The Morning Call
11/1/17
The
Market
Technical
The indices
(DJIA 23377, S&P 2575) rebounded yesterday, keeping alive its relentless
drive higher. Volume was down, but still
high; breadth was weak but remains at a positive level. Both remain above their 100 and 200 day
moving averages and are in uptrends across all time frames.
The VIX (10.2)
was down 3%---finishing below the upper boundary of its short term downtrend,
below 100 day moving average (now resistance), below its 200 day moving average
(now resistance), but above the lower
boundary of its long term trading range and continues to develop a very short
term uptrend. It still looks like the
July low was the bottom.
The long
Treasury up was four cents, ending below (but near) its 100 day moving average
(now resistance) and continues to develop a very short term downtrend, but
above its 200 day moving average (now support), above the lower boundaries of
its short term trading range and long term uptrend.
The dollar was
up two cents, ending within in its short term downtrend and below 200 day
moving average (now resistance) and but above its 100 day moving average (now
support) and continues to develop a very short term uptrend.
GLD declined,
finishing below its 100 day moving average (reverting to resistance), still
above its 200 day moving average (support) and the lower boundary of a short
term uptrend.
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. Despite
some recent churn, the technical assumption has to be that stocks are going
higher.
Trading in UUP,
GLD and TLT were back in sync, though this is more a sign of their recent
schizophrenic behavior than an indication that their investors are in harmony
with the stock boys.
I remain
uncomfortable with the overall technical picture.
Fundamental
Headlines
Yesterday’s
economic data releases were positive: month to date retail chain store sales,
the October Chicago PMI and October consumer confidence were all better than
anticipated while the August Case Shiller home price index was in line.
Overseas,
the numbers were mixed: the October EU inflation rate rose less than consensus;
the October Chinese manufacturing and services PMI was less than estimates; and
the Bank of Japan left rates and its bond buying program
unchanged despite its lower inflation expectations.
***overnight,
the October Chinese Caixin manufacturing PMI was reported in line with
consensus; the October UK manufacturing PMI was above estimates.
The
news flow during the day mostly focused on upcoming events: (1) the unveiling
of tax reform, the latest rumors being that the corporate tax cut will commence
immediately and not be phased in, (2) appointment of a new Fed head---with the
odds of a Powell appointment continuing to gain strength, (3) release of the
Fed minutes---no surprises anticipated, (4) the Bank of England meeting and the
possible announcement of a rate hike and (5) the Friday job’s report---expected
to be awesome.
***overnight,
the announcement of the tax reform bill which was expected today was delayed
until tomorrow; latest rumors are the corporate tax rate will be cut to 20% and
implemented immediately, the top individual tax rate will be left unchanged and
the repeal of the estate tax will be delayed.
Bottom
line: this week, the flow of economic data is off to a good start. If that continues, this will be the third
week in a row of improved numbers. I
don’t think that is enough to get jiggy and raise our forecast. Remember, over the last two years, we have
been through brief periods in which the stats were seemingly pointing to some
sort of economic liftoff only to be disappointment later. So I
take the same attitude as with those prior periods---be open to the
possibility that faster growth is beginning but demanding more data before
making the call.
To
be sure, any one of those aforementioned upcoming news events could have a
positive impact on the data flow; though history tells me to never under
estimate the ability of this group of clowns that we have in our ruling class
to snatch defeat from the jaws of victory.
My
thought for the day: It now takes the average American worker
almost 95 hours to earn enough to buy one S&P 500 index 'unit'...62% higher
than at the peak in 2007 and almost triple its cost at the lows in 2009... And the gurus think that there is no
inflation.
Investing for Survival
What
the charts don’t tell you.
News on Stocks in Our Portfolios
Revenue of $3.78B (+12.5%
Y/Y) beats by $120M.
Economics
This Week’s Data
Month
to date retail chain store sales grew slightly faster than in the prior week.
The
August Case Shiller home price index rose 0.5%, in line.
The
October Chicago PMI came in at 66.2 versus forecasts of 62.0.
October
consumer confidence was reported at 125.9 versus estimates of 121.0.
Weekly
mortgage applications fell 2.6% while purchase applications were off 1.0%.
The
October ADP private payroll report showed job gains of 235,000 versus
projections of 210,000; however, September’s reading was revised from +135,000
to +110,000.
Other
Some
analysis from my favorite optimist (medium):
Update
on big four economic indicators (medium):
Is
the first UK rate hike coming this week? (medium):
The
debt problem (medium):
Politics
Domestic
International War Against Radical
Islam
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for Survival’s website (http://investingforsurvival.com/home)
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