The Morning Call
The Market
Technical
The
indices (DJIA 13074, S&P 1413) had another decent day, closing within their
(1) short term trading ranges [12460-13302, 1343-1422] and (2) their
intermediate term uptrends [12899-17899, 1363-1958].
Volume
declined; breadth was mixed. The VIX
rose fractionally, again finishing right on its 50 day moving average and
between the upper boundary of its short term downtrend and the lower boundary
of its intermediate term trading range.
On a positive note, all this churning in place has worked off an
overbought condition.
On
the other hand, margin debt is near a high (short):
GLD
was up, remaining above the lower boundaries of its short term uptrend and its
intermediate term trading range. If the
lower boundary of its short term uptrend is broken, our Portfolios will likely
Sell a portion of their investment positions.
Bottom line: the
S&P remains locked in a pretty tight range (1395-1422) and continues to be
unable to successfully challenge its 50 day moving average (1416). As long as this directionless trading
continues (which happens to coincide with our current 2012 Year End Fair Value),
I see no reason to either Buy or Sell.
The
increasing correlation of US machinery and tech hardware stocks to the Shanghai
Fundamental
Headlines
Yesterday’s
sole datapoint was the weekly jobless claims number; and they were quite
positive---which extends what has been a fairly upbeat week for data.
Investors/the
media cared for about a nanosecond; then resumed their ‘fiscal cliff’
watch. That said, it seems like Market
participants aren’t concerned. It may be
that consensus reflects our scenario: (1) a deal will get done even if it
occurs next year and is applied retroactively and (2) it will incorporate a
business as usual solution of higher taxes and high spending.
From
a fundamental standpoint, I can’t argue with that conclusion simply because
that is our scenario. I just have a
tough time believing that sentiment will remain as calm as it is when the real
crunch time occurs.
Across
the pond, conditions continue to deteriorate as the eurozone economy shows more
signs of weakness; and political unrest has spread to Italy
European
economic data in the outhouse (medium):
Including
employment (short):
***over
night, the Bundesbank lowered its growth estimate for Germany
Bottom line:
well, good for investors. I believe that
there is more to be written on both the fiscal cliff and the EU sovereign/bank
debt crisis and that right now investors are a bit too sanguine on both. Yes, it would seem that on the fiscal cliff
they are simply agreeing with our forecast.
However, the difference between us is that our Portfolios have 30% cash
partially as a hedge against being wrong on this issue and the Market is near
peak highs in margin debt. That leaves
investors little flexibility if things don’t go a scripted.
In addition, I
honestly can’t figure out what investors are thinking regarding Europe
because they clearly aren’t reading the same newspapers that I am; and they clearly
haven’t done the math---and as Steny Hoyer said yesterday, this is a problem of
arithmetic. And it is a bigger than our own fiscal cliff. Not that it can’t or won’t be solved. But at the moment, it is not being
solved. Here again, our outlook assumes Europe
muddles through; 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 other reason for our large
cash position as well as our GLD holding.
Update
on the Q Ratio valuation (medium):
How
stock analysts performed in 2012 (short):
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