The Morning Call
Note: Tonight my #2 granddaughter
(9) and #3 grandson (7) arrive for a weekend of frolicking. Since they move faster and longer than I, I
will be fighting to keep up and, hence, won’t be writing a Morning Call on Friday
or the Closing Bell on Saturday. As
always, I will be paying attention to the Market and if action is needed, I
will be in touch via a Subscriber Alert.
The Market
Technical
Another
lousy day in stock land which served to cloud the technical picture for
the indices (DJIA 14995, S&P
1612). The good news is that they closed
within their intermediate uptrends (14134-19134, 1500-2088) and their long term
uptrends (4783-17500, 688-1750).
The
not so good news:
(1)
the S&P fell below the lower boundary of its short
term uptrend [1622-1701]. This re-starts
our time and distance discipline; a close below this boundary on Friday, the
short term uptrend will be confirmed as broken.
However, the Dow remains within its short term uptrend [14741-15452]. So the action of the S&P now puts the
Averages out of sync. To confirm a
downturn in the Market, the DJIA also has to break its short term uptrend,
(2)
the S&P also fell back below the upper boundary of
the very short term downtrend. That
negates the break to the upside and confirms the very short term trend as down,
(3)
the S&P closed right on its 50 day moving
average. It has bounced off this support
line four times in the current uptrend; so it clearly represents very strong
defense. A break would be very negative
for stocks and a bounce quite positive,
(4)
another technical underpinning went down, to wit, until
yesterday there has not been three down days in a row in the DJIA since 1/1/13 ,
(5)
worse still, the Market rallied early in the day [buy
the dips] and then got crushed. A couple
more of those will have the bulls re-thinking their position,
(6)
the former S&P all time high [1576] is not far
away. Like the 50 day moving average,
this level provides major support; so it is another critical level to which we
must pay attention,
(7)
suddenly, bad news is not necessarily good news,
(8)
not helping the bulls, over night the Nikkei was down
6% and the Shanghai Composite joined the rout, down 2.5%---which puts it
negative for the year.
Volume remains
low; breadth was mixed. The VIX was up
9%, closing above the upper boundary of its short term downtrend. To confirm this break, it must sustain
current levels through the close Friday.
If that happens, it would be a negative for stocks. Meanwhile, the Market is back to a very
heavily oversold condition; so a bounce here is likely.
GLD rose,
finishing above the double bottom, the lower boundary of its long term uptrend
and the upper boundary of its very short term downtrend---but the chart remains
broken.
Bottom line: the
technical outlook got a bit more confusing yesterday. The S&P is
threatening the break its short term uptrend and its 50 day moving average, has
confirmed a very short term downtrend while the VIX is challenging its short
term downtrend, the five and a half month streak of no ‘three down days in a
row’ has fallen by the wayside and it turns out the bad news is not always good
news. Even if we get a bounce today
and the aforementioned breaks are negated, the Market’s upward momentum has
been curbed. This kind of action is
typical of a Market top---though to be clear, it will take a good deal more technical
damage before that comes to pass.
Nonetheless, a top formation has to start somewhere; and this is as good
a start as any.
Any move to the
upside that pushes our stocks into their Sell
Half Range
Fundamental
Headlines
Yesterday’s
economic news was interesting: weekly mortgage and purchase applications
rebounded even as interest rates are moving up; the May US budget deficit was a
blow out number---much bigger than expected; indeed it witnessed the fourth
largest month for government spending ever---repeat, ever.
That
along with continuing huge gyrations in the Nikkei, the apparent unraveling of
the Greek economy (again) and more racket out of the German press on the
pending high court ruling on the constitutionality of several ECB programs kept
investor anxiety at high levels. Hence,
another sloppy day to the downside.
More
trouble in Greece
(short):
Bottom line: despite an all American attempt to rally off
of Tuesday’s decline, the Market kept getting hit with bad news; and as I noted
above, at least yesterday, bad news was bad news. However, I think that at this moment,
technical factors are probably more important than fundamentals (barring Greece
going toes up, the bankruptcy of a major banking institution, etc.) simply
because the S&P is at point of confluence of several trends and a move
either way will likely bring buyers/sellers out.
So at this
point, I think that the best thing to do is nothing---even if you are a
bull. Just wait and be sure, there is no
break to the downside before doing anymore buying. And if the Market breaks
lower and you have followed my lead, then our cash position is going to look
mighty good.
Bank of England
official warns of ‘biggest bond bubble in history' (medium):
For those who
believe that the rise in interest rates reflect better economic conditions
(medium):
S&P revenue
and earnings expectations (short):
Subscriber Alert
The
stock price of CF & Co (CF-$183) has traded below the upper boundary of its
Buy Value
Range
Investing for Survival
I
continue to do my homework on ETF’s including those holding foreign stocks and
bonds. Here is a summary of some
positive aspects of ETF’s containing foreign, dividend paying stocks. (short):
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