The Morning Call
The Market
Technical
Investors
got positively giddy yesterday, moving the DJIA (14539) up for the tenth day in
a row and leaving it above the previous all time high (14190) and the upper boundary
of its short term uptrend (13679-14366) but below the upper boundaries of its
intermediate term uptrend (13489-18489) and long term uptrend (4783-17500).
Nevertheless,
the S&P (1563) failed once again to challenge its previous all time high
(1576) and the upper boundary of its short term uptrend (1490-1565). That leaves the Averages out of sync; so
under our time and distance discipline the Dow’s break to the upside is still
not confirmed. The S&P continues to
trade within its intermediate term uptrend (1430-2024) and long term uptrend
(688-1750).
Volume
was up a tad; breadth remained solid. The
VIX (11.30) was down big and remains within its short and intermediate term
downtrends. It is also again nearing its
all time low (9.83).
GLD
inched higher, but closed well within its short term downtrend. It is also above a developing support level.
Bottom line: no
matter how jiggy investors get, the S&P just can’t challenge the 1576
level. I still think that it will happen
but remain skeptical that it will confirm a break. It also means that for all the euphoric CNBC
rhetoric, the issue remains, is this a topping process or a pause before
another leg up? We will likely know soon
enough.
That said, even
if there is a break to the upside, I don’t believe that a next leg will cover
much distance as the indices will be bumping up against the upper boundaries of
an 80 year uptrend.
As a result, our
Portfolios remain better sellers.
Good
highs and bad highs (short):
Is
the Shanghai Composite telling us something (short):
The
Dow and initial jobless claims (short):
Sentiment
indicators are not euphoric yet (short):
Ten
sectors overbought (short):
Fundamental
Headlines
The
economic data flow continues positive: weekly jobless claims were better than
expected and the fourth quarter current account deficit was slightly smaller
than estimates. The February PPI
headline number was a little hotter than forecast though core PPI was in line. We have to be pleased that activity is
holding up following the January 1 tax increase.
Getting
mixed Market reviews was the release of Fed approval of major bank capital
plans, though two were rejected and two more were sent back to the drawing
boards to come up with more acceptable plans.
Finally on a
somber note, the Senate Finance Committee released a scathing study of JP
Morgan, accusing it of lying, lousy management and a far too large exposure to
derivatives. Not news to us and
apparently not news to investors because no one flinched when the report came
out.
The
rising Market remains the story, seemingly based on an improving economy and
higher corporate profits with little negative consequences from an inept fiscal
policy, an even more inept monetary policy and a continent filled with broke
governments, broke banks and the intergalactic champions of inept ruling
classes.
Bottom
line: the steady progress of the economy
is a positive, faced as it is with the tax increase in January and the recent
sequester. But that is where the good
news stops. So far a fiscal compromise
remains in question, the Fed continues to play Russian roulette with our
economy, the Senate which normally can’t spell work, forget something useful,
has just told the American people what I have been saying all along, to wit,
that our best in breed bank is a criminal enterprise, with questionable
accounting playing a totally inappropriate high risk trading game.
Based on our
Valuation Model and technical analysis, the investor risk/reward equation is
not attractive enough, except on a very speculative, short term trading basis,
to warrant chasing prices up from here.
I
like our cash position.
Morgan
Stanley on where we are in the credit cycle (medium):
10
clueless denials about the economy (medium):
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