The Morning Call
The Market
Technical
The
indices (DJIA 14296, S&P 1541) staged a rather limp wrested follow through
from Tuesday’s scorcher. Nonetheless,
the Dow remained above the upper boundary of its short term uptrend
(13572-14250) as well as the 14190 previous all time high for the second day of
our time and distance discipline confirmation.
On
the other hand, the S&P remains below the upper boundary of its short term
uptrend (1480-1549) and its previous all time high (1576). Clearly that puts it out of sync with the
Dow. It is important to repeat an
important tenet of our discipline---which is that both of the Averages have to
be in sync on a break in either direction.
This goes double when we are talking about taking out all time highs.
Both
closed within their intermediate term uptrends (13440-18440, 1425-2059).
Volume
was flat; breadth was mixed though the flow of funds indicator was quite
positive. The VIX was up---a bit unusual
for an up day in the Market; but it finished within its short term and
intermediate term downtrends.
GLD
was up again but still closed near the lower boundary of its short term down
trend.
Bottom
line: stocks may be breaking to new highs; but at least under our discipline
that won’t be established till both of the Averages confirm the challenge. So we have some time (or distance) to go. In the meantime, our Portfolios will continue
to take advantage of higher prices.
Stock
prices and margin debt (medium):
On
the other hand: funds flow and stock prices (short):
And:
New
all time highs---before and after (short):
Fundamental
Headlines
Yesterday’s
economic news was basically mixed: weekly mortgage and purchase applications
were strong; however, the ADP private
payroll number grew slower than expected, January factory orders fell less than
anticipated and the latest Fed Beige Book couldn’t have been more bland. While not barn burning stats, they fit our
forecast
The
rest of day, the media and investors remained focused on the Market and the
follow through from Tuesday’s Dow breakout.
Frankly, I was unimpressed; but once again, that’s talking my book.
Bottom
line: the economy is on track with our outlook---based on which stocks are
overvalued. As I noted yesterday,
technically speaking the S&P could rise to circa 1750 and still be within
its long term uptrend. But (1) most of
our stocks are ahead of that index, so their potential upside is likely less,
(2) further, the downside represented by Fair Value to say nothing of the lower
boundary of the S&P long term uptrend present a not all that attractive
risk/reward equation, (3) plus, the tail risks resulting from out of control Fed money printing and an
unraveling of the eurozone are unknowable because we have never been here
before and hence lend weight to the risk side.
I
like our cash position.
Money printing
in hyper speed---$118 million an hour (medium):
Meanwhile
across the pond, things are jumping in Italy
(short):
The
EU crisis is not over (short):
The
latest from John Mauldin (medium):
Credit
Suisse’s global risk appetite indices (short):
Subscriber Alert
The
following stocks are trading in their Sell
Half Ranges
In
the Dividend Growth Portfolio: VF Corp ($163) and Johnson and Johnson ($77).
In
the Aggressive Growth Portfolio: Ecolab ($78).
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