The Morning Call
The Market
Technical
The
indices (DJIA 13534, S&P 1472) drifted higher yesterday, remaining within
their short term uptrends (13051-13702, 1416-1485) and their intermediate term
uptrends (13148-18148, 1391-1986). They
are very close to the September 2012 resistance highs (13682/1474).
The next
significant technical event will be whether or not the Averages can
successfully challenge those resistance highs.
Given recent momentum, it seems likely that equities can move to higher
levels; if so, the next identifiable resistance is at 14140/1576. If not, a double top would be created and
would likely presage a test of the lower boundaries of those short term
uptrends.
Volume declined;
breadth improved with the flow of funds indicator quite strong and on balance
volume equally weak. The VIX was up
fractionally, finishing within its intermediate term downtrend.
GLD rose,
closing within its short term downtrend and its intermediate term trading
range. However, it did manage to break
above a very short term downtrend---a hopeful sign but not positive enough to
prompt any action.
Bottom
line: both short and intermediate term
uptrends remain solidly in tact.
However, the indices are very close to a significant resistance level
(13682, 1474). It seems most probable
that these levels will be successfully breached; and if that occurs, our
Portfolios will continue to lighten up.
If not, our Portfolios will do nothing, awaiting a test of the lower
boundaries of the short term uptrends.
Yesterday’s
GLD action was the first positive that we have had in a long time. Whether or not it anticipates a turn in trend
remains to seen.
Bull
market duration (short):
Fundamental
Headlines
Yesterday’s
US economic news was biased to the upside: December PPI was lower than expected while
December retail sales and November business sales and inventories were stronger
than anticipated. On the other hand,
weekly retail sales were mixed and the NY Fed manufacturing index was
considerably weaker than estimates. All
in all, this data supports our current economic outlook.
Across
the pond, German GDP was weaker than
forecast---which is another strike against my hoped for mending of the EU
economy. In other news, the German
central bank is shipping a majority of its gold currently domiciled in New
York London Paris Germany
Draghi
has more to do (medium):
And
(medium):
The
EU economic indicators are turning dismal again (medium):
And
finally (short):
Of
course, the debt ceiling/sequestration/spending dialogue continued with no
language of compromise; although we are getting a hint of what the solution
might look like from the current Hurricane Sandy relief bill. To wit, lots of
unrelated pork. So anyone believing that a move toward fiscal responsibility is
in the offing has to explain to me how that can happen given the pork spending
that was added to the recent tax increase and Sandy relief legislation.
Is
big deficit reduction dead? (medium):
And
if it is not, what happens next ? (medium):
Bottom line: ‘our strategy remains at odds with a Market
that seems eager to value stocks above what our Model considers Fair. Clearly, this makes my stomach churn and
keeps me constantly challenging the assumptions in our Models. Certainly, I can get valuations higher but it necessitates that
our elected representatives produce a budget that is far more fiscally
responsible than anything they have done in almost two decades. They could do it; but it seems a stretch to
bet money on that assumption. As a
result, I am more comfortable accepting the opportunity cost of not
participating in any further price rise in order to avoid the risk that prices
could quickly retreat to 5% to 10% undervalued if our political class stumbles
on debt ceiling/sequestration/spending cut problem.’
The
latest from Bill Fleckenstein (medium):
The
latest from John Mauldin (long):
The
latest from Jim Grant:
Subscriber Alert
The
stock price of Apple (AAPL ) has traded below
the upper boundary of its Buy Value
Range
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