The Morning Call & Subscriber Alert---1/10/13

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The Morning Call

1/10/13

The Market

           

    Technical

            The indices (DJIA 13390, S&P 1461) had another quiet day---but this one was to the upside.  They remain within their short term uptrends (12993-13629, 1408-1476) and their intermediate term uptrends (13105-18105, 1385-1980).

            Volume declined; breadth improved.  The VIX closed below the lower boundary of its intermediate term trading range for the fourth day, confirming the break of this trend.  It now re-sets to an intermediate term downtrend---very positive for stocks.

            http://www.bespokeinvest.com/thinkbig/2013/1/9/vix-hits-lowest-level-since-june-2007.html

            GLD traded down, finishing within its short term downtrend and intermediate term trading range.

            Bottom line: this week has thus far been a classic example of a consolidation that quietly works off an overbought condition.  Expect more upside.  However, any move to new highs will prompt additional sales by our Portfolios.

            http://advisorperspectives.com/dshort/guest/Chris-Puplava-130109-Market-Bill-of-Health.php

    Fundamental

    

     Headlines

            The economic data this week remains sparse.  Yesterday, the only indicator released was weekly mortgage and purchase applications which were quite good; however, they were influenced by seasonal factors.  Overseas, German productivity rose and that helps keep the ‘muddle through’ scenario in tact.

            Away from economics, the news flow was equally slow.  Again attention was centered on: ‘(1) the continuing monologue from the punditry on 2013 outlook, (2) early maneuvering on the debt ceiling talks, (3) Obama’s nominees for defense, treasury and the CIA.... and (4) the....earnings season which started Tuesday night with Alcoa’s aftermarket release......’   and (5) Biden’s suggestion that Obama may implement gun control via executive fiat.

            I am wondering if the latest actions taken by Obama’s (1) the nominees for defense, treasury and the CIA all of whom the GOP finds objectionable and, hence, there are sure to be major fights in the senate confirmation proceedings and (2) gun control by executive order, which aside from probably being unconstitutional, has raised the ire of republicans, is any indication of His likely stance in the debt ceiling/sequestration/spending cut debate.  That is to say, it appears that Obama is spoiling for a fight and/or is so locked into liberal, socialist purity that He is intent on pursuing what is apparently His new ‘my way or the highway’ strategy.

This ‘no quarter’ attitude may very well work for Him; but it is sure to further divide an already divided country and could lead to a nasty resolution of the spending debate (no raise to the debt ceiling).  Hubris is not an attractive trait; and sooner or later leads to the downfall of those who exhibit it.  Unfortunately when it is the president of the US, that process is not likely to be a pleasant one for the great unwashed,

Bottom line: equities, as measured by the S&P, are overvalued, as measured by our Valuation Model.  Incorporated in that valuation is an improving US economy and a ‘muddle through’ scenario in Europe---so I am generally upbeat.  Hence, it seems to me that any surprises are more likely to come from a negative event (i.e. an impasse over the upcoming debt ceiling/sequestration/spending cut debates and/or Greece, Spain or Italy running into financial problems).  So while I am not fundamentally pessimistic, I do not want to chase prices higher, in particular, with a number of our Portfolio’s stocks having already traded in their Sell Half ranges. 

http://www.zerohedge.com/news/2013-01-09/postponement-draghi-and-accounting

            The latest from John Hussman (medium):

            http://advisorperspectives.com/commentaries/hussman_010813.php

Subscriber Alert

The stock price of Sigma Aldrich (SIAL-$77) has traded above the upper boundary of its Buy Value Range.  Accordingly, it is being Removed from the Dividend Growth and Aggressive Growth Buy Lists.  Both Portfolios will continue to Hold their positions.

The stock price of Nucor (NUE-$45) has traded above the upper boundary of its Buy Value Range.  Therefore, it is being Removed from the Dividend Growth Buy List.  The Dividend Growth Portfolio will continue to Hold its position.

The stock price of Sun Hydraulics (SNHY-$27) has traded above the upper boundary of its Buy Value Range.  Therefore, it is being Removed from the Aggressive Growth Buy List.  The Aggressive Growth Portfolio will continue to Hold its position.

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.