The Morning Call
The Market
Technical
Yesterday,
the indices (DJIA 14760, S&P 1588) bounced from an oversold condition. The S&P recovered above the 1576 (2007
high) support level, halting, at least for a day, the downward price momentum. Both of the Averages are searching for a
lower boundary to a new short term trading range (14190 [?]-15500, 1576
[?]-1687) and remain within their intermediate term (14241-19241, 1508-2096)
and long term uptrends (4783-17500, 688-1750).
Volume
declined: but breadth improved markedly.
The VIX fell but closed well within its intermediate term
downtrend. It is probing for an upper
boundary to a new short term trading range.
GLD
got whacked again. It finished within
its short and intermediate term downtrends but needs to establish a lower
boundary to a new long term trading range.
This remains a badly broken chart.
Bottom line: for
the moment, the 2007 all time highs remain the most visible support levels for
the Averages. Volatility being what it is,
they are apt to be challenged more than once, even assuming that they
hold. For me, there is little to do at
this point until we get some clarity on the short term trend. That said, if any of our Portfolio holdings
trade into their Sell Half
Range
The
latest from Stock Traders Almanac (short):
Are
junk bonds giving us a clue to market direction (short):
Fundamental
Headlines
Yesterday
was a huge data day and most of it was upbeat: May durable goods, the April
Case Shiller home price index, May new home sales, the June Richmond Fed manufacturing
index and June consumer confidence were all reported better than expected and,
in several cases, significantly better than anticipated. The only discordant stat was weekly retail
sales which were mixed. Clearly, these
numbers cumulatively proved nice support for our forecast.
If
that wasn’t good enough, the Bank of China followed the Fed’s lead trying to
walk back their recent tough talk on monetary policy.
On
the other hand:
More on the
Chinese credit problem (medium):
And
what is occurring in global credit markets (medium and today’s must read):
***over
night the ECB/Mario Draghi joined the crowd, assuring everyone that it would
provide ‘adequate liquidity’. On the
other hand, it was revealed in an Italian newspaper that Italy
now faces E8 billion in derivative losses; and guess who was head of the Italy
central bank at the time? Hint: his
first name starts with an M.
Sovereign default
risk is rising (short):
Bottom line: yesterday’s
rebound in stock prices raises one question in my mind: t given (1) the extent
of the Market’s oversold condition and (2) the extraordinarily positive data
flow, why was the bounce so paltry?
I think that the
answer is that the Market psychology is changing noticeably. Gone are the days of unending liquidity ‘the
Fed has your back’ and ‘buy the dips’.
Here is the realization that the Fed is worried that it has created
asset bubbles. I don’t think that it
matters that the Fed is scrambling to soften the Bernanke ‘tapering’ comments. Investors have grasped that he spoke the
truth---so even if the Fed postpones ‘tapering’, investors know that the Fed
knows that it is playing a risky game and the price of admission is
significantly higher than thought last Tuesday.
Perhaps
another reason for a lack luster rally was that our Idealist in Chief has
decided to close down the coal industry in the interest of global warming. Forgetting that the US
is the Saudi Arabia
of coal, that scrubbing technology has advanced markedly and the energy
independence will ultimately have to include coal, His actions will pulverize
employment in this industry---just what a struggling economy needs.
Beware
a declining bond market (medium):
Why
are markets confused (medium and a must read):
For
the optimists (short):
The
latest from Bill Gross (medium):
Subscriber Alert
The
stock price of Target (TGT -$68) has fallen
below the upper boundary of its Buy Value
Range TGT , so no
additional shares will be purchased.
No comments:
Post a Comment