The Morning Call
10/17/14
The Market
Technical
While
the indices (DJIA 16117, S&P 1862) ended the day near the unchanged level,
we still had a lot of volatility intraday.
The Dow closed within a short term downtrend (15829-16900), an
intermediate term trading range (15132-17158) and a long term uptrend
(5148-18484). It also ended below its
200 day moving average.
The S&P finished
within a short term downtrend (1816-1947), an intermediate term trading range
(1740-2019), a long term uptrend (771-2020) and below its 200 day moving
average.
Volume declined;
breadth was mixed. The VIX fell, ending within
a short term uptrend. It also closed above
the upper boundary of its intermediate term downtrend for a second day; if it
remains above this boundary through the bell on Monday, the intermediate term
trend will re-set to a trading range. It also finished above its 50 day moving
average.
The
long Treasury fell but remained within very short term and short term uptrends,
an intermediate term trading range and above its 50 day moving average.
GLD
was up again, continuing its progress off the lower boundary of its long term
trading range. It is currently within a
very short term trading range but short and intermediate term downtrends and
below its 50 day moving average.
Bottom line: we
finally got a day of relatively positive news flow, allowing the Averages to avoid
another rough day. However, we didn’t
get the upside follow through from an oversold condition that I had expected. The inability to gain any momentum to the
upside from an oversold condition in the face of some very positive economic
data argues against a bottom having been made.
Therefore, I
would resist any temptation to spend cash; and if we do get a lift in the
Market, I would be lightening up on all positions that are overpriced or the
underlying company’s fundamentals are deteriorating.
Was
Wednesday the bottom? (medium):
Fundamental
Headlines
Yesterday’s
US economic news was very upbeat: weekly jobless claims fell more than
expected, September industrial production smoked its forecast and the October
Philly Fed manufacturing index was slightly better than anticipated. These figures clearly make patience easier as
I contemplate revising our forecast lower; but if they are outliers and the
trend of poor numbers continues, then a less sanguine outlook seems inevitable.
***overnight,
the ECB said that it would start asset purchases within days (as if); and in
its latest QE move, the BOJ was unable to buy all the bonds that it wanted (mainly
because it already owns them).
Investors’
mood was also helped by the absence of negative data or geopolitical news from
overseas and no new Ebola victims in the US.
Bottom line: the
upbeat employment and industrial production numbers notwithstanding, the trend
in economic news remains discouraging.
To be sure, yesterday’s stats could mark a turnaround; but it is clearly
too soon to be getting jiggy. In the absence
of better data, the expectation should be for a lot of downward revisions in
forecasts. Couple that with a Market
that remains very rich on a valuation basis (Year End Fair Value is circa S&P
1480) and the disappearance of the ‘buy the dippers’, and I remain content to
count our cash and do nothing.
My
bottom line is that for current prices to continue to hold, it requires a
perfect outcome to the numerous problems facing the US and global economies AND
investor willingness to accept the compression of future potential returns into
current prices.
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
easy money market is probably over (medium):
All
of these are must reads:
The
latest from Mohamed El Erian (medium):
The
latest from Lance Roberts (medium):
The
latest from Jim Rogers (medium):
Subscriber Alert
The
stock price of Apple (AAPL-$96) has declined into its Buy Value Range. Accordingly, it is being Added to the
Aggressive Growth Buy List. No shares
will be purchased at this time.
No comments:
Post a Comment