The Morning Call--for Romeny the key is follow through

The Market

           

    Technical

            The indices (DJIA 13494, S&P 1450) were up modestly yesterday, closing within their primary trends: (1) short term uptrends [13268-14038, 1423-1513] and (2) intermediate term uptrends [12476-17476, 1316-1916].  Additional resistance exists at 14190/1576 and support at 13302/1422.

            Volume was up slightly; breadth was mixed.  The VIX fell but remains in the zone between the upper boundary of its short term downtrend and the lower boundary of its intermediate term trading range.

            The net long position in S&P futures is at an all time high (short):

            http://www.zerohedge.com/news/2012-10-03/about-money-sidelines-its-all

            GLD rose fractionally, finishing above the lower boundaries of its very short term and short term uptrends and the intermediate term trading range.

            Is gold in a bubble (9 minute video):

            http://www.zerohedge.com/news/2012-10-03/gold-bubble

            Bottom line: the primary price trends remain up.  As a skeptic, the most positive thing that I can say is that stock prices have been moving sideways for the last two weeks.  Still that statement itself has a double edged implication in that they could be resting before another leg up or losing momentum in anticipation of rolling over.  Even though I have a dog in this hunt, I have no feel for the odds that prices are headed up or down---though I have to concede that the trend is up until it is not.

So I continue to grit my teeth, focus on our Sell Discipline and try to keep from wallowing in what I believe will be temporary misery.

            Market performance in October after a big up September (short):
            http://blog.stocktradersalmanac.com/post/Not-So-Big-September-Not-Such-A-Big-DJIA-DIA-Deal

    Fundamental

    

     Headlines

            Yesterday was a great day for US economic stats: weekly mortgage and purchase applications were both up solidly, the ADP private payroll survey showed a higher increase in employment than expected and the September ISM nonmanufacturing index joined the manufacturing reading coming in stronger than anticipated. 

This data along with prior readings this week are hopefully turning the tables on the lousy string of numbers from the prior two weeks.  Clearly, we have two more days but if this trends holds, I will count this week as a very good one for our forecast.

The big news internationally was rioting in Tehran where inflation is spiraling out of control.  The major impact was on oil (it was down) as investors apparently anticipated an outcome that would result in more Iranian oil hitting the market.  Frankly, I don’t know what this all means.  I do know that the Tehran merchant class was a significant force in the fall of the Shah.  I also know the last time they challenged the mullahs, things didn’t go so well for them.  So I am not sure that there is a bet to make here, at least at this time.

http://www.zerohedge.com/news/2012-10-03/guest-post-hyperinflation-has-arrived-iran

The other thing on investors’ minds was the debate last night.  Every talking head in the galaxy voiced his/her opinion about the impact on the election (and Market) that a win by one or the other candidate would have.  As you know, at the moment, I am not sure there is much difference between the two in terms of how much change in the taxes, spending and regulations they can actually implement.

            Bottom line: I hate being the pessimist because I love my life.  I want to believe that Romney could make a difference; but given his campaign performance to date, I see no reason to believe that he will win and even if he does, I am not sure that he has the balls and/or persistence to take on and beat the calcified, corrupt, rent seeking bureaucrats and politicians that now infest our nation’s capital.

            To be clear, there are a lot of great people in this country in both parties.  Unfortunately, none of them has much influence over the workings of a government that would likely cause a second American revolution if Washington, Adams and Jefferson et al saw what has been wrought.

            ***OK, I feel slightly better this morning.  I thought Romney did a masterful job last night; but the key here is follow through.  If he goes back the same old ropa-dope that he did after the Ryan nomination (another uplifting moment), it will be for naught.

            http://www.bloomberg.com/news/2012-10-04/what-romney-s-victory-means.html

This is a bit long but it is a review of a new book on how politics work in Washington.  It is very discouraging but it is a must read:

http://www.nakedcapitalism.com/2012/10/how-professional-democrats-and-professional-republicans-ran-america-into-the-ground.html

            The math in Europe doesn’t work (medium):

            http://www.zerohedge.com/news/2012-10-03/weeping-counting-house

            More from David Rosenberg (medium):

            http://www.zerohedge.com/news/2012-10-03/david-rosenberg-rip-wealth-effect

            The impact of QE on the equity market (medium):

            http://advisorperspectives.com/commentaries/pimco_100212a.php

            This link is a summary from a paper from the New York Fed.  As you might expect, it gets deep in the weeds on econometric modeling; but the conclusion is astounding, i.e. the current Fed model will lead to dramatically higher inflation (must read):

            http://www.zerohedge.com/news/2012-10-03/fed-confused-reality-does-not-conform-its-economic-models-shocked-models-predict-hyp

            And speaking of Fed policy, which I wish that I wasn’t (short):

            http://www.zerohedge.com/news/2012-10-03/complete-fed-failure-retail-investors-pull-out-most-domestic-equity-funds-two-months

            Thursday morning humor (medium):

            http://nihoncassandra.blogspot.com/2012/10/my-not-so-golden-rules-about-investing.html