The Morning Call
The Market
Technical
The
indices (DJIA 13384, S&P 1461) took a rest yesterday, but remained within
both their short term uptrends (12951-13595, 1405-1473) and their intermediate
term uptrends (13089-18089, 1383-1978).
This subdued pin action following a big up move is generally a positive
sign that stocks are going higher.
Volume
rose; breadth deteriorated. The VIX
fell, closing below the upper boundary of its short term downtrend as well as
below the lower boundary of its intermediate term trading range for the second
day in a row---another plus.
GLD
declined, finishing within its short term downtrend but above the lower
boundary of its intermediate term trading range. It also closed below the lower boundary of
its very short term uptrend.
Bottom
line: the momentum remains to the upside; and our strategy remains unchanged,
i.e. chipping away at stocks that trade either into their Sell
Half Range
Historically,
our Sell Discipline has generally moved our Portfolios into a large cash
position ahead of a Market top. The time
frame can be as short as three to six months and as long as a year plus
(1999-2000 comes to mind). That
Discipline can cause heart burn especially when Markets are accelerating into
overvalued territory. Certainly, this is
one of those times. I try to temper the
timing of Sales by taking the technical picture into account; but in the end,
our Portfolios are almost always at max cash when sentiment is at its euphoric
high. Now is the time for patience.
GLD
was unable to the recover its very short term uptrend; so momentum remains to
the downside. As a result, our
Portfolios are lowering their GLD positions to 2-3%.
For
the bulls amongst you (medium):
Chart
porn for the bears (medium):
Fundamental
Headlines
Not
much news yesterday economic, political or otherwise. The news media spent the day getting every
pundit that they could find to give their 2013 forecast. Most are fairly positive---much more so than
our outlook. Of course, many are
expecting a more responsible resolution of our government’s spending problem
than I; and if they are correct, I will probably have to raise our economic and
Market forecasts. But our political
class is going to have to prove itself before I do that.
Bottom
line: stocks, as measured by the S&P, remain overvalued, as measured by our
Valuation Model. But as you know, it is
not because our outlook is negative. I
expect (1) the economy to continue to grow albeit at a historically sub par
rate, (2) corporate profits to grow, (3) inflation to remain reasonably stable
and (4) Europe to continue to ‘muddle through’. However, I believe that the economic problems
in Europe , Japan US
The
math of middle class entitlements (medium):
The
ECB continues to hold the EU together with accounting gimmicks (medium):
Along
with the help of the Bank of Japan---what could possibly go wrong here?:
Welcome
to Greek bailout #4 (medium):
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