The Morning Call
The Market
Technical
The
indices (DJIA 15335, S&P 1666) took a breather yesterday, but remained
within all major uptrends: short term (14471-15180, 1588-1665 [the Dow is above
its upper boundary]), intermediate term (13965-18965, 1481-2069) and long term
(4783-17500, 688-1750).
Volume
declined; breadth deteriorated. The VIX
rose, finishing within its short term and intermediate term downtrends.
GLD
bounced strongly off its April low. If
GLS remains above 130.8 by Wednesday’s close, our Portfolios will begin to
re-build this position.
And
(medium):
And
on a brighter note (short):
Bottom line: stocks
remain firmly in an uptrend. While there
are numerous technical indicators that raise questions of durability, momentum
is currently trumping everything. As
long as that remains the case, stocks will continue to move higher.
However, I believe that the 17500, 1750 levels present impenetrable
resistance.
Meanwhile, (m)y strategy continues to be to take
advantage of what I consider unwarranted optimism by lightening up on positions
when the stock price trades into its Sell Half Range
Some
perspective on this ‘can’t lose’ market (short):
Fundamental
Headlines
Only
one number yesterday---the Chicago Fed’s National Activity Index came in well
below expectations. That isn’t great for
our forecast; but in context of the overall dataflow, it is not a game changer.
As
usual, no one seemed to care. Most of
the day investors and the media spent speculating about what happens to Jamie
Dimon today, wondering how far up the food chain the IRS
scandal is going to move and trying to understand why FOMC member Evans spent
so much time focused on the math of the Fed’s balance sheet since everyone with
a third grade education knows how massive it is and how much more massive it
will be if QEInfinity continues.
If
that sounds like a snoozer, then you understand the market’s performance.
Bottom
line: stocks (as defined by the S&P)
get more overvalued (as defined by our Model) every day; and as long as
investors’ mood remains highly optimistic, that is not likely to change. I have no idea how much higher stocks will
go. But I don’t think that is the
appropriate measure. The issue is, are you smart enough to ride what is left of
this rally and get out before stock prices are lower than they are today.
If you are, you
have my utmost admiration. I,
regrettably, am not that smart. So I
rely on a Model that has worked on a long term basis for four decades. I am wrong to have our Portfolios at 40% cash
today. I am content to be wrong on a
short term basis to be sure my principal stays in tact long term.
The
latest from John Hussman (medium):
Is
a melt up coming? (medium):
More
on valuation (short):
And
(medium):
Unfortunately,
all those under funded pension funds are not benefiting from the recent Market
moon shot (medium):
Speaking
of retirement funds, they appear to be a source of funds for the growing real
estate bubble (short):
True
or false: ‘Profits are the milk of the stock market’. And the answer is (short):
So
much for ‘Cyprus
isn’t a template’ (short):
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