The Morning Call
The Market
Technical
Yesterday,
the indices (DJIA 13927, S&P 1511) suffered their biggest setback in
sometime. However, they remain within
their (1) short term uptrends [13424-14083, 1461-1531] and (2) their
intermediate term uptrends [13380-18380, 1415-2010].
Volume
was flat; breadth turned very negative.
The VIX spiked up 20% but remains within its intermediate term
downtrend.
GLD
(151.44) got crushed again. It closed
below the lower boundary of its short term downtrend and is nearing the lower
boundary (147.92) of its intermediate term trading range. It needs to hold this level or the longer
term outlook will get considerably more negative, i.e. (1) the gold miner ETF
is in its time and distance test for breaking the lower boundary of its
intermediate term trading range, (2) the intermediate term trend would be down,
(3) the next visible support level is 127.12 and (4) the lower boundary of its
long term trend is circa 66.00.
Bottom line:
yesterday’s pin action was something of a surprise if for no other reason that
it broke the euphoric aura that has characterized the Market since January
1. I don’t think that too much should be
made of this, at least for the short term---sooner or later stocks had to have
an unusually rough day. Furthermore,
prices could sell down to the 13424/1461 level and never break their short term
uptrend. So I am not backing off of the
thought that the Averages can reach the 14140/1576 area.
That said, a
return to Fair Value has to start someday and yesterday could as easily be that
day as any other. The key that will
point the way is, as always, follow through.
So we watch knowing that we have plenty of cash if the current Titan III
formation has at last fizzled out but ready to do additional trimming if stocks
resume their upward trend.
The
Market’s bill of health (medium):
Fundamental
Headlines
We
finally got some economic data yesterday: weekly mortgage and purchase
applications were weak, housing starts fell though building permits rose,
January PPI was roughly in line and weekly retail sales improved. A mixed performance; what else is new.
Across
the pond, we also got some good news (French and Swiss consumer sentiment
improved) and bad news (Italian industrial production fell). Clearly, the hopium in those sentiment
numbers didn’t have the same impact as the prior day’s German positive reading.
What
sunk the Market was the release of the latest FOMC minutes in which there was at
least some serious discussion about the end date of monetary easing. Not that they voted to do it; indeed, they
voted to continue the $85 billion a month bond purchases. However, the mere mention of the removal of
the current massive liquidity stream was clearly enough to tighten some sphincter
muscles. Could this incident be the
catalyst that prompts the bond guys to bid rates up? We will know soon enough.
Bottom
line: I have spent a lot of verbiage
reminding everyone that the Fed has never successfully negotiated the transition
from monetary ease to tightening.
Assuming the latest FOMC meeting marks the beginning of this round, then
the next year is likely to be a volatile one in the bond pits even if the Fed
is ultimately victorious in avoiding either recession or inflation---simply
because sooner or later everyone will have doubts and that will get reflected
in prices. The point being that unless
investors take the FOMC news as anything other than a head fake, the last two
months steady march higher may be coming to an end.
And
then there is sequestration. The heat
(and bulls**t) level surrounding this issue gets hotter (deeper) everyday. I can only imagine what it is going to be
like late next week. As you know, if it
happens, I believe it a positive for the economy. However, with the sound and fury likely from
Obama and His MSM sycophants, the lemmings
on Wall Street may not be quite so upbeat.
Patience
remains at a premium.
The
latest from John Mauldin (medium):
The
risks of a collapse dwarf all other factors (short):
No comments:
Post a Comment