The Morning Call--How will Apple impact the Market?

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The Morning Call

1/24/13

The Market

           

    Technical

            The indices (DJIA 13779, S&P 1494) continued its upward march yesterday, finishing within their short term uptrends (13127-13772, 1425-1494) and their intermediate term uptrends (13199-18199, 1396-1991). 

At the close, the S&P confirmed the break above the 1474 resistance level; and the Dow is above its comparable level (13682) for the second day.  Both of the Averages closed right on the upper boundary of their short term uptrend.  I have opined that these boundaries may act as a governor on the rate of price advance.  If correct, a pause at these levels would not be a surprise.  Furthermore, Market darling Apple reported some disappointing numbers after last night’s close and the stock is off 10% in after hours trading.  It will be interesting to see how the Market, in general, handles this development in today’s pin action.

Volume fell; breadth was again mixed though the flow of funds and on balance volume indicators are quite strong.  Indeed, some sentiment indicators are in extremely overbought territory.  The VIX was up fractionally, but remains within its intermediate term downtrend.

http://advisorperspectives.com/dshort/guest/Chris-Puplava-130123-Market-Bill-of-Health.php

And:

http://www.bespokeinvest.com/thinkbig/2013/1/22/796-of-sp-500-stocks-overbought.html

GLD fell, closing within its short term downtrend and its intermediate term trading range.  It also remains above the lower boundary of a very short term uptrend. 

http://www.zerohedge.com/news/2013-01-24/faber-shiller-%E2%80%9Cyou-keep-your-us-dollars-and-i%E2%80%99ll-keep-my-gold%E2%80%9D

Bottom line:  the trend is up and will be so until it isn’t.  The rate of progress may slow a bit, hampered by the upper boundaries of the indices short term uptrends.  Aside from that, 14140/1576 appears to be a reasonable goal to the upside while 13168/1474 now marks short term support.

            The latest from the Stocktrader’s Almanac (short):

            http://blog.stocktradersalmanac.com/post/Highest-Margin-Leverage-Versus-Stock-Market-Cap-Since-1929-

    Fundamental

     Headlines

            Yesterday’s US economic news returned to a more neutral tone: weekly mortgage and purchase applications were up while retail sales were mixed.  Not much information value.

            The IMF lowered its 2013 global growth outlook, though the IMF is so frequently wrong in its forecasts that I take their comments with a grain of salt.

            ***overnight the Japanese trade deficit soared while Chinese PMI was better than expected.

            Politics dominated the news flow with:

(1)                            Secretary Clinton testifying most of the day on the Benghazi fiasco.  In sum, the facts surrounding what she knew and when she knew it remain obscure---although she did take full responsibility for the deaths of four Americans.  That said, she still has her job while four underlings are typing resumes.  Sort of reminiscent of the banksters,

(2)                            the house passed the extension of the debt ceiling while Obama allowed that He would sign it.  I guess this succeeds in keeping the GOP from being tarred and feathered as obstructionists; but it does diddily to cut spending.  In other words, it provides no evidence that a shred of fiscal responsibility exists in Washington.  It may make investors feel a tingle in their legs because it extends the time boundary of the current liquidity driven market; but our economy is no better off today than it was a month ago.  

Bottom line:  that churning sound you hear is my stomach.  I spend a good deal of my day challenging every assumption in our Economic and Valuation Models and I can’t get results that move Fair Value to higher levels.  I do understand that equity prices are being driven higher by massive money printing---with which I have two problems (1) the more money that is printed, the worse the long term economic prospects and (2) I believe that there is an ‘emperor’s new clothes’ moment out in our future when the universe recognizes that the global ruling class in collusion with their central bankers are employing policies that are inhibiting not helping future economic growth, then everyone runs for the door at the same time but no one gets out.  I don’t know when that moment will occur; but I do know that I am willing to accept the opportunity cost of not being fully invested today in order to save our Portfolios the pain when it does happen.

    

      Investing for Survival

            http://www.zerohedge.com/news/2013-01-23/socialism-europe-has-arrived-our-shores

Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973. His 40 years of investment experience includes institutional portfolio management at Scudder, Stevens and Clark and Bear Stearns. Steve's goal at Strategic Stock Investments is to help other investors build wealth and benefit from the investing lessons he learned the hard way.