The Morning Call
The Market
Technical
The
indices (DJIA 15122, S&P 1626) had another tough day, as the recent
increase in volatility manifested itself again.
However, they closed within their major uptrends: short term (14741-15452, 1620-1699),
intermediate term (14134-19134, 1498-2086) and their long term uptrends
(4783-17500, 688-1750).
As you can see,
the S&P finished the day fairly close to the lower boundary of its short
term uptrend; it also closed right on the upper boundary of its very short term
downtrend. In this case under our time
and distance discipline, that would not qualify as having negated the break
above that boundary. However, I am extending
the time element one more day. In sum,
if the S&P closes above this boundary today, then the short term downtrend
will be deemed broken; if not, then the downtrend will still be in play.
Volume was again
quite low; breadth was dreadful. The VIX
jumped 10% but remained within its short and intermediate term downtrends. However, it is once again within striking
distance of the upper boundary of the short term downtrend---a break of which
would be negative for stocks.
GLD has off, but
still finished above its double bottom, the lower boundary of its long term
uptrend and the upper boundary of the very short term downtrend. Nevertheless, the GLD chart is broken.
Bottom line:
volatility is keeping the technical picture clouded. If the S&P is down today, then its very short term downtrend will
remain in tact plus the lower boundary of its short term uptrend will again be
threatened. An up day will negate the
very short term downtrend and pave the way for the potential challenge of the
S&P 1675-1687 level (the upper zone of the May 22 ‘outside down day’).
Any move to the
upside that pushes our stocks into their Sell
Half Range
Fundamental
Headlines
Yesterday’s
economic data was passable: weekly retail sales were mixed, April wholesale
inventories were up in line but wholesale sales were much stronger. Nothing to be negative about here.
However,
bad news abounded from other sectors:
(1)
in the US ,
a research report predicted that Citi would take a loss of as much as $7
billion in its currency trading operation.
To be clear, this is a forecast not a fact. However, it keeps alive the nagging doubts
about the viability of our banking system and the manageability of the large
banks. (medium)
Over night, we learn this---more price rigging
(medium):
(2)
continuing worrying over how the German constitutional
court will rule on ECB bank bailout measures (see yesterday’s Morning Call),
(3)
more carnage in the Nikkei following a BOJ decision to
not expand its QE. This appears to be a
continuation of the unwind of the yen carry trade which has negative
implications for every asset that was
bought with the funds from the cheap yen loans.
The worry among investors is that the aggressive selling of the Nikkei
finds its way to our shores,
(4)
political turmoil in Turkey . By itself, this is the least worrisome. However, when investors get nervous, rioting
and mayhem don’t help their disposition.
Bottom line: rumblings worldwide are suggesting that all
is not well in stock land: economic/financial conditions are deteriorating in
Europe---again, the Chinese economy is weakening more than many expected, the
Japanese monetary policy is Bernanke on steroids and it is developing some
cracks, our own government is so plagued by scandal that no serious public
discussions are being had with respect to critical issues (did you know that
the senate voted on an immigration bill, yesterday---a half assed one at that)
in particular a doomed fiscal policy and do I need to add the near universal
confusion over ‘tapering’.
Of course,
investors have thrived of late on bad news so equity prices could continue to
advance. Gosh only knows, if they love
bad news, they now have a snoot full. I
remain a skeptic.
Lance
Roberts on the EU and impending disaster (medium):
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