The Morning Call-Is this the best the Bulls can do?

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The Market

           

    Technical

            The indices (DJIA 13564, S&P 1459) meandered most of yesterday’s session, finishing within both their (1) short term uptrends [13143-13913, 1401-1479] and (2) intermediate term uptrends [12373-17373, 1304-1904].  Additional resistance exists at 14190/1576.

            Volume declined; breadth improved, especially the flow of funds indicator.  The VIX dropped, remaining well below the upper boundaries of both their short term and very short term downtrends.  It is now a short hair away from challenging the lower boundary of its intermediate term trading range.

            GLD rose, keeping it above the lower boundaries of its short term and very short term uptrends.  It is also well above the lower boundary of its intermediate term trading range.

            The link between gold and inflation (short):

            http://www.ritholtz.com/blog/2012/09/gold-vs-inflation/

            Now they are counterfeiting gold bars (medium):

            http://www.zerohedge.com/news/tungsten-filled-10-oz-gold-bar-found-middle-manhattans-jewelry-district

            Bottom line:  the Averages primary trends are up.  I try not to argue with the tape but with our Valuation Model indicating that stocks are overvalued and our internal indicator not confirming the aforementioned uptrends, there is simply too much weighing against investing with the trend.  My focus continues on the Sell side, except for our GLD position.

    Fundamental

    

     Headlines

            Yesterday’s economic news included weekly retail sales, which were mixed and the second quarter budget deficit, which fell considerably more than anticipated---so slightly positive results.  But there was nothing ground shaking and the Market’s very tight, meandering behavior suggests that most investors agreed. 

            Stocks dull performance also suggests the lack of any additional news.  Of course, the narrative on the Fed’s and Draghi’s new ‘all in’ strategy continued as a major point of discussion among the talking heads and the editorial staffs of the print media; though the directionless Market of the last two days make me wonder if the recent rally following the Draghi/Bernanke announcements is the bulls’ best shot.  We will know soon enough.  In the meantime, here is some more analysis of these latest moves by the central bankers:

            The danger in the Fed’s new ‘unlimited bid, limited offer’ policy (medium):

            http://www.minyanville.com/business-news/politics-and-regulation/articles/investor-sentiment-affect-on-fed-on/9/18/2012/id/44106

            And (medium):

            http://advisorperspectives.com/commentaries/sentinel_91712.php

            Applying game theory to Draghi’s plan (medium/long---a must read):

            http://www.nakedcapitalism.com/2012/09/yanis-varoufakis-the-game-of-the-two-marios.html

            Money fleeing the PIIGS (medium/long):

            http://www.bloomberg.com/news/2012-09-18/deposit-flight-from-europe-banks-eroding-common-currency.html

            Bottom line: I hate the kind of market that we are in because I believe that the evidence points to a top somewhere in the current vicinity; but I am not smart enough to trade the current uptrend till it hits that top---even though, stocks could go to the 14190/1576 level and not re-set to a long term uptrend.  So I wait and agonize.