The Morning Call
The Market
Technical
The
indices (DJIA 16414, S&P 1843) had another schizophrenic day (Dow down,
S&P up), but finished within major uptrends across all timeframes: short
term (15814-20814, 1794-1947), intermediate term (15814-20814, 1688-2269) and
long term (5050-17400, 728-1900).
Volume
fell; breadth was mixed. The VIX rose,
leaving it within a short term trading range and an intermediate term downtrend.
The
long Treasury was up (again) on continuing strong breadth. It remains within a short term trading range
and an intermediate term downtrend.
GLD
fell, closing below its 50 day moving average (which it penetrated on Friday)
and the lower boundary of a very short term uptrend. In other words, it continues to be unable to
get out of its own way. It remains
within both a short and intermediate term downtrend.
Bottom
line: the S&P still hasn’t been able
to re-challenge its all time high, leaving the possibility of a double top intact. That said, it may be a function of nothing
more than a recent schizophrenic consolidation period. The keys are (1) until/unless the S&P
closes below the 1815 level at the very least and more importantly the lower
boundary of its short term uptrend, there is no confirmation of a double top and
(2) the Averages remain firmly within all major uptrends and that means that the
trend is up and our expectations should include higher prices.
However, if one
of our stocks trades into its Sell Half Range, our Portfolios will act
accordingly.
400
days without a correction (short):
http://www.bloomberg.com/news/2014-01-21/more-than-400-days-without-a-correction-ritholtz-chart.html
Fundamental
Headlines
There
were no US economic releases yesterday; although there was an article by Fed mouthpiece
John Hilsenrath that speculated that the Fed would increase the size of the
taper at the FOMC meeting next week.
I hate being on
the other side of an argument with a known insider, but I would think that the
recent employment and sales data would give the Fed pause before taking another
step in the tapering process.
Overseas, Chinese fourth
quarter economic growth slowed---that is a positive in that it could relieve
pressure on the Bank of China to tighten credit. In the EU, German investor confidence was
strong. It seemed that these two
numbers accounted for yesterday’s early Market optimism: although that didn’t
last too long as several earnings (revenue) reports came in short of
expectations.
***over
night the Bank of China injected funds into the system to help alleviate the
credit crunch---but to no avail, so far.
Update
on the Chinese credit problem (medium and today’s must read):
Bottom
line: yesterday’s pin action was
basically non-directional as the absence of any economic news, a mixed set of
earnings reports and bad weather in the northeast kept investors on the
sidelines. That said, my underlying
thesis remains that stocks are sufficiently overvalued that we are facing
either a prolonged period of Market stagnation or a correction.
I
can’t emphasize strongly enough that I believe that the key investment strategy
today is to take advantage of the current high prices to sell any stock that
has been a disappointment or no longer fits your investment criteria and to
trim the holding of any stock that has doubled or more in price.
More
on valuation (medium):
Goldman
defends its ‘stocks are overvalued’ call (medium):
The latest from John
Hussman (medium):
Update on Japanese QEInfinity
(medium):
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