The Morning Call
7/12/17
The
Market
Technical
The indices
(DJIA 21409, S&P 2425) experienced a volatile day but ended basically flat (Dow
up, S&P down slightly). They remain in
a narrow one month trading range, but we have seen this pattern before over the
last year---and it has always been resolved to the upside. Since they retain their upward momentum as
defined by their 100 and 200 day moving averages and uptrends across all
timeframes, I see nothing, technically speaking, to inhibit the Averages’
challenge of the upper boundaries of their long term uptrends---now circa
24198/2763. We need to say cognizant of
the recent weak volume and breadth; though that is likely a function of the
summer doldrums.
The VIX (10.9)
fell 2%, remaining stuck between the lower boundaries of its intermediate and
long term trading ranges (on the
downside) and its 100 and 200 day moving averages (on the upside).
The long
Treasury was up, sufficiently to regain the lower boundary of the very short
term uptrend which was negated on Monday.
Usually when there is a sudden reversal in price the day after a trend
change, I put the call in abeyance subject to follow through in either
direction. It remained below its 200 day moving average for the fourth day
which resets it from support to resistance.
However, it is a short hair away from regaining that level. So if TLT rallies again today, I will
probably suspend that call awaiting follow through. I noted yesterday, that TLT’s recent move
lower could be a sign of a change in bond investors sentiment; now it looks
like it could be a sign of a bottom---again ‘could be’ being the operative
words.
The Fed and
interest rates (medium):
The dollar resumed
its decline, ending in a very short term downtrend and below its 100 and 200
day moving averages, supporting the notion that bonds could have found a bottom.
GLD was up, but
did little to enhance an otherwise lousy chart.
Bottom line: even
on a volatile, low volume, weak breadth day, the Averages managed to close
within a very tight one month trading range. I could quote any number of headlines that
would normally cause investor heartburn---‘normally’ being the operative
word. Today all news is still good news.
I have no insight into how long this psychology
will last; but it seems reasonable to assume that, technically speaking, the
indices next big move will be to challenge the upper boundaries of their long
term uptrends.
Fundamental
Headlines
Yesterday’s
economic news remained discouraging: growth in month to date retail chain store
sales slowed, the June small business optimism index was below forecasts and while
May wholesale inventories were slightly better than projected, sales were down
markedly.
On
fiscal policy:
(1)
the Trump administration took another hit over its
potential Russian connection, as Trump Jr. was accused of having met with a Russian
official that promised damaging information on Hillary. Subsequently, junior released all the emails
associated with the contact. You can
read them below and decide for yourself if there is some sort of smoking gun. But in doing so, remember that ‘treason’ as
defined by the Constitution is aiding an enemy in war. There is a campaign finance law that
prohibits soliciting contributions from a foreign entity---sort of like the
Clinton Foundation did. But as you can
see in the link, the Russians pulled a bait and switch, i.e. promised
information but asked for help. I hate
getting involved in the Washington he said, he said bullsh*t, but I mention
this because of its potential to delay and defer the Trump/GOP fiscal agenda.
(2)
on the other hand, senate majority leader McConnell canceled
first two weeks of August recess in order to work on healthcare reform and tax
cuts and said that a new healthcare bill will presented tomorrow. It is
encouraging that they are trying. But
forgetting the lack of support from the dems, the current dissension in the GOP
ranks raises the question whether this action is just another jerk off session. Clearly the senate finding agreement on
healthcare reform would be a refreshing step forward. http://www.zerohedge.com/news/2017-07-11/senate-cancels-first-two-weeks-august-recess-work-legislation
On
monetary policy, in the face of Yellen’s testimony and the release of the
latest Fed beige book, none other than Jamie Dimon says the Fed has no clue
what it is doing (medium):
Amen.
Bottom line: the
good news is that at least the GOP senate is trying to move the Trump/GOP
fiscal program forward (‘trying’ being the operative word). The bad news is the economy continues to
struggle and the Fed seems to be ignoring it.
We will, perhaps, know more about monetary policy direction by the end
of the day; but then again we may not.
And if we do know more, it won’t change the fact that the Fed has
mismanaged the transition from easy to normal monetary policy---again. And that, in my opinion, is not good news for
stocks.
June’s
dividend tally (short):
My
thought for the day: I designed my pricing discipline on the principle that the
key to making money was how I managed being wrong. It matters less whether I am right or wrong
on an investment and more on how much money I lose when I am wrong and how much
money I make when I am right. My Stop
Loss discipline keeps my losses manageable while Sell Half discipline means
that I only take profits at valuation extremes.
Investing for Survival
Ten
things to give up if you want to save more money.
News on Stocks in Our Portfolios
Cummins (NYSE:CMI) declares $1.08/share quarterly dividend, 5.4% increase from
prior dividend of $1.025.
Economics
This Week’s Data
Month
to date retail chain store sales grew slower than in the prior week.
May
wholesale inventories rose 0.4% versus estimates of up 0.3%; but sales fell
0.5%.
http://www.zerohedge.com/news/2017-07-11/wholesale-sales-tumble-3rd-straight-month-inventories-build
Weekly
mortgage applications dropped 7.4%, while purchase applications were down 3.0%.
Other
Peak
oil demand (medium):
Or……..
OPEC
admits it has a problem (medium):
Politics
Domestic
This is a pretty
fair assessment of the Comey email brouhaha (medium):
International War Against Radical
Islam
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