The Morning Call
The Market
Technical
The
indices (DJIA 14676, S&P 1578) took a breather yesterday and closed within their
major uptrends: short term (14137-14828, 1550-1624), intermediate term
(13772-18772, 1459-2053), and long term (4783-17500, 688-1750). The S&P finished above its former all
time high (1576) for the second day in a row.
If it remains above this level through the close Monday, it will move
back in sync with the Dow as having broken above the prior highs.
Since
the Average ended the day basically unchanged, those developing head and
shoulders formation remain in tact.
However, as I noted yesterday, a move higher will destroy the
pattern. To complete the formation, the
indices need to penetrate below the ‘necklines’ (14435, 1540).
Volume
was flat; breadth weakened. The VIX
continues to meander directionlessly but remains within both its short term and
intermediate term downtrends.
GLD
was up again. It is still trading below
the lower boundaries of its short and intermediate term downtrends but above
the lower boundary of its long term uptrend.
Bottom line: yesterday’s pin action did little to
illuminate the current technical issues: (1) the red light is flashing on that
head and shoulders formation and (2) the clock is ticking on the confirmation
by the S&P of a break to all time highs.
Sell in May in
post election years (short):
Fundamental
Headlines
Yesterday’s
economic news was something of a downer: weekly mortgage and purchase were up
modestly; that’s OK, but they are secondary indicators. Meanwhile, March durable goods orders (both
the headline and ex transportation numbers) were very disappointing. This is more of the same weak data that we
have received of late. It is not going
to prompt me to alter our forecast; but there is a cumulative factor at work.
In
any case, investors didn’t care. The
Market maintained its upside bias as speculation continues that the ECB will
ease monetary policy at its meeting next week.
Pimco
on what needs to occur to heal Europe (hint: it is not
an easy ECB) medium:
Bottom line: stocks
are overvalued (as defined by our Valuation Model) based on our economic
scenario which is in the process of moving from roughly the consensus forecast
to one that is above estimates. The EU
economies are a mess; and I am becoming more concerned that China
won’t provide the offsetting economic strength that I had originally
assumed.
***overnight,
the UK reported
first quarter GDP rose more than
anticipated.
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.
The
trend in operating earnings (short):
Update
on this season’s earnings and revenue ‘beat’ rates (short):
The
latest from Doug Kass (medium):
What
the smart money is doing with EU debt (short):
Santelli
on Tuesday’s flash crash and high frequency trading in general (two videos):
Subscriber Alert
The
stock price of Target (TGT -$70) has risen
above the upper boundary of its Buy Value
Range TGT .
The
stock price of CF Industries (CF-$187) has risen above the upper boundary of
its Buy Value Range. Therefore, it is
being Removed from the Aggressive Growth Buy List. The Aggressive Growth Portfolio will continue
to Hold CF.
Investing for Survival
This
is the first five programs in the series The Retirement Gamble:
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