The Morning Call
I am off to vote. A check of the overnight markets shows all is
relatively quiet with the world watching the US
The Market
Technical
The
indices (DJIA 13112, S&P 1417) drifted higher yesterday, closing within
their (1) short term trading ranges [12973-13661, 1395-1474] and (2)
intermediate term uptrends [12685-17685, 1338-1934]. Additional resistance exists at the 50 day
moving averages (13340, 1434) and the former 13302/1422 resistance, turned
support now resistance level. Support is
marked at the 200 day moving averages (12991/1379).
Volume
fell; breadth improved. The VIX was up
5%, bringing it back to near the upper boundary of its short term
downtrend. It closed above its 200 day
moving average, the lower boundary of a very short term uptrend and the lower
boundary of its intermediate term trading range.
GLD
was up slightly, finishing below the upper boundary of a new very short term
downtrend but above the lower boundaries of its short term uptrend and its
intermediate term trading range.
Bottom
line: given that (1) the lower
boundaries of the new short term trading ranges are above our Year end Fair
Values and (2) the indices can’t sustain a rally off those boundaries, I think
that (1) there is little technical incentive to Buy stocks at the bottom of
this trading range and (2) it suggests that these boundaries will be challenged
and breached sooner or later.
However, more
important from the technical standpoint, the test will provide an idea of the
strength of these boundaries.
Market
volatility as an election predictor (short):
Fundamental
Headlines
We
got one economic report yesterday: the October ISM nonmanufacturing index was
in positive territory though it came in slightly less than expected and below the
September reading. Nevertheless, it fits
our current forecast to a tee; so in that sense, it was a positive.
All eyes are on
the election, not on the ball (medium):
In
addition, the eurocrats are awakening.
The Greek parliament votes on the latest austerity package tomorrow, a
strike is planned to coincide with it, a major controversy has arisen over
Spanish bond ratings and in a speech, Ms Merkel said the eurocrisis will take a
long time to fix.
Merkel
believes the eurocrisis will last five (count them) five years (short):
More
on Draghi’s folly (medium):
Bottom
line: stocks, as defined by the S&P,
are overvalued, as defined by our Model.
Of course, that statement by itself means little because the election
could lead to big changes in the assumptions that go into our Model, depending
on who wins and how intent they are on fulfilling the campaign pledges. Clearly, we will know more by tomorrow
morning, In the meantime, with the
spread of potential outcomes (and their economic consequences) sufficiently
wide, I have no incentive to so anything other than sit on my hands.
This
is your fiscal tax cliff (short):
Is
cash trash or king (medium):
The
latest from John Hussman (medium):
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