The Morning Call--If good news is good news and bad news is good news, what is s**tty news?

The Morning Call

5/1/13

The Market

           

    Technical

            The indices (DJIA 14839, S&P 1597) just keep on truckin’, closing within all major uptrends: short term (14227-14917, 1559-1653), intermediate term (13816-18816, 1463-2057) and long term (4783-17500, 688-1750). 

            Volume was up (a deviation from the recent pattern); breadth was mixed.  The VIX was off fractionally and remains with its short and intermediate term downtrends.

            GLD was up slightly, finishing with its intermediate term downtrend and its long term uptrend.

Bottom line:  the Averages just don’t want to go down, no matter the divergences, no matter the news.  I wish that I had some wisdom on how to deal with this phenomena; but I have little.  I have already done 95% of what needs to be done to deal with a runaway Market to the upside---take profits in overextended stocks, much of which appears in retrospect to have been too early.  But that is a sunk cost; plus historically our Sell Discipline always anticipates rather than follows the movement in the indices. 

Any of our stocks that trade into their Sell Half Ranges will be dealt with accordingly.

            http://www.zerohedge.com/news/2013-04-30/macro-collapse-pushes-sp-500-new-all-time-nominal-high-after-close

                And (short):

            http://blog.stocktradersalmanac.com/post/Toppy-Patterns-Converge-At-Highs--End-Best-6-Months-DIA-SPY-IWM

                And (short):

            http://advisorperspectives.com/dshort/updates/Regression-to-Trend.php

               

    Fundamental

     Headlines

            Yesterday’s news couldn’t have had a more pronounced ‘spread’; that is,  the February Case Shiller home price index and the April Conference Board index of consumer confidence came in dramatically ahead of expectations while the April Chicago PMI was not only well below estimates but came in below 50---a sign of contraction.  There was one plain vanilla stat---weekly  retail sales which were basically mixed.

            By far the most important number was the Chicago PMI with the rest being secondary indicators; and a reading under 50 is not what you want if you are forecasting growth.  That said, we remain in a Market where good news is good news and bad news is good news (more central bank easing).  So investors continued to bid prices up, anticipating more scintillating news from the FOMC meeting wrapping up today and the ECB meeting tomorrow.

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.’

    

            Note to Draghi et al---how austerity works (medium):

            http://www.zerohedge.com/news/2013-04-30/guest-post-how-make-austerity-work

Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973. His 40 years of investment experience includes institutional portfolio management at Scudder, Stevens and Clark and Bear Stearns. Steve's goal at