The Morning Call
The Market
Technical
The
indices (DJIA 16367, S&P 1865) recovered a bit yesterday. The S&P finished within uptrends across
all timeframes: short (1786-1963), intermediate (1738-2538) and long (739-1910). The Dow remains within short (15330-16601)
and intermediate (14696-16601) term trading ranges and a long term uptrend
(5050-17400). They continue out of sync
in their short and intermediate term trends---which leaves the Market
trendless.
Volume
declined; breadth improved. The VIX fell,
finishing within its short term trading range and intermediate term downtrend. It also dropped below its 50 day moving
average---a positive sign for stocks.
The
long Treasury was down, failing to bust through the upper boundary of its short
term trading range for the fourth time.
While the decline was not significant, it still keeps alive the
possibility that rates have seen their lows (not surprising if the Fed is
indeed on a path to a faster transition to tighter monetary policy). It remains in an intermediate term downtrend. The good news is that it is still above its
50 day moving average.
GLD
rose fractionally, but was unable to regain the lower boundary of its very
short term uptrend---thereby negating that trend. It closed within short and intermediate term
downtrends but managed to remain above its 50 day moving average.
And
(short):
Bottom line: if the indices can generate follow through to
yesterday’s advance, then, on a very short term basis, they will have made a higher
low from last week. Not a huge positive,
but a plus nonetheless. On the other
hand, they must also overcome the March 7 high; otherwise, they make a second
lower high. Furthermore, divergences
continue to grow in number and in magnitude.
I continue to
believe that the upper boundaries of the Averages long term uptrends are apt to
be challenged, though, in my opinion, the internal strength of the Market is going
to have to improve before those resistance levels can be breached.
Meanwhile, we
have a trendless Market; so there is really not much to do save using any price
strength that pushes one of our stocks into its Sell Half Range and to act
accordingly.
A
look at the Market’s performance in April (short):
Fundamental
Headlines
The
US economic news yesterday was mixed to positive: the March Richmond Fed
manufacturing index was a disappointment, February new homes sales were down
but less than expected, weekly retain
sales were mixed, the January Case Shiller new home price index was better than
forecasts and March consumer confidence was much stronger than estimates. As long as the data flow is mixed to positive
our forecast remains on track.
Only
one stat from overseas: German business optimism fell.
Otherwise
the day was fairly quiet, in the sense that the news flow from areas drawing
the most investor attention were not two inch headlines:
(1) Fed
policy: in a speech, hawkish Dallas Fed chief Fisher actually sounded more
accommodative than he has recently. That
helped sooth concerns about interest rates rising sooner than had been
expected,
(2) two
small banks in China experienced runs by depositors.
(3) the
chess game over the EU/US response to Russia’s annexation of Crimea continues:
The EU and Russia (medium):
China, India and Russia (medium):
The US and Russia (medium):
Latest from Ukraine (medium):
Bottom line: yesterday
was a quiet day with stock prices working their way higher likely on the back
of a number of mostly secondary economic stats.
I think that is a pretty good sign that there are enough buyers to keep
prices heading up in the absence of any real news. That is not an attempt to discount yesterday’s
data. It certainly helps my confidence in
our outlook. But, at least as calculated
by our Valuation Model, a continuing recovery is more than adequately reflected
in current prices. Indeed, it is
generously valued. In other words in the
absence of any bad news on Fed policy, China’s financial problems, Japan’s economic
problems and the potential political/economic problems stemming from the
current standoff with Russia, stocks are still in nosebleed valuation
territory.
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.
Bear
in mind, this is not a recommendation to run for the hills. Our Portfolios are still 55-60% invested and
their cash position is a function of individual stocks either hitting their
Sell Half Prices or their underlying company failing to meet the requisite
minimum financial criteria needed for inclusion in our Universe.
It
is a cautionary note not to chase this rally.
What
is the retail investor to do (medium):
http://business.financialpost.com/2014/03/24/should-you-plow-into-stocks-or-follow-the-smart-money/
No comments:
Post a Comment