The Morning Call
7/15/14
The Market
Technical
The
indices (DJIA 17055, S&P 1977) had a good day, closing above their 50 day
moving averages and within uptrends across all time frames: short (16185-17664,
1912-2078), intermediate (16512-20872, 1851-2651) and long (5083-18464,
762-1999).
Volume
was down; breadth improved. The VIX fell
below the upper boundary of its former very short term downtrend. This is one trading day after confirming the
break; so the obvious question is did our discipline make the call one day too
soon. I will wait to see today’s pin
action before making that decision. It
also finished below its 50 day moving average and within short and intermediate
term downtrends
TLT
also declined. However, it remained
above the upper boundary of a former short term downtrend in which a break had
been confirmed last Friday (very similar price action as the VIX, except it
didn’t challenge a confirmed break). It closed
above its 50 day and within short and intermediate term trading ranges.
GLD
fell 2%. It finished below the upper boundary
of a former very short term downtrend which, like the VIX, had been confirmed on
Friday. Even worse, it closed below the
lower boundary of a very short term uptrend.
The only good news was that it remains above its 50 day moving average
and within a short term trading range.
Subscriber Alert
Once
in a while, the Market makes you look like a smuck and yesterday was my
turn. The Buy call on GLD couldn’t have
been worse from a timing standpoint. It
closed below my Stop Loss. I am going to
watch the open; but unless there is a bounce, I will be Selling the position
initiated yesterday morning.
Fundamental
Headlines
No
US or international data releases yesterday.
Draghi
did give a speech to the European Parliament in which he was pretty negative
short term (euro is appreciating, the EU economy in declining, EU needs fiscal reform
and he won’t stop aggressively easing money).
No one seemed to
care because Yellen is testifying before congress today and tomorrow. And when Yellen speaks, investors go ape
shit---because she sooths them with monetary sugar plums into infinity. So everything should be coming up roses
today.
My
bottom line is that for current prices to hold, it requires a perfect outcome
to the numerous problems facing the US and global economies AND investor
willingness to accept the compression of future potential returns into current
prices.
I can’t emphasize strongly enough that I
believe that the key investment strategy today is to take advantage of the
current high prices to sell any stock that has been a disappointment or no
longer fits your investment criteria and to trim the holding of any stock that
has doubled or more in price.
Bear
in mind, this is not a recommendation to run for the hills. Our Portfolios are still 55-60% invested and
their cash position is a function of individual stocks either hitting their
Sell Half Prices or their underlying company failing to meet the requisite
minimum financial criteria needed for inclusion in our Universe.
It
is a cautionary note not to chase this rally.
The
latest from John Hussman (medium):
A
portfolio premortem (short)
A
long term investor’s guide to beating the odds (medium):
More
on valuation (medium and a must read):
No comments:
Post a Comment