Monday, August 14, 2017

Monday Morning Chartology

The Morning Call

8/14/17

The Market
         
    Technical

            The selloff in the S&P took it below its former high (the Dow did not).  That is a very minor negative in the scheme of things---it remains above its moving averages and in uptrends across all timeframes.



            The long Treasury continued its upward march, undoubtedly aided by the weak PPI and CPI numbers (lower inflation means lower interest rates, a weaker economy and likely an easier Fed).  Notice it made a higher low and a higher high last week---a good sign of trend momentum.



            The dollar continued its downward track.  As you can see, it made another lower high, keeping the momentum lower.




            Gold’s chart further improved last week---bouncing of its 100 day moving average and resetting its very short term uptrend.  However, it has reached a critical technical level---the upper boundary of its short term trading range.  GLD challenged it once before, unsuccessfully.  If it can make a clear break, that probably means that the S&P and the dollar will continue to fall, while the VIX and TLT will rise.



            Reflecting the drop in the S&P, the VIX soared last week.  It closed above its 100 day moving average (if it remains there through the close today, it will revert to support), its 200 day moving average (if it remains there through the close tomorrow, it will revert to support) and the upper boundary of its short term downtrend (if it remains there through the close tomorrow, it will reset to a trading range).  Notice that I added a minor resistance level (green line), which the VIX penetrated on Friday, but couldn’t hold above.  That is the best short term guidepost that we have, that is, if the VIX busts through it, the next resistance level is considerably higher (circa 23).  If it retreats from here, that likely means that the Market sell off is over.



    Fundamental

       Headlines

Last week’s economic data was tough to interpret: it was slightly weighed to the upside and that included one primary indicator (productivity).  However, the lower PPI and CPI numbers are subject to one’s own bias.  On the one hand, they clearly give the Fed room to stay easier longer (a plus for the Market?) and keeps inflation out of our lives.  On the other hand, they point to a weaker economy, suggesting slower corporate profit growth and an excuse for the Fed to perpetuate QE (a negative for the economy).  Since (1) I am measuring the economy and not the Market in this exercise and (2) the Market did not respond positively to those stats, I am going to rate them as negative which makes the week a wash: in the last 96 weeks, twenty-nine were positive, fifty-two negative and fifteen neutral. 

            The political news was dominated by the school boy, ‘mine is bigger than yours rhetoric’ between North Korea and US, i.e. the Donald.  As you know, I think this a very dangerous strategy for Trump in the sense that it could spawn a ‘Branch Davidian’ type response from Un, i.e. ‘f**k it, we are all going to die sooner or later, I am ready to go down in a blaze of glory’.

            Bottom line, nothing in the numbers to alter our ‘struggling economy’ forecast.  Trump needs to shut up.  I am pleased with our Portfolios’ cash position.

            More fodder for the bulls (short):

       Investing for Survival
   
            The math problem with buy and hold.
           
    News on Stocks in Our Portfolios
 
VF Corporation (NYSE:VFC) acquires global workwear company Williamson-Dickie Mfg. for ~$820M.

Economics

   This Week’s Data

   Other

Politics

  Domestic

  International

            China imposes sanctions on North Korea (short):

            Afghanistan = Vietnam?

           



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