The Morning Call
7/25/17
The
Market
Technical
The indices
(DJIA 21513, S&P 2469) drifted lower yesterday; the Dow (the S&P did
not) finished below the upper boundary of its recent trading range. Volume
was low and breadth dismal. But the
upward momentum as defined by their 100 and 200 day moving averages and
uptrends across all timeframes remains intact.
At the moment, technically speaking, I see little except for the VIX, to
inhibit the Averages’ challenge of the upper boundaries of their long term uptrends---now
circa 24198/2763.
The VIX (9.4) was
up slightly, but finished in downtrends across all timeframes. It is not surprising that it is at all-time
lows at a time when stocks are at all-time highs; but it does suggest that
further highs in stocks will be limited in magnitude.
The long
Treasury fell, but still ended above its 100 and 200 day moving averages and the
lower boundary of its very short term uptrend.
The dollar managed
a meager bounce, remaining very close to the lower boundary of its short term
trading range. It is also in a very
short term downtrend and below its 100 and 200 day moving averages.
GLD moved higher, closing above its 100 day
moving average for the second day. If it
remains there through the close today, it will revert to support.
Bottom line: stocks
seemed to rest yesterday, likely awaiting the results of the today’s earnings
deluge, the senate healthcare vote and FOMC meeting. As I noted last week, TLT, UUP and GLD
investors continue to bet on a sluggish economy and a dovish Fed.
Fundamental
Headlines
US
economic news was mixed: the July Markit composite, manufacturing and services
PMI’s came in ahead of consensus while June existing home sales were well below
estimates.
Overseas,
the July EU Markit PMI hit a six month low and the IMF lowered its 2017 US economic
growth estimate.
***overnight,
the July German business confidence index hit a new high.
In other news, the
UK trade secretary will meet his US counterpart and congress agreed on
sanctions against Russia.
This
week will include:
(1)
an FOMC meeting (results on Wednesday). As you know, I believe that the Fed has
reached the point where it has no good policy options. If it remains easy, it simply makes worse the
ultimate unwinding of an already failed QE experiment. If it tightens, it starts that unwinding
process which I believe will result in a painful correction of the gross
mispricing and misallocation of assets,
BOJ now getting internal criticism (medium):
(2)
the busiest period in the current earnings reporting
season.
Update on this seasons earnings’
beats (short):
(3)
today’s senate showdown on healthcare.
Bottom
line: we started the week with a lot of mixed signals: the chattering class
narrative is that the US economy is healthy and improving but TLT, UUP and GLD
suggest otherwise; after two weeks of upbeat stats, the EU Markit PMI was a
disappointment; there was better news on trade but the Russian connection won’t
go away and the senate action on healthcare is at stall speed; earnings are
generally above expectations but the stocks of many of those companies who beat
estimates are getting whacked. Is this a
sign of anything other than an uncertain news flow? Probably not.
But with equity prices at nosebleed levels, I would want to be sure I owned
some cash.
Overvaluation
is not due to passive investing (medium):
My
thought for the day: most of us are creatures of habit and that often applies to
our investments. We’re comfortable with
the stocks (or indices) we often trade and that means we miss opportunities
outside of that comfort zone for fear of the unknown. Change
isn’t only positive, it’s
inevitable.
Investing for Survival
Top
habits of best retirement savers.
News on Stocks in Our Portfolios
Revenue of $3.6B (+5.0% Y/Y) misses by $10M.
Revenue of $6.05B (-3.4% Y/Y) beats by $90M.
Revenue of $1.17B (+12.5% Y/Y) beats by $10M.
Revenue of $7.81B (+2.0% Y/Y) misses by $50M.
Revenue of $11.33B (+9.6% Y/Y) beats by $400M.
Kimberly-Clark (NYSE:KMB): Q2 EPS of $1.49 in-line.
Revenue of $4.55B (-0.9% Y/Y) misses by $10M.
Revenue of $15.28B (+2.8% Y/Y) beats by $40M.
Economics
This Week’s Data
The
July Markit composite PMI came in at 54.2 versus expectations of 53.2; the manufacturing
PMI was 53.2 versus estimates 52.0; the services PMI was 54.2 versus forecasts
of 54.1.
June
existing home sales fell 1.8% versus consensus of -0.1%.
Other
Politics
Domestic
Quote of the day
(short):
International War Against Radical
Islam
Sliding
into an endless war syndrome (medium):
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