The Morning Call
10/21/14
The Market
Technical
The indices (DJIA
16399, S&P 1904) performance yesterday was bit schizophrenic (IBM’s disappointing
number held the Dow to a small gain while the S&P soared). The DJIA closed within a short term downtrend
(15782-16857), 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 (1808-1938), an intermediate term
trading range (1740-2019) and a long term uptrend (771-2020). It closed right on the lower boundary of its
former short term trading range and slightly below its 200 day moving
average---both of which are resistance points.
How the S&P handles these levels will give a good idea of Market
direction.
Volume fell; breadth
was mixed. The VIX declined, remaining
within a short term uptrend, an intermediate term downtrend and above its 200 day
moving average.
The long
Treasury rebounded back above the lower boundary of its very short term
uptrend, negating the Friday break. It
remained within a short term uptrend, an intermediate term trading range and
above its 50 day moving average.
GLD rallied but ended
below the lower boundary of its very short term uptrend for a second day,
confirming Friday’s break. It remained
within short and intermediate term downtrends and below its 50 day moving
average.
Bottom line: the
key today is how the S&P deals with those two resistance levels. If it can break back above those levels, then
this round of lower prices could be over.
If not, then we are likely in for more downside.
Our strategy remains to do nothing. 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.
Update
on sentiment (short):
Fundamental
Headlines
There
was no US or foreign economic data released yesterday.
***overnight,
Chinese GDP was reported up 7.3% versus expectations of up 7.2% but below
second quarter results of +7.5%; the ECB announced that it is considering
expanding its QE to include corporate bonds.
China:
ECB:
The only bit of
news that I saw was a release that stated that Russia and Ukraine were close to
an agreement on the price of gas this winter.
Of course, there have been dozens of releases announcing agreements of
one sort or the other between these two antagonists for the last six months and
virtually all of them have come to naught.
This time it may be different but I am not holding my breathe.
Bottom line: 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 Doug Kass (medium):
The
latest from John Hussman (medium):
After
the correction, stocks are still overvalued (short):
Capital,
debt and the stock market (medium):
Investing for Survival
12
lessons from Jeff Gundlach (medium):
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