Thursday, May 23, 2013

The Morning Call--from vacation

The Morning Call

5/23/13

The Market
           
    Technical

            It always happens.  I put on a bathing suit and the Market does something that bears comment.  Yesterday technically is called a bearish outside day---that is, Wednesday’s intraday high was higher than Tuesday’s intraday high and Wednesday close was below Tuesday’s intraday low.  In tech land an outside down day is viewed negatively.  However, this is the age of QEInfinity and given the recent strength and momentum, this could prove to be a one or two day phenomena.  Further, the equities were overbought by any definition; so a Market rest is not out of the question.

            Here is a two day S&P chart that illustrates what an outside down day looks like:





On the other hand, the pin action could signify a change in trend; although bear in mind that tops are generally processes not events.  So even if we are witnessing a change in trend, it will be a while before we really know it. 

Bottom line: at the moment, this is an interesting development, nothing more; however, it could build into something meaningful.

    Fundamental
    
            Precipitating the above was investor confusion over the Bernanke testimony and then the release of the minutes of the last FOMC meeting.  Contained within both was the kind of ‘on the one hand’/’on the other hand’ bulls**t typical of officialdom so that they can later say that they were correct no matter what happens.  That said, investors interpreted the tilt of the comments toward ‘tapering’ maybe closer than ever.  That turned a Market off to a strong start on the assumption that Bernanke would be dovish into a waterfall formation as investors began to think that reality may be at hand.

            The Fed minutes as parsed by Bernanke’s bitch Hilsenrath:

                                    Bottom line: nobody knows what the Fed is going to do.  Indeed I would argue that what they do is irrelevant.  What matters is how long investors allow the Fed to get away with its irresponsible policies before they start refusing to buy bonds and/or stocks are ever decreasing returns.

            ***over night, Japanese stocks got crushed and China’s manufacturing PMI indicated contraction.



Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973. His 40 years of investment experience includes institutional portfolio management at Scudder, Stevens and Clark and Bear Stearns. Steve's goal at

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