The Morning Call
The Market
Technical
The
indices (DJIA 16530, S&P 1837) put in a rebound yesterday, remaining within
major uptrends across all timeframes: short term (15690-20690, 1774-1930),
intermediate term (15690-20690, 1676-2257) and long term (5050-17400,
728-1900). However, related to the
January effect, stocks are still down through the first four trading days of
the year.
Volume
fell; breadth improved. The VIX
declined, finishing within its short term trading range and intermediate term
and continuing to provide little information on stock price direction.
January
sentiment survey (a bit long but a must read):
The
long Treasury rose, closing within its short term trading range, its
intermediate term downtrend and continuing to build a head and shoulders
formation.
GLD
fell but remained above the upper boundary of a very short term downtrend. Nevertheless, it is also well within short
and intermediate term downtrends.
Bottom
line: yesterday, the Averages recovered
some of its early 2014 losses but are still down for the year. By rule, the January effect ends today. So it will be interesting to see how stocks
close. As I noted yesterday, there are
plenty of technical reasons for stocks to continue their advance even if the
January effect proves negative. If so,
my target is still the upper boundaries of the indices long term uptrends
(17400, 1900).
In any case I
will continue to use any advance as an opportunity for our Portfolios to take
advantage of our Sell Price Discipline.
Fundamental
Headlines
Yesterday
was quiet. US
economic data was comprised of secondary indicators: the November US trade
deficit was smaller than expected (think declining energy imports) and weekly
retail sales were mixed. Nothing there.
On
the political front, the senate passed a procedural motion that allows debate
to begin on the six month extension of the unemployment benefits (the eleventh
time in five years for those counting) ---which, of course, potentially (depending
on where they get the funds) busts the budget agreement made a mere month
ago. To be sure, the house also has a
vote and it has been a bit more miserly than our illustrious senior body.
Forgetting the
argument about the economic soundness of said policy and whether or how the
house responds, if an extension is approved, it would be a perfect example of
why fiscal policy remains high up on our list of potential risks to the
economy. I can understand some dyed in
the wool liberal proposing an extension (despite the fact that the prior ten
did no good) of unemployment benefits; but if the senate approves, it speaks to
the fact that these guys just don’t get it; and until they are replaced with
those who do, our government will go ever deeper into debt, consume an ever
larger percent of the country’s productive capacity and create a burden our
children and grandchildren can not possibly pay.
The media and
pundits paid little attention to that and spent the day contemplating today’s
release of the minutes from the last FOMC meeting and Friday’s nonfarm payroll
report and its potential impact on Fed policy.
Judging by the pin action, investors are either convinced of a
goldilocks scenario or they are too busy counting their chips to care.
The
problem with Fed policy (medium and today’s must read):
Bottom line: 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.
The
latest from John Hussman (medium):
Will
capital spending propel the economy in 2014? (medium):
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