The Morning Call
4/1/14
The Market
Technical
Yesterday was a
great one for the indices (DJIA 16457, S&P 1872). The S&P closed within uptrends across all
timeframes: short (1789-1966), intermediate (1747-2547) 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 was up
fractionally; breadth was mixed. The VIX
got whacked, finishing within its short term trading range and its intermediate
term downtrend and breaking below its 50 day moving average.
The long Treasury
was down, closing right on the upper boundary of its short term trading range;
so I am again putting off re-setting a trend change. It is also in an intermediate term downtrend but
remained above its 50 day moving average.
GLD fell again,
staying within a short and intermediate term downtrend and below its 50 day
moving average.
Bottom line: at the risk of sounding like a party pooper,
yesterday was the end of the quarter and typically the time that fund managers ‘paint
the tape’ in order to make their quarterly performance look good and help out
with the bonuses. Further, volume remained
low, breadth was mixed (only 50 out of 156 stocks in our Universe are above, at
or near their prior highs), the NASDAQ is getting pulverized and the Averages
still didn’t make it above their last lower high.
That said, the Market’s
historically turn in their best performance in the March/April period. So I still argue that the upper boundaries of
the Averages long term uptrends will likely be challenged; and yesterday could
well be the start of that process. But the
factors listed above suggest a lessening in the underlying strength of equities
and in the likelihood that those boundaries can be challenged successfully.
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.
US
funds raising cash (medium):
Secular
bull and bear markets (medium):
Fundamental
Headlines
Yesterday’s
US economic data was mixed: the March Chicago PMI was below expectations while
the Dallas Fed manufacturing index was above (mixed is OK).
Overseas,
Japan’s March industrial output and PMI were disappointing (not what Abe wanted
to hear), EU inflation was below estimates (not what the ECB wanted to hear)
and the Greek parliament passed some painful legislation in order to receive the
next tranche of aid (not what the Greek electorate wanted to hear).
***overnight,
another Chinese company defaults (medium):
Not
a lot for the Market to be pleased with---but Yellen made a stick save by
giving what was probably her most dovish speech in some time. If all the prior confusing signals from the
Fed were ignored, then it would appear that Fed policy is back to its ‘free
money to infinity’ policy. Of course,
you can’t exactly ignore all that prior rhetoric. So I continue to (1) rate Fed policy as ‘confused’,
(2) believe that [a] it is because the Fed is confused and [b] it increases the
already substantial probability that the Fed will bungle the transition process
to normalized monetary policy.
I
knew the ruling class wouldn’t be quiet for long. Today, the senate will begin investigating
Caterpillar because it hired a high powered tax accounting firm to devise a strategy
to exploit the US tax law (i.e. avoid taxes) to its maximum extent---something that
it has every right to do. But rather
than working on simplifying the tax law, our senators would rather grandstand
by beating up on a corporation for taking advantage of the laws that they
passed. That ought to help stimulate capital
spending and create jobs---what a bunch of morons.
Bottom line: Yellen
further muddied the Fed policy discussion by sounding quite dovish in a speech
yesterday. With all the conflicting signals,
you would think that investors wouldn’t know whether to shit or go blind. But ever the optimists, they continue to view
any news as good news. I don’t think
that a great prescription for determining investment strategy---but what do I know? As I said above, I think that the conflicting
signals are just a disguise of the Fed’s own uncertainty and that this episode is
not likely to end well.
Meanwhile, the
bad economic news continues out of Japan and the EU, the Chinese have yet to make
those stimulative policy changes promised last week and Putin is playing Obama
like a Stradivarius. To date, policy
makers have been able to keep these simmering crisis under control; and may
very well be able to do so forever. But,
in my opinion, stocks have no potential for these negative factors priced in. Indeed, the only thing they seem to have
priced in is higher growth and greater stability into the next decade. I am sorry, I don’t have the balls to bet all
my money on such an outcome.
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.
The latest from John Hussman
(medium):
Tapering
and loan growth (short):
EU
banking system time bomb (medium):
More:
The
latest from Marc Faber (medium):
The
latest from David Stockman (medium):
No comments:
Post a Comment