The Morning Call
The Market
Technical
The
indices (DJIA 16264, S&P 1849) followed the same playbook that it has
operated off of all week---a ramp up at the open and then a drift lower the
rest of the day. Yesterday, both were
down. 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
fell; breadth was mixed. The VIX
declined, finishing within its short term trading range and its intermediate term
downtrend and above its 50 day moving average.
The
long Treasury rose again, closing above the upper boundary of its short term
trading range for the second day. If it
remains over that boundary at the end of trading today, the trading range will
be negated and will re-set to a short term uptrend.
GLD
dropped, finishing within its short and intermediate term downtrends and below
its 50 day moving average.
Bottom
line: with yesterday’s decline, the
Averages have now put in a second lower high.
That is a short term judgment, so I am not suggesting a Market top. But the indices are out of sync and coupled
with the mounting divergences, they may be in the process of raising a warning
flag. However, that means little until additional
trend lines began to be violated and that has not happened.
In other words,
the trend is flat to up until it is not.
So it seems likely to me that the upper boundaries of the Averages long
term uptrends are apt to be challenged---though the weakening Market internals may
be indicating that those boundaries are as good as it is going to get.
A new
development that is more confusing than it is concerning is the behavior of other
Markets. As I noted yesterday the long
Treasury is close to breaking to the upside (higher prices, lower yields) which
is not consistent with an improving economy or a tighter Fed while GLD has
already broken its very short term uptrend which is consistent with a tighter
Fed. It is still too early to be getting
concerned but not too early to be paying close attention.
Here is the
answer on what is going on in gold (medium):
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.
The
latest from the Stock Trader’s Almanac (short):
Update
on sentiment (short):
Fundamental
Headlines
Yesterday’s
US economic data was generally upbeat: February pending home sales were down but in line, weekly jobless claims
fell more than expected, the revised fourth quarter GDP growth and price index
were in line though corporate profits were slightly better than anticipated and
the March Kansas City Fed manufacturing
index was double forecasts. In short,
the trend to better data continues.
No
real new news from the EU, China or Japan.
Ukraine did reject the proposed IMF bailout which I reported yesterday;
but beyond that all was quiet.
****overnight
(medium):
Bottom line: no
changes: (1) the economy continues to look healthier than it did a month ago, (2
) the uncertainties around Fed policy, the Japanese and EU economies, the
Chinese financial system and the Ukrainian/US/Russia standoff lurk in the weeds
as potential disruptive elements and (3) stocks are considerably overvalued.
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.
Investing
in uncertain markets (medium):
S&P
is now overvalued on forward earnings (short):
Investing for Survival
The
problem with reverse mortgages (medium):
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