The Morning Call
The Market
Technical
The
indices (DJIA 12542, S&P 1353) meandered lower yesterday, remaining below
the lower boundaries of their newly re-set short term downtrends (12631-13133,
1367-1416). The Dow also finished below the
lower boundary of its intermediate term uptrend (12761-17761) for the second
day; the S&P remains above its comparable level (1345-1941), though clearly
it is inching closer. This leaves the
Averages out of sync on their intermediate term uptrends. The importance of this is that under our
technical discipline a break of this support level must be confirmed by both of
the indices.
Volume
fell; breadth was mixed but the flow of funds indicator was horrendous. The VIX was up, closing within the two narrowing
zones marked on the upside by the upper boundary of its short term downtrend
and on the downside by (1) the lower boundary of its very short term uptrend
and (2) the lower boundary of its intermediate term trading range.
GLD
fell, remaining below its 50 day moving average and above the lower boundaries
of its short term uptrend and its intermediate term trading range.
How gold got to
be money (4 minute audio):
Bottom
line: stocks just can’t get out of their
own way. It seems like every morning,
they rally, it looks like an oversold bounce is starting, and then sellers come
in and drive prices lower. The key
technical factor right now is whether or not the lower boundaries of the
Averages’ intermediate term uptrends can hold.
I have opined that the bears should meet some stiff opposition before successfully
challenging these support levels. That
said, the Dow is already half way through the time element of its challenge and
it hasn’t so much as hiccupped.
If the break
does eventually get confirmed, additional support exists at 13304/12022 and
1292/1266.
(1) with the S&P now approaching Buy
territory, I am making my list and checking it twice (2) however, I will also
focus on those stocks that are near breaking key support levels but are a long
way from their Buy
Value Range
Bullish
sentiment continues to decline (short):
Fundamental
Headlines
Yesterday’s
economic data contained more Sandy related influences:
the NY Fed manufacturing index was down, though not by much; while the Philly
Fed index was positively horrible. Weekly jobless claims were also very
disappointing. However, they all showed
signs of Sandy CPI ,
both the headline and ex food and energy numbers were up modestly, in line with
forecast. So despite a big day in stats,
we really learned nothing new.
Investors
spent the rest of the day obsessing
about the fiscal cliff and war in the Middle East . With respect to the former, there was no new
news but the viewing public was inundated with opinions from every expert known
to man and some that aren’t.
Is political
uncertainty killing investment return (medium):
The importance
of monetary versus fiscal policy (medium):
What
Bernanke haft wrought (medium):
In Israel Gaza
Bottom line:
despite the fact that much of this week’s economic data is being distorted by Sandy Middle
East ---on which I have no feel for the calculus that the major
players use in plotting their strategies.
But it clearly is not a positive for oil or stock prices, and (3) the
ongoing clusterf**k in Europe . While (1) and (2) commanded the headlines
yesterday, this problem is still the 800 pound gorilla in the room.
As the axiom
states, markets hate uncertainty; and we have a snoot full of that right now. Unfortunately, all of the above three factors
will likely remain unresolved over the near term. Clearly some of this is now
reflected in lower stock prices; though I doubt that it all is. We are nearing a point where our Portfolios
start to nibble---I just want to see how the current assault on the lower
boundaries of the indices intermediate term uptrends goes before firming up our
Buy strategy.
The good news is
that our Portfolios have a lot of cash and the number of values is growing as
reflected in our Buy Lists.
More on the bond
bubble (medium):
Update
from Guggenheim Partners (medium):
If
I have heard argument that ‘you have to own equities because bonds yield
nothing’ once, I have heard it 100 times.
I have always had a problem with investing in the least worse
alternative, even if cash yields little.
This analysis provides the math for that argument (medium):
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