The Morning Call
9/1/17
The
Market
Technical
The indices
(DJIA 21948, S&P 2471) had another good day on noticeably higher volume and
much improved breadth. The S&P experienced
good follow through from Wednesday’s move that voided a number developing
negative technical formations, further suggesting that it has completed its recent
consolidation process and is heading higher.
The VIX (10.5) fell
another 6 %, leaving it below the upper boundary of its short term downtrend,
back below its 100 day moving average (if it remains there through the close
today, it will revert to resistance), below its 200 day moving average (if it
remains there through the close next Monday, it will revert to resistance) and
below the lower boundary of a developing very short term uptrend. It is apparently about to again challenge the
lower boundaries of its former intermediate and long term trading ranges. Still the question remains as to whether or
not the VIX has bottomed.
The long
Treasury rose, ending above its 100 and 200 day moving averages (both support),
the lower boundaries of its short term trading range and its long term uptrend
and has now made a third short term higher high.
The dollar fell
back, likely responding to comments by Mnuchin favoring a weak dollar. It finished in a short term downtrend and below
its 100 and 200 day moving averages but remained above the lower boundary of
its short term trading range.
GLD rose on heavy volume, ending above the lower
boundaries of its short term and very short term uptrends and above its 100 and
200 day moving averages (both support).
Bottom line: yesterday’s
positive pin action appeared to confirm that the S&P’s struggle to hold its
short term uptrend is over. On the other
hand, the performances of TLT, GLD and UUP are not reflecting an improving
economy; if that is what has equity investors jiggy. I continue to be uncomfortable with the overall
technical picture.
Fundamental
Headlines
Yesterday’s
economic data were mostly upbeat: weekly jobless claims, August retail chain
store sales and the August Chicago PMI came in above forecasts while July
personal spending and the July pending home sale index were below and July
personal income was in line. Overall
this week’s stats to date are weighed to the plus side, though today will be
another big one for data releases.
Overseas,
the August Chinese manufacturing PMI came in ahead of expectations while the
services PMI was below; August EU inflation was slightly above projections;
August German unemployment declined. The
EU continues to be a bright spot.
***overnight,
the August Caixin (small business) manufacturing PMI was above estimates; the August
EU manufacturing PMI was in line while the UK PMI was above forecast.
Aside
from the numbers and the recently improving pin action in the S&P, there
was not a lot of mentionable news. Though
the one thing to be aware of is that another major hurricane is developing and
headed our way.
Bottom line: it
appears that investors are back in the ‘everything is awesome’ mindset. The economy, no problem. Tax reform. You bet’cha. Tight money.
No way, Melvin. Hurricane Irma,
fagetaboutit. They may be right; but I wouldn’t
be fully invested on that thesis.
The
great debt for equity swap (medium):
My
thought for the day: be skeptical of earnings reports. Accounting rules give management a wide range
of alternatives on how to record expenses.
As you might expect, they elect the options that reflect the company in
the best light; and that can often lead to a less than accurate view of the
company’s operation. For instance, over
the past year, reported corporate profits have been growing……..but the taxes they
paid declined. Watching cash flow is a
slightly better way of measuring progress (or the lack thereof) because that
measure generally reflects operations and are free of the management accounting
decisions.
Investing for Survival
Small
tweaks that turn a good life into a great life.
News on Stocks in Our Portfolios
C.H.
Robinson (NASDAQ:CHRW) announces the acquisition of
Milgram & Company for $50M. Milgram
is a provider of freight forwarding, customs brokerage and surface
transportation in Canada.
Economics
This Week’s Data
The
August Chicago PMI came in at 58.9 versus consensus of 58.6.
July
pending home sales index fell 0.8% versus estimates of an increase of 0.4%
August
nonfarm payrolls rose 156,000 versus expectations of 180,000.
Other
Harvey
won’t boost GDP (medium):
A
word of caution from an optimist (medium):
July
2017 median family income (short):
Update
on big four economic indicators (medium):
Ex
housing, the US economy is experiencing deflation (medium):
Politics
Domestic
International War Against Radical
Islam
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