The Morning Call
The Market
Technical
So
much for ‘sell the news’. The indices
(DJIA 15371, S&P 1733) had another good day. The Dow started the day down big on negative
news out of IBM but recovered most of the
loss by the close. It remains within its
short term trading range (14190-15550), though clearly it is approaching its
upper boundary. The S&P closed
within its short term uptrend (1685-1839) and also closed at an all time high. This leaves the Averages out of sync on a
short term basis.
Both
of the Averages are within their intermediate term uptrends (15080-20080,
1604-2190) and long term uptrends (4918-17000, 715-1800).
Volume
rose, but not by much; breadth was mixed.
The VIX was down 8%, finishing within its short term trading range and
its intermediate term downtrend. I
checked our internal indicator: in a Universe of 149 stocks, 43 are now at all
time highs, 78 are not and 28 are too close to call. In our limited sample, that is not great
breadth.
The
long Treasury rose, ending within its short term trading range and intermediate
term downtrend.
GLD
was up 3%, closing right on the upper boundary of its very short term
downtrend. It remains below the upper
boundaries of its short term and intermediate term downtrends. However, the developing right shoulder of a
head and shoulders pattern is still in tact.
Bottom
line: as I noted above, investors are
back in happy land, having bought the rumor and bought the news. No doubt, the prospect of a Yellen Fed money
for nothing monetary policy is resurfacing.
The S&P has taken the first step in busting through its all time,
though the Dow is lagging and is out of sync.
We are very
close to the beginning of the best months of the year (November to April)
performance-wise. Plus the Holidays tend
to boost everyone’s sentiment. If the
Dow can make a new high and re-set with the S&P, then traders may want to
play the November/December period to the upside. Though I would caution that (1) the last time
they made new highs, it was a three day affair, so be careful not to jump the
gun and (2) another fiscal fist fight is scheduled at the first of the year.
Nonetheless, if
equities move up in price and any of our stocks trade into their Sell
Half Range
What
the Dow Theory says about Market direction (medium):
Fundamental
Headlines
Yesterday’s
US economic news was mixed: weekly jobless claims fell less than expected while
the Philly Fed index was well over forecasts.
Overseas, UK
retail sales were better than estimates.
However, with all the unreported data, I don’t think many investors are
paying a lot of attention to these numbers.
Bottom
line: while it may be a bit too early to tell, it does seem from the commentary
that I am hearing that we are back to the pre-no tapering comments Market,
where money for nothing ruled, good news was good news and bad news was good
news. That said, I would emphasize that
little has occurred that would raise expectations for corporate profit growth
or a more responsible fiscal policy---indeed, we are facing another budget/debt
ceiling go around in just three months.
Furthermore, the latest euphoria notwithstanding, we really don’t know
the impact that the last three weeks have had on business and consumer
confidence.
All we have is a
slowly improving Europe , the absence of tapering and the
Market’s historical performance record November to April. That may be enough on which to make a trading
bet; but I can’t get to current valuations on the fundamentals.
Money
for nothing and the S&P (short):
Another
great article from Lance Roberts (medium):
What
is a ‘normal’ return (short):
Barry
Ritholtz on the deficit (short):
The
latest from Jeff Gundlach:
You
can believe in magic or you can believe in math (9 minute video):
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