The Morning Call
7/19/17
The
Market
Technical
The indices
(DJIA 21574, S&P 2460) closed mixed yesterday (Dow down, S&P up) but
neither by much. Both remained above the
upper boundary of their recent one month trading range. Volume was flat, remaining at a low level;
and breadth was weak. They remain firmly
in uptrends defined by their 100 and 200 day moving averages and uptrends
across all timeframes. At the moment, I
see nothing, technically speaking, to inhibit the Averages’ challenge of the
upper boundaries of their long term uptrends---now circa 24198/2763.
The VIX (9.9) was
up slightly, but still finished below the lower boundary its intermediate term trading
range for the fourth day (resetting to a downtrend) and the lower boundary of its
long term trading range for the third day (if it remains there through the
close Thursday, it will reset to a downtrend).
The long
Treasury was up again on volume, ending well above its 200 day moving average
as well as the lower boundary of its very short term uptrend. The move was sufficient that I am leaving
both trends positive.
The dollar got
smacked, making its pin action more ugly than ever. UUP is below its 100 and 200 day moving
averages, within a very short term downtrend and is nearing the lower boundary
of its short term trading range.
GLD was up, closing
above its 200 day moving average (if it remains there through the close on
Friday, it will revert to support) and is nearing its 100 day moving average. So clearly, this chart is improving.
Bottom line: stocks
turned in another flattish day, holding above the recent trading range despite multiple
sources of bad news and providing continuing evidence that investor optimism prevails
whatever the news flow. TLT, UUP and GLD
are all reflecting an expectation of a weaker economy/lower rate environment---which
the stock boys apparently aren’t worried about.
Relax and watch for a potential challenge of the upper boundaries of the
Averages long term uptrends. But be sure
to initiate or build your cash position using a portion of your winners as a
source of funds (remember sell high, buy low).
How
an Elliott wave analyst looks at the current market (short):
How
the Stock Traders’ Almanac looks at the current market (short):
Fundamental
Headlines
The
economic stats were again disappointing: both import and export prices were
down, month to date retail chain store sales lower and the July housing index
below estimates.
***overnight,
a member of the ECB governing council said that monetary accommodation was
still needed, suggesting the narrative that will forthcoming at tomorrow’s ECB meeting.
Further the Bank
of Japan appears ready to abandon its 2% inflation target. That ought to mean that it will also abandon
its QE Infinity policy since it was adopted to push inflation up; but it ought
to have abandoned QE long ago. So you
never know what these guys will do.
Add
in the failure of the senate healthcare proposal and some earnings reports
coming in below expectations and the result was a discouraging day. On the other hand, the house released a
goldilocks FY2018 budget plan which appears to be a bit long on hope. Of course, this is just the opening salvo, so
expect more changes.
Goldman
on the failed healthcare bill, the new house budget proposal and the upcoming
debt ceiling debate (medium):
Bottom line: it
was poor news day; so why shouldn’t stock prices be up? Probably because the ECB and BOJ continue to
pump up global liquidity. Sooner or
later, the price is going to be paid for the gross mispricing and misallocation
of assets. I just don’t know when. I do know that I want to own cash when it
happens.
ECB balance
sheet now bigger than the Fed’s (short):
Willful
blindness (medium):
My
thought for the day: one of the reasons behind my focus of dividend paying
stocks is evidence that expected future earnings growth is faster when current
payout ratios are high and slowest when payout ratios are low---contradicting
the commonly held belief that substantial reinvestment of retained earnings
fuel faster future earnings growth. The primary
reason behind this seeming contradiction is the tendency of managements to misallocate
excess capital toward empire building, value destructive acquisitions and stock
buy backs.
Investing for Survival
Perceived
versus real risk tolerances.
News on Stocks in Our Portfolios
Revenue of $19.29B (-4.7% Y/Y) misses by $160M.
Revenue of $2.62B (+2.3% Y/Y) misses by $10M
Economics
This Week’s Data
Month
to date retail chain store sales grew slower than in the prior week.
The
July housing index was reported at 64 versus consensus of 68.
Weekly
mortgage and purchase applications rose.
June
housing starts were up 8.2% versus expectations of up 7.1%; permits increased
7.3% versus estimates of up 3.2%.
Other
Update
on student loans (medium):
The
quiet demise of austerity (medium):
Update
on social security solvency (medium):
Brief
update on China’s economy (short):
Politics
Domestic
Swampland’s ten
commandants (medium):
International War Against Radical
Islam
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for Survival’s website (http://investingforsurvival.com/home)
to learn more about our Investment Strategy, Prices Disciplines and Subscriber
Service.
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