The Morning Call
The Market
Technical
Stocks
rebounded yesterday. The DJIA (14662) closed above its former all time high
(14190) and the upper boundary of its short term uptrend (13866-14561); while
the S&P remained below these comparable levels (1576) and (1516-1590). This leaves the Averages out of sync, with no
S&P confirmation of the Dow’s breakout to new highs.
Both
of the indices finished within their intermediate term uptrends (13611-18611,
1404-2038) and their long term uptrends (4783-17500, 688-1750).
Volume
rose slightly and breadth improved somewhat.
However, advance/declines were negative as was the Russell 2000. None of this is indicative of Market
strength. The VIX fell and remains
within both its short and intermediate term downtrends.
GLD
got whacked. It remains within its short
term downtrend; however, the developing support level is still in tact.
Bottom line: the
S&P continues to be unable to surmount its former all time high and join
the Dow’s move to the upside. Meanwhile
overall breadth is weak-ish and doesn’t appear to be supportive of the surging
Dow. The question remains, is the Market
topping or forming a base for another push upwards? I favor the former and, hence, continue to
focus on the Sell side.
Fundamental
Headlines
Yesterday’s
economic news was decent and I am sure contributed to continuing investor
optimism: weekly retail sales were strong as were February factory orders; but
March vehicle sales were flat.
Save
the Cypriot finance minister resigning, there were not a lot new headlines from
that country.
Ron
Paul on the great Cyprus bank robbery (medium):
Elsewhere
in the EU, I noted yesterday morning that employment and manufacturing data
were dismal. In addition, there was some
rough news out of one of the supposed lions of the EU:
Bottom line: our
economy continues to perform as well as I could expect. However, as good as it is, stocks are
overvalued by roughly 11% on our positive economic outlook. Indeed, that overvaluation is at the point
where the exercise of our Sell Discipline has pushed cash to 40% of our
Portfolios total value---a level that normally would make me extremely nervous
even if stocks are 11% overvalued.
However, I am
not nervous because of a couple of tail risks: (1) a decision by the Markets
that the current Fed nuclear powered money machine will ultimately cause us a
lot of pain and (2) a spark that could lead to an explosion among the EU’s over
indebted sovereigns/over leveraged banks.
Neither may occur; but the probabilities that they will are high enough
that 40% cash feels good.
More
on valuation (medium):
http://advisorperspectives.com/dshort/commentaries/Market-Valuation-Inflation-and-10-Year-Yields.php
The
disconnect between the economy and the Market (short):
More
from David Stockman (medium and today’s must read):
The
latest from David Rosenberg (medium and also a must read):
http://www.zerohedge.com/news/2013-04-02/when-great-deflationary-bear-starts-turning-inflationary
http://www.zerohedge.com/news/2013-04-02/when-great-deflationary-bear-starts-turning-inflationary
The
latest from Bill Gross (medium):
The
latest from Charles Biderman (6 minute video):
http://www.zerohedge.com/news/2013-04-02/biderman-nominates-krugman-big-lie-award
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