The Morning Call
The Market
Technical
The
indices (15783, S&P 1771) slept though the Veteran’s Day
Holiday---both inching a bit higher and remaining
within uptrends across all time frames: short term (15239-20239, 1711-1865),
intermediate term (15239-20239, 1624-2206) and long term (5015-17000,
728-1850).
Volume,
not surprisingly, was nonexistent; breadth was mixed. The VIX closed within but near the lower
boundary of its short term trading range and within its intermediate term down
trend.
The
bond market was closed.
GLD
was down fractionally, finishing right on the lower boundary of its very short
term uptrend but well within its short and intermediate term downtrends.
Bottom
line: all trends of both indices are up,
though, the number of divergences continues to grow. And that is
worrisome. On the other hand, I believe it
likely that the Averages will take a run at the upper boundaries of their long
term uptrends (17000/1850). If the risk
is Fair Value (11575/1436), then the risk reward from current levels is not all
the attractive.
A trader still
might want to play for another leg up but I would do so only if tight stops are
used. As a longer term investor, I think
that the aforementioned risk/reward ratio is an invitation to lose money. I would, however, take advantage of the
current high prices to sell any stock that has been a disappointment and to
trim the holding of any stock that has doubled or more in price.
In the meantime,
if one of our stocks trades into its Sell
Half Range
Chart
of the day (short):
Corporations
are now net sellers of stock (medium):
Fundamental
Headlines
With
the government, bond market and other segments of the economy shutdown
yesterday, there was little news flow.
The only datapoint worth mentioning is Chinese CPI
which was higher than expected though PPI was quite tame.
Bottom line: the
assumptions in our Economic and Valuation Models remain on track. That means that I remain confident in the
Fair Values generated by our Valuation Model; hence, stocks are overvalued.
In other words,
economic progress is being made; the issue is what you pay for it and our
Valuation Model is suggesting rather strongly that investors are paying
Cadillac prices for Chevy.
More
on valuation (medium):
Todd
Harrison on the Market (medium):
The
latest from Mohamed El Erian (medium):
The
latest from John Hussman (medium):
Confessions
of a former Fed official (medium and today’s must read):
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