The Morning Call
The Market
Technical
The
indices (DJIA 12951, S&P 1407)
meandered lower yesterday, closing within (1) their short term trading
ranges [12460-13302, 1343-1424] and (2) their intermediate term uptrends
[12875-17875, 1360-1455].
Volume
rose; breadth was mixed. The VIX rose
again, finishing above its 50 day moving average for the second day. It remains between the upper boundary of its
short term downtrend and the lower boundary of its intermediate term trading
range.
GLD
got whacked, closing below the 164.00 interim support level. Speculation is that this selling is coming
from the funds that have big profits in gold and want to take their capital
gains prior to 12/31. That
notwithstanding, as a result of the penetration of the 164 level, our
Portfolios are Selling the remainder of their trading position (that
leaves a 10% investment position in GLD). GLD continued to trade above the
lower boundaries of its short term uptrend and its intermediate term trading
range.
Bottom
line: yesterday’s follow through to the downside sets 13302/1424 as the upper
boundaries of Averages new short term trading ranges. That said, the follow through wasn’t all that
impressive after an ‘outside’ down day; so apparently the bulls aren’t
intimidated by the combo of the Averages bouncing off their 50 day moving
averages and then clocking an ‘outside’ down day.
With the S&P
in the upper half of its short term trading range and slightly above Fair
Value, there is nothing compelling about putting cash to work.
Another
sign of the need for clarity (short):
Fundamental
Headlines
The
only economic data yesterday were weekly retail sales. The week over week numbers didn’t look so hot
but that was because they were following the week of Black Friday; the year
over year figures looked fine.
***over
night the Chinese services PMI nosedived.
Aside
from the political bickering over the fiscal cliff, the day was fairly
quiet---hence, the relatively aimless, non volatile trading for the day.
Bottom
line: while all was quiet on the western
front yesterday, there is clearly more to come on the fiscal cliff as well as
the EU sovereign/bank debt crisis. For
the moment the fiscal cliff is the focus of investor attention; however as you
know, I think that (1) it will ultimately have less to do with the economic
outlook than the EU problem though (2) on a short term basis it could
still roil the Markets.
Since our
Valuation Model has a non-optimal resolution to the fiscal cliff built into its
Market Fair Value judgment, any price weakness could offer a buying opportunity---absent
any progress in Europe .
That has been my view for some time; however, I have been thinking
(always a danger) that any negative mispricing of the fiscal cliff outcome
could end up providing some of the cushion I really want because of the EU
crisis.
In other words,
I don’t need a cushion to Buy stocks for fear of a fiscal cliff because (1) I
don’t think that it is going to happen and (2) any political solution is
already in our Model. I need the cushion
because of the risk of a serious EU problem; but if I get that cushion because
of a fiscal cliff mispricing, I may use the occasion to Add to stocks. I worry that such a strategy may be too cute
by half; so I am still thinking about it---I’m thinkin’, I’m thinkin’.
And
you thought conditions in Greece
The
latest from John Hussman (medium):
Is
the Japanese market a model for our own or is it different this time? (short):
For
the real bears amongst you (medium):
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