The Morning Call
The Market
Technical
The
indices (DJIA 15301, S&P 1710) continued to have happy feet yesterday. The Dow finished within its short term
trading range (14190-15550). In
addition, it closed above its 50 day moving average. The S&P closed within its short term
uptrend (1681-1835).
Both of the
Averages are within their intermediate term uptrends (15037-20037, 1603-2189)
and long term uptrends (4918-17000, 715-1800).
Volume rose
slightly; breadth was mixed. The VIX was
up and ended within its short term trading range and its intermediate term
downtrend.
GLD increased a
little but remains below the upper boundaries of its very short term, short
term and intermediate term downtrends.
The bond market
was closed yesterday.
Bottom
line: the strong bounce back that began
late last week and carried through yesterday has reversed all the multiple
potential breakdowns in the Averages. So
the bulls remain in control. It wouldn’t
surprise me if we get a ‘sell the news’ reaction when, as and if a compromise
is reached on the budget/debt ceiling negotiations.
The key thing
that I will be watching is where the current short term uptrend tops out. If we get a lower high, the Market could be
setting up a head and shoulders formation.
If stocks move on to new highs, then we have to assume there is more
strength left in the bulls.
If equities move
up in price and any of our stocks trade into their Sell
Half Range
Fundamental
Headlines
No
US economic
news yesterday; but we did get a couple of international datapoints: Chinese
exports fell and CPI rose while Indian
wholesale prices were up. Not that this
means a great deal.
All
eyes remain of the DC budget/debt drama.
Equities were off in early trading in the absence of a compromise being
reached over the weekend. They then
rallied later in the day as the media rumors suggested that a deal was close.
Bottom line: as
usual, our political elite are taking the budget/debt ceiling negotiations down
to the wire. I continue to believe that
this will end with some sort of half-assed-kick-the-can (entitlement and tax
reform)-down-the-road agreement that will keep the ruling class in business but
do little for you and me. While the
stock market may breathe a sigh of relief, I don’t think any of the shenanigans
will do much to improve business and consumer confidence.
Furthermore,
even if no compromise is reached, I still don’t think that there will be
default on our debt. The fact is that
tax revenues equal around $235 billion a month while interest on the debt is
about $45 billion. So there is no reason
to default unless Obama makes a conscious political decision to do so. That is not to say that no one will suffer. Certainly, some pain will be
experienced. But all the talk of
international catastrophe caused by default is so much political bulls**t---unless,
as I say, it is done by conscious decision.
In addition, it
is also not to say that business and consumer confidence won’t be even more
impaired than it already has been.
Finally, as I noted last week, because no one is expecting a failure to
reach a budget/debt ceiling compromise, if it happens, the Market reaction
could be very ugly.
Capex
versus dividends (medium and today’s must read):
Operating
earnings continue to increase (short):
The
latest from John Hussman (medium):
The
latest from Nassim Taleb (medium):
The
latest from David Kotok (medium):
The
latest from Marc Faber (medium):
Emerging
markets versus the S&P (short):
The
Market sees through political posturing (medium):
If you own Puerto Rican muni bonds or mutual
funds that own them, this is a must read:
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