The Morning Call
2/13/14
The Market
Technical
The
indices (DJIA 15963, S&P 1819) treaded water yesterday. They closed within their short term trading
ranges (15330-16601, 1746-1858). The Dow
remains within its intermediate term trading range (14696-16601) and below its
50 day moving average, while the S&P is in an intermediate term uptrend
(1708-2488) and above its 50 day moving average. Both are in long term uptrends (5050-17400,
728-1900).
Volume
fell; breadth deteriorated. The VIX
declined, finishing within its short term trading range and intermediate term
downtrend and right on its 50 day moving average.
The
long Treasury dropped for the sixth time in seven trading sessions and appears
to be forming a head and shoulders formation (both negative for the bond). It remained within its short term trading
range and intermediate term downtrend.
GLD
continues its run, confirming the break above the upper boundary of a very
short term downtrend and remaining within a developing very short term
uptrend. It remains within short and
intermediate term downtrends. However,
if GLD retreats, tests the lower boundary of the developing very short term
uptrend and bounces, then our Portfolios will likely began re-establishing
positions.
Bottom
line: a quiet day of consolidation,
especially after a rally from an oversold position, isn’t unusual. But it also doesn’t alter the technical
status of the Market. The Averages
remain in a short term trading range, the upper boundary of which represents an
all time high but one that has already been tested and held. Volume remains weak and if it continues, should
make breaching those highs more difficult.
That said, the bulls have repeatedly proved that they have staying
power; and until that changes, the probability of more upside remains high.
However, as I
pointed out yesterday, the risk/reward from current price levels is
dramatically tipped to the risk side. So
I am happy to let others fight over another 3-5% upside to insure that our
Portfolios don’t get clocked.
For now, we just
sit back and wait for either a break over the prior highs or for the S&P to
follow the Dow and break the lower boundary of its intermediate term uptrend.
The only
potential action that would be needed is if any price strength pushes one of
our stocks trades into its Sell Half Range and our Portfolios act accordingly.
Stock
performance around Presidents Day (short):
Fundamental
Headlines
Yesterday was
also a quiet news day. Mortgage and
purchase applications fell while the January budget deficit rose, though less
than expected. Overseas, there were some
relatively more important numbers: Chinese exports spike 10.6% while Japanese
machinery orders plummeted 15.7%---both adding to the economic uncertainty
surrounding the emerging markets.
None
of the above had much impact on investor psychology as most of the day was
spent digesting Tuesday’s rip roaring response to Janet Yellen’s first
performance as Fed chief. She speaks to
the senate today ***now delayed due to weather.
I wouldn’t think that there will be anything new, but you never
know. So the takeaway remains the same:
tapering for pussies unless someone sneezes.
Here
are comments on Yellen’s testimony from the Fed mouthpiece. John Hilsenrath
(medium):
Is
tapering tightening (medium and a must read):
While
the senate vote on the debt ceiling bill wasn’t complete, by late in the
afternoon 53 aye votes had been cast, assuring its passage.
Thoughts
on raising the debt limit (short):
Finally
Obama raised the minimum wage for all employees of federal contractors by
executive order.
Average federal
employee salary (short):
Bottom line: the
economy continues its sluggish performance, the ruling class is doing what it
does best (spend our money) and the Fed is on track to stay accommodative for
as far as the eye can see. In short,
nothing has changed that would suggest any improvement in the economic
outlook.
Stocks remain
very richly valued on almost any economic scenario. So again, nothing has changed.
Hence, our strategy is unaltered:
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.
Double
good news for the emerging markets (short):
The
latest from Jeff Gundlach (3 minute video):
Wealth
confiscation draws ever closer in the EU (medium and today’s must read):
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