The Morning Call
The Market
Technical
The
indices (DJIA 16417, S&P 1845) sank yesterday; the S&P was unable to
remain above its former all time high.
This has the makings of a double top, but it is far too soon to make
that call. More likely, it was just
consolidation after a big two day run. The
Averages closed within major uptrends across all timeframes: short term (15790-20790,
1792-1945), intermediate term (15790-20790, 1685-2266) and long term
(5050-17400, 728-1900).
Volume
fell; breadth softened. The VIX rose but
remains near the lower boundary of its short term trading range. It is also in an intermediate term downtrend.
The
long Treasury was up, finishing within a short term trading range and an intermediate
term downtrend.
GLD
was higher, closing within short and intermediate term downtrends. GLD is currently struggling (so far
unsuccessfully) to penetrate its 50 day moving average. If that occurs, it would add another plus to
GLD’s technical picture. If not, this
will remain an ugly chart.
Bottom
line: the S&P couldn’t hold its new
all time high; hence, no follow through, at least for now. This pin action supports the notion of a
schizophrenic Market; and as I noted above, it sets up a possible double
top. It is far too soon to make that
call; and indeed, it would not be confirmed until/unless it closes below the
1815 level at the very least and more importantly the lower boundary of its
short term uptrend (1792).
So for the
moment, we await either an assault on the upper boundaries of the Averages long
term uptrends or a significant enough follow through to the downside to break
the long term upward momentum.
If one of our
stocks trades into its Sell Half Range, our Portfolios will act accordingly.
More
on the January barometer (medium):
Fundamental
Headlines
Yesterday’s
US economic news remained generally positive: December CPI was in line, weekly
jobless claims fell slightly and the Philly Fed manufacturing index was a bit
stronger than expected. Overseas,
the EU inflation rate declined. Hence, no surprises.
What
got the Market off on the wrong foot were disappointing earnings report from
Best Buy, Goldman and Citi. I thought
this was significant in that:
(1) the
Best Buy number adds to this week’s confusing retail data. As you know, I was not nearly as impressed
with those December retail sales figures reported on Tuesday as the rest of the
Market because [a] the November data was revised down big and [b] the earnings
reports and forward guidance on enough retailers were mixed---providing little
support for the December data. The Best
Buy report reinforces than notion,
(2) earnings
season is just starting. If investor
reaction to every earnings miss mirrors yesterday’s pin action, the next couple
of weeks could be rough.
Bottom
line: yesterday’s pin action raises the
question of whether this earnings season might be more volatile than investors
have gotten used to. That would fit with
the schizophrenia scenario. However,
volatility is not necessarily synonymous with down. Though it could be, given the current degree of
stock overvaluation. Whether or not it
does is to be determined. Either way, we
are still left 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.
The
other side of stock buybacks (short and a must read):
The
latest from GMO (medium):
Thoughts
on efficient markets (medium):
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