The Market
Technical
The
indices (DJIA 13169, S&P 1418) spent the day backing and filling and ended
the day basically flat; hence, they remained (1) above their 50 day moving
averages for the second day, (2) within their short term trading ranges
[12460-13302, 1343-1424] and (3) within their intermediate term uptrends
[12908-17908, 1363-1958].
Volume
fell; breadth was mixed. The VIX was up
but continued to trade below its 50 day moving average (a positive of stocks) and
between the upper boundary of its short term downtrend and the lower boundary
of its intermediate term trading range.
GLD
had a good day but remained below its 50 day moving average and above the lower
boundaries of its short term uptrend and its intermediate term trading range.
Bottom line: the
Averages remain locked in very tight short term trading ranges (12982-13302,
1395-1424); although they did close for the second day above their 50 day
moving averages. As long as this directionless trading continues (in a zone
that happens to coincide with our current 2012 Year End Fair Value), I see no
reason to either Buy or Sell. That said,
the confirmed break of their 50 day moving averages (which will occur at the
close today) suggests that any break out of the current very tight trading
range will be to the upside.
Fundamental
No
economic data was reported yesterday.
That
left the Market to contemplate:
(1)
the fiscal cliff.
As you probably know, Boehner and Obama met over the weekend. Afterwards, both sides did its obligatory
mewing about being willing to compromise,
Yesterday saw little to add to that story. There were some minor players offering their
opinions---which are worthless in the scheme of things. In fact, I think that the absence of any
speechifying by the major players is a hopeful sign that progress is being
made. On the other hand, I wouldn’t bet any
money on it.
(2)
international developments of which there were many:
[a] data out of Japan suggests that it is slipping into recession, [b] the
trade data out of China was not good {note---it is harder for them to lie about
trade data since someone else is on the other side of the trade}, and [c]
Italian PM Monti announced his resignation effective after the latest budget is
agreed upon.
EU clings to failed policies
(medium):
Central bankers contemplate going
beyond ‘all in’ (medium):
Bottom line: I don’t think it wise to be lulled to sleep by
a quiet Market day. The fiscal cliff and
the EU sovereign/bank debt crisis are far from being solved. Of course, there is likely to be a fiscal
cliff agreement---unsatisfactory as it may be.
I don’t have a problem with investors assuming that this will occur; but
I do think that they are being a bit too sanguine about the process, especially
with stocks slightly overvalued (as calculated by our Model).
More important,
I continue to be at a loss to explain the casualness with which investors
accept that all is going to end well in Europe . Because both economic and political
conditions are deteriorating and the eurocrats look to taking a well deserved
break from all that heavy lifting that they have been doing (not). As you know, our Models assume a muddle
through scenario but it is less
because I believe it and more because I can’t figure out how to Model and
discount not muddling through. And that
is the .... reason for our large cash position as well as our GLD holding.
What
scares Paul Singer the most (medium):
Risk
versus uncertainty (medium):
The
political class is the biggest risk to the Market in 2013 (short/medium):
The
latest from John Hussman (medium):
Equity
yields: a screaming buy or a reversion to the mean (medium):
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