The Morning Call
The Market
Technical
The
indices (DJIA 14818, S&P 1593) had another great day, finishing within all
major uptrends: short term (14220-14902, 1557-1651), intermediate term
(13804-18804, 1463-2057) and long term (4783-17500, 688-1750). In addition, the S&P confirmed its break
above its former all time high and moved back in sync with the Dow.
Volume
was abysmal (continuing the unhealthy pattern of up prices on down volume);
breadth improved. The VIX rose
fractionally, remaining within its short and intermediate term downtrends.
GLD
was up again, closing within its intermediate term downtrend and its long term
uptrend. However, it is still below the
lower boundary of its short term downtrend.
Bottom line: with yesterday’s close, all signs are ‘go’
with respect to another leg to the upside.
As you know, my best guess (which admittedly hasn’t been worth much
lately) is that the upper boundaries of the Averages long term uptrends are a
solid barrier. Certainly, with the trend
up, that boundary is going to advance over time. But at some point, the downside risk has to
enter into investor’s risk/reward analysis.
Fundamental
Headlines
Yesterday’s
economic news was mixed to negative: March personal income was below
expectations though spending came in better than estimates; the Dallas Fed
April manufacturing index was terrible.
While disappointing viz a viz our forecast, nobody else in stock land
cared.
Investors
were focused on the potential easing by the ECB this week and the formation of
a new government in Italy . Plus the Market’s drive to the hoop is itself
increasing becoming the story driving the Market.
Bottom line: ‘central bank monetary expansion seems to
be the fuel propelling stock prices higher because I sure can’t justify them on
fundamentals. Being a lousy trader, I am
not good at rationalizing prices that are too far divorced from my version of
reality. It is particularly difficult
this time around because of the extremes to which the central banks have taken
monetary policy and the lack of any sound explanation of how they are going to
unwind these measures without causing severe disruptions.
Until someone can ‘splain’ to me a
reasonable end game, I am content to under perform as a price to avoid
disaster.’
As I have noted
endlessly, I am not a trader and do not trade for my own account. However, for those of you who do trade and
want to participate in whatever is left of the up market, I would be looking at
underperforming sectors, commodities being the prime example. After all, if the global economy is going to
the moon, commodities should do better.
Two to look at are the Powershares Commodity ETF (DBC) and Gabelli’s Gamco Natural
Resource Gold and Income Trust (GNT ).
Another
underperforming area is emerging market stocks: Vanguard Emerging Market ETF
(VWO), Wisdom Tree High Yield Emerging Market ETF (DEM), S&P Emerging
Market Dividend ETF (EDIV).
Tight stops are
absolutely essential.
At some point
risk is going to kick in and Ranger Equity Bear ETF (HDGE) might be considered.
The
latest from John Hussman (medium):
The
return of the housing bubble (short but a must read):
The
latest move by the Bundesbank (medium):
Is
a EU QE coming (short/medium)?
The
bank with the largest derivative exposure (medium):
***overnight
EU unemployment rate ticked up again.
Yesterday,
I responded to an article that excused the Fed from a raft of sins. This article entails considerably more
economic expertise than my own. A must
read (medium)
http://www.zerohedge.com/news/2013-04-29/guest-post-why-feds-buy-and-hold-no-sales-exit-not-feasible
Inflation
and the Fed (short):
Investing for Survival
Wall
Street is out of control (short):
http://www.thereformedbroker.com/2013/04/28/absolutely-out-of-control/
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