The Morning Call
The Market
Technical
Well,
so much for a change in sentiment. The
indices (DJIA 13979, S&P 1511) roared back yesterday. While the Dow managed to spike back above the
upper boundary of its short term uptrend (13273-13919), the S&P couldn’t
quite get there (1442-1513)---which is about the only negative for the
day. Both of the Averages remain within
their intermediate term uptrend (13287-18287, 1404-1999).
Volume
was slightly; breadth rebounded. The VIX
fell and closed within its intermediate term downtrend.
Gold
fell fractionally, but finished above the lower boundary of a very short term
uptrend. It continues to trade within a
short term downtrend and an intermediate term trading range.
Bottom
line: clearly, the bulls are alive and well and aren’t hesitant to keep pumping
up stock prices. Yesterday’s pin action
indicated that (1) the upper boundaries of the indices short term uptrend
continue to act as a magnet and (2) the bears are not strong enough to mount
even a half hearted follow through. That
keeps me convinced that 14140/1576 is a reasonable technical price
objective. Our Portfolios will continue
to lighten up as equity prices move higher.
More
great Market analysis from Lance Roberts (medium and today’s must read):
Fundamental
Headlines
Yesterday
was definitely less eventful than Monday.
On the economic front, weekly retail sales were passable after a couple
of weeks of mixed readings and the ISM nonmanufacturing index was slightly
better than expected. A positive.
With
results in from more than half of the S&P 500 companies, 69% have beaten
profit expectations, compared with the 62% average since 1994 and the 65%
average over the past four quarters. Sixty-six percent of companies have beaten
on revenue. Fourth-quarter earnings for S&P 500 companies are
expected to rise 4.5%, according to the data, above the 1.9% forecast at the
start of earnings season.
In
Europe , the EU PMI ’s
improved and the Italian and Spanish securities markets rebounded. That said, the European economy as a whole
and the southern EU economies in particular are nowhere near healthy nor are
their banks. This remains a negative
component of our forecast.
Obama
took His fight for income redistribution to airwaves, suggesting that
sequestration be postponed and substituted with smaller spending cuts and more
taxes as a down payment for a budget that deals with the major fiscal
issues. He forgot to mention that He
missed a deadline for His 2013 fiscal year budget and that the senate hasn’t
passed a budget in four years; although He did manage to paint a dark cloud if
the GOP insisted on sequestration. Yesterday’s
rhetoric is likely mild relative to the heat He will apply as March 1 (the
sequestration effective date) approaches.
The republicans haven’t budged yet---‘yet’ being the operative
word. I maintain my belief in the ‘line
in the sand’ thesis.
As
an aside, part of Obama’s plan is to eliminate corporate tax loop holes---with
which I have no problem as long as the overall tax rate is lowered to stay
competitive globally. Here is a study on
the impact of getting rid of the loop holes but not lowering the tax rate:
Bottom
line: we now know that yesterday’s pin
action was indeed a one day phenomena; however, it doesn’t change my
conclusion: ‘I do believe that (1)
stocks are overvalued even assuming our positive outlook on continuing growth
in the US and ‘muddling through’ in Europe and (2) the ‘tail risks’ associated
with a financial crisis in Europe and/or the sudden unwillingness of bond
investors to further indulge irresponsible global monetary policy while not
quantifiable [at least by me] are much larger than current consensus seems
prepared to acknowledge. Therefore, it seems reasonable to me that stocks, at a
very minimum, will return to Fair Value [1406].’
Brace
for a stock market accident (medium):
Speaking
of which (medium):
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