The Morning Call
The Market
Technical
The
indices (DJIA 15567, S&P 1692) took something of a breather yesterday. The S&P was off fractionally; but
remained within its newly re-set short term uptrend (1594-1750). The Dow was up enough to finish above the
upper boundary of its short term trading range (14190-15550). Under our time and distance discipline, if it
remains above 15550 through the close Thursday, the break of its trading range
will be confirmed. However, for the
moment, the Averages are out of sync---meaning that there is no direction on a
short term basis.
Both
of the indices remain within their intermediate term (14421-19421, 1531-2119) and
long term uptrends (4918-17000, 715-1800).
Volume
fell; breadth was mixed. The VIX was up,
after bouncing off the lower boundary of its short term trading range. It remains within its intermediate term
downtrend.
The
long term trend in volume (short):
The
trend in ‘all or nothing’ days (short):
GLD
rose again; this time breaking above its 50 day moving average. It closed within its short and intermediate
term downtrends.
Bottom line: the
assault on the May highs continues. The
S&P has re-set to a short term uptrend.
Yesterday, the Dow began its effort to challenge the upper boundary of
its short term trading range. A close
above 15550 through the end of trading on Thursday will confirm its break.
I know that this
comment will smack too much of me talking my book, but I am surprised that the
indices’ challenge has been as plodding as it has been. That doesn’t mean that stocks won’t continue
to levitate. I just find the trading
unusually sluggish for an attempt to change trend. My point being that perhaps it reflects the
limited upside due to the proximity of the upper boundaries of the S&P
short (1750) and long term (1800) uptrends.
Fundamental
Headlines
Yesterday’s
economic news was mixed: weekly retail sales were up, while the Richmond Fed’s
manufacturing index was much weaker than anticipated. Both of these stats are secondary indicators,
so there is little to read into these numbers.
There
were also a couple of upbeat (?) headlines from overseas: Spain reported second
quarter GDP down by the smallest percentage
in a couple of years---‘down’ being the operative word; and China announced
that it would not allow economic growth to fall below 7% annually---remember
that their government stats are of very questionable veracity on top of the
fact that they lie....a lot.
***over night, Eurozone PMI
rose into positive territory---the best reading in 1 ½ years; however, Chinese PMI
fell to the lowest level in 11 months and employment hit a four year low.
In
sum, very little macro news that could influence stock prices. Earnings season continues to dominate the
news flow and that is largely company specific.
However, results remain well ahead on original (adjusted) forecasts and
has given a modest upward bias to equity prices.
Update
on this quarter earnings and revenue ‘beat’ rate (short):
Bottom
line: I remain sanguine on the economy
and corporate profits; though as you know, my expectations are for very
sluggish growth from both over the next 12 to 24 months. On the other hand, with those inputs, our
Valuation Model can’t get equity prices, in general, anywhere near current
values---even if we avoid disruptions in the financial system brought on by
sovereign and/or bank defaults in Europe, by a major mistake by the Fed
transitioning from easy to tight money or by problems in our own banking system
resulting from counterparty risk exposure to the EU banks or new revelations of
mismanagement, malfeasance, etc out of our banksters.
On top of that,
the charts don’t suggest an upside of any magnitude.
In
the end, I am sticking with our discipline, focusing on lightening up on those
stocks that hit their Sell Half
Range
What
if the secular bear market isn’t over? (short):
The
Fed’s problem; pay close attention to the last chart (short):
Subscriber Alert
In
the annual review of Sanofi (SNY), the company failed to meet the minimum
financial strength requirements of the High Yield Universe. Accordingly, the High Yield Portfolio will
Sell its position at the Market open.
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