The Morning Call
The Market
Technical
The
indices (DJIA 12756, S&P 1374) had another rough day closing within (1)
their short term downtrends [12673-13164, 1372-1420] and (2) their intermediate
term uptrends [12743-17743, 1345-1941].
Further, the S&P finished below its 200 day moving average (1382)
for the fourth day and sufficiently so to confirm the break.
Two
things to note: (1) the current proximity of the Dow to the lower boundary of
its intermediate term uptrend suggests that a test of this level is near, (2)
the proximity of the S&P to the lower boundary of its newly re-set short
term downtrend suggests just the opposite; that is, it is not unreasonable to
assume that the S&P could bounce off the lower boundary of its short term downtrend. So while momentum is clearly to the downside,
there remains enough disharmony between the Averages that it is not automatic
that we are going to get a big flush.
Volume
bounced back; but breadth declined. The
VIX was down fractionally; but it was the second day below the lower boundary
of its very short term uptrend---which confirms the break of this trend. Further, for it to be down on a solidly down
price day, is quite unusual. Both are a
positive for stocks. It remains in the
narrowing zone between the upper boundary of its short term downtrend and the
lower boundary of its intermediate term trading range.
GLD
fell, remaining below its 50 day moving average but above the lower boundaries
of its short term uptrend and its intermediate term trading range.
Bottom
line: the Market’s technical internals
continue to deteriorate. The DJIA is
already on the cusp of challenging the lower boundary of its intermediate term
uptrend while the S&P is trailing---as it has with the previous support levels
higher up. I am not predicting a break
of this important support level; but I imagine that there will be a sizeable
battle before we know the outcome.
My focus
continues on (1) those stock closing in or near the Buy
Value Ranges Buy
Value Range
Fundamental
Headlines
Yesterday’s
economic news was mixed: weekly retail sales were up as expected after a Sandy
impacted report last week; October’s budget deficit was ugly. There was no news in this data; so there is
nothing that would impact our forecast.
Investors
and the media spent the day noodling over the fiscal cliff, the EU debt crisis
and the increasing ugly unfolding of the Petraeus scandal. Consensus seems to be that our politicians
aren’t stupid enough to push the economy over the fiscal cliff although there
is no consensus on how they avoid it.
Indeed, the more time that passes, the more individual parties are
laying down markers that would make compromise more difficult. Yesterday, Tiny Tim Geithner threw in his two
cents worth, to wit, tax rates need to go up.
The
games begin (medium):
Robert
Rubin on the fiscal cliff (medium):
Ron
Paul on the fiscal cliff (7 minute video):
The
Reinhart/Rogoff ‘bang’ moment (short and today’s must read):
On
the other hand, the eurocrats couldn’t find their own ass with a pair of deer
antlers. They added confusion over the
Greek bail out discussion, disagreeing not just publicly but in the same news
conference.
And
to add to the comedy, Greece
A
summary of yesterday’s events in the EU (medium):
And
(medium):
***overnight,
protestors take to the streets across the continent (medium):
Gross
notional derivatives outstanding (short and a must read):
The
Petraeus scandal is metastasizing faster that small cell carcinoma, entangling
ever more and diverse players. All the
major Washington
Bottom line: ‘the economic fundamentals ex the fiscal
cliff and the euro disaster are progressing as well as we could hope given the
burdens the economy must shoulder. I do
believe that the fiscal cliff gets fixed however dysfunctionally; and as a
result, ex the significant downside presented by a failure in Europe , our Portfolios would be starting to
nibble at current levels.
However, the aforementioned downside in Europe is of such a magnitude that I think that
stocks prices need to suffer an additional haircut before they compensate us
for assuming the risk of ownership.’
The
latest from Nomura’s Bob Janjuah (medium):
Subscriber Alert
The
stock price of Occidental Petroleum (OXY -$75)
has fallen below the lower boundary of its Buy
Value Range
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