The Morning Call
10/29/14
The Market
Technical
The
indices (17005, 1985) had another gangbusters day. The Dow finished above the upper boundary of
its short term downtrend (15665-16745) for the second day; if it remains above
that level through the close on today, the trend will re-set to a trading
range. It also ended within an
intermediate term trading range (15132-17158), a long term uptrend (5148-18484)
but above its 50 day moving average.
The S&P closed
above the upper boundary of its a short term downtrend for the third day,
thereby confirming the break and re-setting to short term trading range
(1820-2019) It also finished within an
intermediate term trading range (1740-2019), a long term uptrend (771-2020) but
above its 50 day moving average.
Volume was
abysmal; though breadth improved. By one
measure, the Market is increasingly overbought. The VIX fell 10%, ending within
a short term uptrend, an intermediate term downtrend and below its 50 day
moving average.
The long
Treasury fell, closing within a very short term trading range, a short term uptrend,
an intermediate term trading range and above its 50 day moving average.
GLD rose,
remaining within a very short term trading range, short and intermediate term
downtrends and below its 50 day moving average.
Bottom line: the
‘don’t fight the Fed’ crowd continues to provide upside momentum; although
volume is terrible and equities are in extreme overbought territory. I continue to feel completely out of touch
with Market sentiment. When I am, it is always best to do nothing. Nonetheless, I would use any rise in prices
to Sell stocks that are near or at their Sell Half Range or whose underlying
company’s fundamentals have deteriorated.
Best
six months of the year begins in November (short):
Fundamental
Headlines
We
had a full plate of US economic data yesterday: the August Case Shiller home
price index fell versus expectations of an increase, September durable goods
orders both the headline number and the ex transportation reading were both
negative versus estimates of a rise, weekly retail sales were positive, the
October consumer confidence index was a blowout number as was the October Richmond
Fed manufacturing index. By volume this
data was a plus; however, the durable goods orders were by far the most important,
so I would judge the day as a wash.
Overseas,
there were no reported stats; however, there was a slew of negative articles on
China, Japan and the EU.
China’s
‘ghost’ cities (medium):
http://www.zerohedge.com/news/2014-10-28/china-ghost-town-index-here-are-chinas-10-ghastliest-cities
Can
China achieve a ‘soft’ landing? (short):
Head
of Bank of Japan lies and lies and then lies some more (medium):
Eurozone
remains challenged (short):
Why
the ECB stress test was a farce (medium and today’s must read):
None
of this made any difference because the QEInfinity dreamweavers were
anticipating some kind of good news out of the Fed today. Maybe so.
Bottom
line: if the Fed stays loose, it would seem to indicate that the EU
recession/deflation scenario is alive and well and living in the Eccles Building. If it tightens, well we are back of looking
at the charts following QEI, II and III---which were not pretty.
I
won’t even attempt to guess what Yellen et al will do today. But I am unshaken in our investment strategy.
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.
The
latest from John Hussman (medium):
For
the bulls (medium):
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