The Morning Call
The Market
Technical
The
indices (DJIA 15499, S&P 1685) had something of a roller coaster day. The Dow remains within its short term trading
range (14190-15550).
While the
S&P is still in a short term uptrend (1604-1760), it also closed below the
former upper boundary of its short term trading range (1687). You will remember that I noted that 1687
should be acting as support; however, the last couple of days it has acted as
resistance---definitely not a positive sign for equities. I am not reversing the short term re-set
call; but I am getting close. In the
meantime, the Averages remain out of sync.
Volume rose;
breadth deteriorated. The VIX was up,
remaining within its short term trading range and its intermediate term
downtrend.
GLD
fell, finishing below the very short term uptrend for the second day. A close below that trend tonight would negate
this only hopeful sign in the GLD chart.
It remains within its short term and intermediate term downtrends.
Bottom line: the
challenge of the 15550/1687 level remains stalled in an out of sync position
(S&P re-setting to an uptrend; the Dow not). I had thought that the release of second
quarter GDP and the FOMC statement would do
something to jar stocks out their current directionlessness. Wrong.
We still have the ISM manufacturing index today and nonfarm payrolls
tomorrow to provide that expected spark.
Meanwhile, the indices are out of sync and without direction.
Secular
bull and bear markets (medium):
Are
we at an inflection point (short):
The
latest sentiment numbers (short):
Fundamental
Headlines
Yesterday
was busy data-wise: weekly mortgage and purchase applications were off again;
the ADP private payroll report was up but
less than anticipated; second quarter GDP
was up more than estimates, but first quarter GDP
was revised down by an equal amount---so the numbers were a wash; Chicago PMI
was disappointing; and the FOMC minutes read a tad less positive but at the
same time more vague (no mention of ‘tapering’.
In
total, I would rate the economic data as negative (suggesting a possible
deferment in ‘tapering’). Add to that
the slightly more ‘dovish’ tone to the FOMC minutes and I would have thought
that stocks would be off to the races.
Of course, they were initially, but then backed off by the close.
However,
bond prices fell (rates up). So with
stocks losing momentum in the face of data pointing to an accommodative Fed, it
suggests (the operative word) that perhaps my admonition was correct that we
should forget all the yakking about ‘tapering’, ‘tightening’, the Fed policy
direction and how investors will interrupt it all and just focus on interest
rates as an indicator of Market direction.
I am not pounding the table at this point; but yesterday’s pin action
was supportive of that point of view.
A
counterpoint from PIMCO. Note the author
fails to mention the influence and power of bond investors if they lose faith
and trust in the Fed.
Goldman
forecasts that the Fed will have to lower its second half GDP
forecast (short):
Meanwhile,
foreigners get out of Dodge (short):
What
history tells us about a rising interest rate environment (medium):
Bottom line: the
economic data remains sluggish and the Fed continues to instill confusion in
the Markets (no mention of ‘tapering’ in the FOMC statement). In other words, situation normal. Hence, I have no cause to alter our economic
forecast or our Valuation Model---meaning, stocks, as calculated by our
Valuation Model, are overvalued and our Portfolios will continue to use any
price strength (i.e. stocks trading into their Sell Half Range) to lighten
their equity exposure.
Update
on this quarter’s revenue and earnings ‘beat’ rate (short):
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