The Morning Call
The Market
Technical
The
indices (DJIA 16245, S&P 1826) continue to consolidate from an over bought
position, finishing within all major uptrends: short term (15663-20663,
1773-1926), intermediate term (15663-20633, 1673-2254) and long term
(5050-17400, 728-1900). Yesterday’s pin
action puts the Averages down for the first three trading days of January.
More
on the January barometer (short):
And:
Volume
was low---as it has been for the last two weeks; breadth was mixed. The VIX fell, leaving it within a short term
trading range and an intermediate term downtrend,
The
long Treasury was up, closing within a short term trading range and an
intermediate term downtrend. It
continues to build a head and shoulders formation---the neckline being the
lower boundary of its short term trading range.
GLD
was up, finishing within its short and intermediate term downtrends, but above
the lower boundary of its very short term downtrend. The latter is a mild positive especially
after GLD bouncing off a very well defined double bottom. I need more strength to the upside before
beginning to re-establish this position.
Bottom line: the Averages didn’t make it to the upper
boundaries of their long term uptrend during 2013’s seasonally positive Holiday
trading. Certainly, they still could,
although the first three trading days of the new year are not auguring well for
such a prospect (January effect).
On the other
hand, (1) stocks were very overbought at year’s ends, so a sell off was not
unexpected, (2) they are in an uptrend
and will be unitl they are not, (3) statistically, stocks tend to trend higher
in a year following an up +25% year [like 2013] and (4) over the last two
years, most of the negative technical signals [outside down days] and axioms
[sell in May and go away] haven’t worked.
So technically speaking, there are a number of arguments for ignoring
the January effect, assuming the first five trading days are negative.
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
Mixed
economic news yesterday. In the US ,
November factory orders were better than forecast while the December ISM
nonmanufacturing index was disappointing.
Overseas, the Chinese service PMI was
down to 50.9 from a prior reading of 52.5 while the EU PMI
was up to 52.1 from 51.7.
George Soros on China
(medium):
On
the political front, Janet Yellen was approved as the new Fed chief.
So
nothing earth shattering that would have a Market impact.
Bottom line: while
the Holidays diverted investor attention from the uncertainties of Fed policy,
their focus should sharpen on the 2014 Fed issues: (1) will it prove effective
in unwinding QE without causing economic disruptions? (2) will it even matter to the Markets if
current overvaluations persist or get more extreme? I await the answers.
That
said, 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.
Latest
data on stock allocation of individual’s (short):
Outlook
for the global bond markets in 2014 (medium):
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