The Morning Call
9/27/17
The
Market
Technical
The indices
(DJIA 22284, S&P 2496) were mixed yesterday (Dow down, S&P up), though
they were basically flat. Volume declined;
breadth weakened further. Both remain
above their 100 and 200 day moving averages and are in uptrends across all time
frames.
The VIX (10.1) was
down by pennies. It ended below the
upper boundary of its short term downtrend, below its 100 and 200 day moving
averages but finished right on the lower boundary of its long term trading
range. The question remains, did the VIX
bottom in July?
The long
Treasury declined slightly, but still finished above its 100 and 200 day moving
averages (both support) and the lower boundaries of its short term trading
range and its long term uptrend.
The dollar was
up strong, but remained in short term and very short term downtrends and below
its 100 and 200 day moving averages.
However, it has broken the series of lower highs; and it closed very
near the upper boundary of its very short term downtrend.
GLD was down 1%,
but ended above its 100 and 200 day moving averages (both support) and the
lower boundary of a short term uptrend. However,
it has now made a second lower high.
Bottom line: long term, the indices remain
strong viz a viz their moving averages and uptrends across all timeframes. Short
term, they are above the resistance level marked by their August highs, meaning
that there is no resistance between current price levels and the upper boundaries
of the Averages long term uptrends.
On the other
hand, all those gap openings from two Monday’s ago still need to be
closed.
Finally, the pin
action in GLD, TLT and UUP was a bit confusing.
GLD and UUP pointed to a stronger economy/higher interest rates---probably
a reaction to the confused but somewhat hawkish statement from Yellen. The bond guys seem to remain convinced of
sluggish economy.
I remain
uncomfortable with the overall technical picture.
The
latest NYSE margin data (medium):
Fundamental
Headlines
Yesterday
witnessed the release of a number on economic datapoints: month to date retail chain
store sales improved from the prior week, the September Richmond Fed
manufacturing index was ahead of expectations; however, August new home sales
(primary indicator) were abysmal and September consumer confidence was below
estimates. The July Case Shiller home
price index was in line. Nothing
overseas.
Yellen
made a major address in which she explained the Fed still had no clue about
what is going on but she is worried about starting to tighten too late. Note to Janet, you should have been worried
about that three years ago.
And:
Other
Fed officials were also on the stump displaying a perfect lack of consensus (medium):
As
usual there are so many ‘on the one hand, on the other hand’ that it is tough
to have a clear picture of what this group of eggheads are thinking. That said, Yellen said one thing that
suggests that the hawkish stance set at last week’s FOMC meeting prevails: “it
would be imprudent to keep monetary policy on hold until inflation is back to 2
percent”
Janet
in Wonderland (medium and today’s must read):
In
addition, there were more leaks on the Trump/GOP tax bill (medium):
Bottom line: the
economy continues to perform sluggishly (witness new home sales). The Fed continues to throw head fakes---in an
investor panel on CNBC yesterday afternoon, no one could agree on what Yellen
said in her speech; and these guys are professional observers. Reading her above quotes, it is not surprising. So while she seemed to be pointing to higher rates
and the unwinding of QE, she has left the Fed with the ability to do anything,
then point at one or more of the ‘on the one hand, on the other hand’
statements and claim that it told us so.
My position hasn’t
changed. The Fed screwed up once again;
only this time it did it in grand style, expanding its balance sheet to $4.5 trillion
with marginal effect on the economy but pushing equity valuations to nose bleed
levels. When this story ends, it will
not be a plus for stocks.
Here
is a reasonable argument on why ending QE won’t end the bull market. My objection to his argument is that much of
the day to day action in US stocks is done by algos/quant traders who could
care less about earnings but do focus on Fed policy (medium):
My
thought for the day: Take emotion out of
your investment decision making process.
I have constructed a valuation model that makes my buy/sell decisions
relatively easy even at times of market extremes. It may be involve more time and effort than
you want to invest. But the validity of
my particular process is far less important than the point of just having a
process that allows you to make sound investment decisions whatever is occurring
in the market.
Investing for Survival
Warren
Buffett wins $1 million bet that S&P would outperform hedge funds (medium):
News on Stocks in Our Portfolios
Revenue of $9.07B (+0.1% Y/Y) misses by $20M.
Economics
This Week’s Data
Month
to date retail chain store sales grew slightly faster than in the prior week.
The
July Case Shiller home price index rose 0.3%, in line.
August
new home sales fell 1.9% versus expectations of an increase of 2.1%.
September
consumer confidence came in at 119.8 versus estimates of 120.2.
The
September Richmond Fed manufacturing index was reported at 19.0 versus forecast
of 13.0.
Weekly mortgage
applications fell 0.5% while purchase applications were down 4.0%.
August
durable goods orders rose 1.7% versus consensus of +1.5%; ex transportation,
they were up 0.2% versus projections of up 0.4%.
Other
Stripping
NAFTA of what makes it great (medium):
US
slaps tariffs on Bombardier (medium):
Update
on oil (medium):
Apartment
vacancy rates (medium):
Quote
of the day (short):
Politics
Domestic
International War Against Radical
Islam
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for Survival’s website (http://investingforsurvival.com/home)
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