Tuesday, January 20, 2015

Tuesday Morning Chartology

The Morning Call


The Market

       Tuesday Morning Chartology

            I don’t need to present some chart for you to know that volatility reigned supreme last week; so much so that any technical conclusion at the end of any given day had to be looked at with askance.  That applies to these comments.   That said, the S&P broke out of its developing pennant formation on Wednesday, traded below the prior higher low on Thursday then rallied back to the lower boundary of the pennant pattern on Friday.  There are both positive (the initial break of the lower boundary of the pennant formation was a false flag) and negative views (not one but two support levels were broken; plus Friday’s move was influenced by options expiration and short covering before a long weekend) of this pin action.  What this all means is that I am confused and when confused, the best thing to do is nothing.

            TLT is clearly on a moon shot, pushing above the upper boundaries of both its short and intermediate term uptrends.  The good news is that our muni bond holdings in the ETF Portfolio have tagged along.  The bad news is that prices are so stretched that some consolidation seems likely to occur.  Of course, that is a technical judgment; and TLT prices are being driven up by some scary fundamental factors; so that consolidation maybe a time in coming.  I wouldn’t be chasing bond prices up.

            This sure looks like a bottom to me.  However, patience.  If GLD remains above the upper boundary of its short term trading range on the close Tuesday, the trend re-sets to up.  If it is above the upper boundary of its intermediate term downtrend on Wednesday, that trend will re-set to a trading range.  If that occurs, our Portfolios will likely start to nibble.

            The VIX played with the upper boundaries of its short term trading range and intermediate term downtrend all last week, but ended below both.  That is modestly positive outcome.  Of course, it is still quite near both, so conditions can change on short notice.

            Over the holiday:

(1) the Shanghai Composite was down over 7% as officials suspended three broker/dealers for margin finance and securities lending violations.  Last night, China reported 2014 GDP growth at 7.4%, the slowest in 24 years,

(2) Denmark lowered its central bank rate and the Turkish PM said that Turkey’s central bank will lower their rate tomorrow; and, of course, global markets are giddy over a large ECB QE announcement on Thursday,

            But will it work? (4 minute video):

                (3) the IMF lowered its global GDP growth estimates for 2015 and 2016,

            (4) fighting has resumed in Ukraine.

            More fallout from the Swiss franc revaluation (medium):

            The latest from Societe Generale (medium):

       Investing for Survival

            New Year’s resolution: review or create an estate plan (medium):

    News on Stocks in Our Portfolios
·         Johnson & Johnson (NYSE:JNJ): Q4 EPS of $1.27 beats by $0.01.
·         Revenue of $18.25B (-0.6% Y/Y) misses by $310M.


   This Week’s Data

                The latest developments in oil (medium):



Holder ends civil asset forfeiture.  Give that man a cigar (medium):

  International War Against Radical Islam

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