The Market
Technical
Monday’s
pin action was a roller coaster. But in
the end. the indices (13515, S&P 1444) finished up and well within their
primary trends: (1) short term uptrends [13265-14035] and (2) intermediate term
uptrends [12457-17457, 1313-1913]. The
bounce took the S&P back above the 1442 support level for the second time,
once again invalidating Friday’s break.
Additional
resistance exists at 14170/1576 (October 2007 high) and support at 13302/1422
(April 2012 high---resistance now support).
Volume
was down; breadth mixed. The VIX jumped
again, but left it below the upper boundary of its short term downtrend. It also remains above the lower boundary of
its intermediate term trading range.
Gold
rose slightly and continues to trade above the lower boundaries of its very
short term and short term uptrends and its intermediate term trading range.
Bottom
line: my cognitive dissonance remains in the stratosphere as the bulls remain
in firm control of the tape. While many
of the internal measures of Market strength that I watch are not pointing to
higher prices, they are clearly just as wrong as I am.
I have no idea
to what height this Market will go---it could be much higher. Once stocks are overvalued fundamentally and
overextended technically, the magnitude of overvaluation and/or overextension
is near impossible to forecast. Nevertheless,
I am sticking with my strategy of focusing on our Sell Discipline. side, except
for GLD.
Sell
side indicator shows extreme bearishness (that’s bullish):
Fundamental
Headlines
The
economic news got investors hyped at the outset of trading yesterday. Specifically, after a series of disappointing
reports in the industrial sector, the September Institute for Supply Management
manufacturing index came in well above expectations while August construction
spending was positive versus estimates of a down month.
These
data overshadowed some pretty rough international stats: high EU unemployment
(11.4%---though this was expected), EU PMI
(46.1---which denotes contraction but it was 0.1% above forecast) and lousy UK PMI (no excuses here). In other words, investor elation
notwithstanding, our economy is getting no help from the rest of the globe.
Later
in the day, the Ber-nank gave speech in which he re-iterated that Fed policy
would stay easy well after signs that the economy has strengthened. Based on investor response to the first time
he made such a comment, I would have thought that it would just kick in the
afterburners of the rally. Nope. The Market drifted lower following those
comments.
Stephen
Roach on Fed policy (medium):
The
unintended consequences of an open ended QE (medium/long):
***overnight
the central banks of Australia South Korea
Bottom
line: at this point, I have no feel for this Market. I am at odds with the technicals. I have lost my empathy with a Market where
good news is good news one day, but bad news the next and visa versa. This isn’t the first time in my career that
this has happened; and when it has, I have found that the best thing to do in
nothing---which is what I am doing
Thoughts
on Investing from the Reformed Broker (medium):
The
latest stats on earnings guidance (short):
The
latest from Marc Faber (medium):
The
latest from John Hussman (medium):
Update
on market valuation (medium):
Investing for Survival
These
articles form part of the basis for why we need to be thinking about a new
direction in investment strategy:
On
freedom from Alexis de Torqueville (short):
Conditions
in Iran
The
latest from Bill Gross (medium):
And
a more detailed explanation of why Pimco thinks gold is a good investment
(medium and today’s must read):
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