The Morning Call
The Market
Technical
I
am back earlier than I thought (comments this week will still be abbreviated) because
much has changed with the S&P (1402) over the past week. It has (1) broken the newly re-set short term
uptrend, (2) broken below its 50 day moving average again [wiggly red line] and
(3) appears to have rejected the break above the former upper boundary of a
short term trading range [1424].
A
word about the latter---our technical discipline’s guidelines for the
confirmation of a break of a short term trend is three days. Clearly that is our guideline and it does not
always work out that way. The current
situation has all the appearances of such a case, i.e. it takes the Market
longer to reject a breakout than normal; however, I am going to give it another
day or so but making that call.
If
in fact, the break to the upside has been rejected, then the former short term
trading range is now operative (1343-1424) with interim support at 1395. The lower boundary of S&P’s intermediate
term uptrend now intersects at 1378.
Fundamental
As
I am sure that you are aware, the reason for the current sell off is the
inability of our elected representatives to come up with a compromise on the
fiscal cliff. This is not a
surprise. I have argued several times
that the major imperative for a compromise would likely turn out to be a
dramatic decline in stock prices. That
said, Friday’s close put the S&P right at its Year End Fair Value---which
hardly qualifies the current sell off as ‘a dramatic decline in stock
prices’. Hence, if this thesis proves
correct, we are in for more downside.
The
good news is our Portfolios have plenty of cash.
The
bad news is that in the midst of a contentious debate on how much to raise our
taxes and not on the real fiscal issue (too much spending), Obama has just approved
a pay raise for all government employees.
Take a good look at our future, ladies---a power elite that votes itself
pay increases which it insists must be paid for by raising our taxes instead of
imposing the slightest discipline on itself to manage this country’s budget
responsibly.
News on Stocks in Our Portfolios
Economics
This Week’s Data
Other
Politics
Domestic
International War Against Radical Islam
No comments:
Post a Comment