The Morning Call
The Market
Technical
The
indices (DJIA 14700, S&P 1585) had another good day, finishing within all
major uptrends: short term (14144-14850, 1550-1624), intermediate term (13792-18792,
1459-2053), and long term (4783-17500, 688-1750). The S&P closed above its former all time
high for the third day.
In addition,
yesterday’s pin action took the head and shoulders pattern for the S&P out
of play. That narrows the focus to
whether or not the S&P will confirm its break to new highs. The end date of the time element of our time
and distance discipline is Monday.
Looking ahead, if the S&P does confirm its break, all the upper
boundaries of the uptrends become important resistance. However, I think the most important are those
of the long term trends. That would put
the upside for the S&P from current levels at circa 10%. While not to be sniffed at, after a 100%
increase off the bottom, it seems insufficient to me to warrant spending cash
expect for the most nimble trader.
Volume decline
(keeping the pattern going of up prices on lower volume); breadth was
mixed. The VIX rose fractionally,
leaving within its short and intermediate term downtrends.
GLD was up big,
closing above the lower boundary of its intermediate term uptrend. It remains
below the lower boundary of its short term downtrend and above the lower
boundary of its long term uptrend. I am
waiting for the next move to the downside to measure its strength and magnitude
before considering rebuilding this position.
More
from Barry (medium):
Bottom line: yesterday’s move to the upside took the
developing head and shoulders formation out of play. The remaining technical issue is, will the
S&P confirm its break to new highs?
If it does, the upside based on the upper boundary of the S&P long
term uptrend doesn’t seem all that attractive given the age and magnitude of
the current uptrend---though if I could trade worth a s**t, I would probably
try to do so. On the other hand if the
S&P retreats back below 1576, the Market top scenario remains viable.
Update
on sentiment (short):
Fundamental
Headlines
Yesterday’s
economic data was mixed with weekly jobless claims coming in lower than
expected while the April Kansas City Fed’s manufacturing index was a disappointment. There is not a great deal of significance to
either number since both are secondary indicators---though the KC Fed index is
a bit less important an indicator than jobless claims. On the other hand, the KC Fed index is a
monthly stat while jobless claims is weekly making the former slightly more
significant on a time basis. Net, net
there wasn’t much notable about the daily stats; certainly nothing to make me
want to reconsider our forecast.
The
jobless numbers along with a better UK GDP
figure got stocks off on the right foot that carried through the day. Mid afternoon, there was some concerning
headlines out of Europe: the Bundesbank dissed OMT in a paper to the German
court, EU bank lending continued to decline and Spanish unemployment hit new
all time highs. None of these sounds
particularly upbeat but investors remain hyped in anticipation of the ECB
joining the money printing race at next week’s meeting. So stocks sold off a little but remained
solidly in the black through the close.
The
Bundesbank rejects the use of ‘outright monetary transactions’, i.e. one of
Draghi’s bazookas, in an opinion delivered to the German Constitutional Court which
rules in June on the OMT’s constitutionality (medium):
Meanwhile,
banking lending continues to decline in the eurozone (medium):
Spanish
unemployment hits all time high (short):
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.’
Searching
for certainty in an uncertain Market (medium):
http://www.minyanville.com/business-news/markets/articles/economy-us-economy-economic-growth-stock/4/24/2013/id/49459
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