The Morning Call
The Market
Technical
The
indices (DJIA 15545, S&P 1695) continued to inch higher. The S&P confirmed the break of the upper
boundary of its short term trading range, re-setting it to a short term uptrend
(1633-1750). On the other hand, the Dow
challenged the upper boundary of its short term trading range (14140-15550) but
fell back, unable to hold above.
Both
of the Averages finished within their intermediate term (14397-19397,
1530-2118) and long term uptrends (4918-17000, 715-1800).
Volume
dropped; breadth was mixed. The VIX
declined again, closing very near the lower boundary of its short term trading
range. It remains within an intermediate
term downtrend and a long term trading range.
Gold
streaked higher and finished above that very short term downtrend. It has now returned to being solidly within
its short and intermediate term downtrend.
Now that the waterfall formation seems to have ended, we can at least
start looking for an entry point.
Bottom
line: the assault on the May highs is progressing. The S&P has now re-set to a short term
uptrend; while the Dow hasn’t even closed above its comparable boundary, though
it did manage to penetrate it intraday yesterday. This leaves the Averages out of sync, meaning
there is no confirmation of the break out above the May highs.
If
this challenge is ultimately successful, resistance is marked by the upper
boundary of major uptrends: S&P short term---1750, intermediate
term---2118, long term ---1800.
Stocks
and the Misery Index (short):
Fundamental
Headlines
Yesterday’s
economic did not make good reading: the Chicago National Activity Index was
negative versus estimates of a positive reading, while June existing home sales
were also disappointing.
Of
course, we are in the thick of earnings season and that is where investor
attention is focused. So far, the
balance of reports have been better than expected (which is a bit deceptive
because so many companies lowered estimates earlier).
In
a time when bad news is good news (CNAI and home sales) and good news is good
news (earnings reports), that means that stocks almost have to be up. And indeed, they did.
Bottom
line: it would seem that investors have
completely forgiven Bernanke for his ‘tapering’ comments and are eagerly re-embracing
QEInfinity, making my thesis that they had experienced an ‘emperor’s new
clothes’ moment wrong.
Meanwhile,
I continue to struggle with valuation---not just fundamentally (so many of our
stocks hitting their Sell Half Ranges) but also technically (given the
resistance posed by the upper boundaries of the S&P short and long term
uptrends, the upside is limited versus the downside if the S&P trades to
the lower boundaries of the short and long term uptrends).
In
the end, I am sticking with our discipline, focusing on lightening up on those
stocks that hit their Sell Half
Range
The
struggle with owning cash (medium):
And
why you should (medium):
The
latest from Jim Rogers (medium):
The
Grantham quarterly letter (medium):
The
latest from John Hussman (medium):
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