poo pooed the deal as overly vague, I still believe that it a plus because (1) if nothing else, it is yet another sign that Trump’s trade objective is making deals not blowing up relationships, (2) the Chinese, historically, approach change at a snail’s pace; so I think it unrealistic to expect a massive single step forward.

            The economic and investment strategy bottom lines are unchanged: the economy is in increasing danger of reverting to very sluggish growth if not recession and stocks are way too expensive even under the most optimistic scenario.

            The four most dangerous words in investing, part deux (medium):


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    News on Stocks in Our Portfolios
 
Economics

   This Week’s Data

            The May NY Fed manufacturing index came in at -1.0 versus expectations of +8.0.

   Other

            Update on big four economic indicators (medium):

            More on auto loans (medium):

Politics

  Domestic

  International War Against Radical Islam


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