The Market
Technical
The
indices (DJIA 13473, S&P 1441) traded lower yesterday, but remained within
their primary trends: (1) short term uptrends [13334-14165, 1431-1523] and (2)
intermediate term uptrends [12503-17503, 1319-1917]. Additional resistance exists at 14190/1576
and 13653/1469, support at 13302/1422 and 1442.
Clearly, the S&P dipped below the 1442. Since this level is minor support, I am not
reading much into it; though it could be an early warning signal. 13302/1422 is much more important.
Volume
lifted a bit; breadth was rotten. The
VIX rose, closing below the upper boundary of its short term downtrend and the
lower boundary of its intermediate term trading. This is a pretty wide gap; so there is not a
lot of information in that statement.
The information is that the VIX couldn’t remain below the upper boundary
of its very short term downtrend and couldn’t successfully penetrate the lower
boundary of its intermediate term trading range. That suggests a positive tilt to the VIX
which is negative for stocks.
GLD
fell again, making yesterday the second day below the lower boundary of its
very short term uptrend. A repeat of
that today will negate that uptrend.
Approximately 2 ½ points lower, GLD would break a second support
level. If that (168.4) is taken out,
there is a ten point air pocket before it would find the lower boundary of its
short term uptrend, Since a large portion
of our GLD position is partly a trading one, a break of 168.4 would likely lead
to a lightening up on this holding.
Bottom line: the primary price
trends continue to the upside; though the Averages look increasingly
toppy. That is not a prediction;
although given my recent record, if it was, I wouldn’t even take it serious. That said, I firmly believe that at some
point I will be correct that prices are way overextended. Whether or not the current pin action is
signaling it, I am not going to venture a guess. I am still focused on our Sell Discipline.
Fundamental
Headlines
One
minor economic datapoint yesterday---weekly retail sales which were upbeat.
Three
other news items that were impacting prices:
(1)
Merkel visited Greece
The ECB’s toxic debt loop
(medium):
(2)
the IMF issued a new set of predictions on global
growth as well as that of individual countries.
While I don’t have any more confidence in this institutions forecasts
than I do in the World Bank, nonetheless, they did not make pleasant reading
and investors reacted negatively to this last report.
And this
other less publicized report---equally ugly (medium):
I don’t know whether
or not this means that investors are finally waking up to the realization that
economic conditions are not rosy; but recognition has to start somewhere
(medium).
(3)
Apple stock, the darling of investors’ eyes, is
starting to suffer some whackage. It is
getting more notice from the talking heads, has be concerning to all the lemmings
that pored money into this stock in its latest Titan III
imitation and represents 4% of the S&P; so when, as and if, this stock
starts declining in earnest, the door probably isn’t wide enough for a
controlled exit. That likely means there
are some nervous feet and may be carrying over into the Market in general.
Meanwhile,
earnings season started with a so so report from Alcoa followed by poor guidance
from Chevron and Cummings.
Bottom line: stocks are overvalued (as measured by our
Model); and save for the potential of a Romney victory in November which could
lead to more responsible fiscal, monetary and regulatory policies, I see
nothing else that could take equity prices higher. In fact, the US
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