The Morning Call
11/12/14
The Market
Technical
With
the bond crowd on holiday, the indices (DJIA 17614, S&P 2039) snoozed their
way through the day. Both closed within
uptrends across all timeframes: short term (16053-18810, 1801-2207),
intermediate term (16053-20153, 1692-2408) and long term (5159-18521,
781-2043). They are also finished above
their 50 day moving averages.
Volume
plunged (not surprisingly); breadth remains negative (somewhat
surprisingly). The VIX rose, ending
within a short term uptrend (though close to its lower boundary) and an intermediate
term downtrend and below its 50 day moving average.
Sentiment
versus momentum (medium):
More
on breadth (short):
And
(short):
As
I noted above, the bond market was closed; so nothing on the long treasury.
GLD
rose and continues to act like it might want to try to put in a bottom. However, until it at least breaks out of its
short term downtrend and recovers the lower boundary of its former long term
trading range, there is no point assuming that it might occur. Meanwhile, it also remains within intermediate
and long term downtrends and below its 50 day moving average.
Bottom line: the
Averages took a break yesterday with the bond market closed. Nonetheless, they remain quite overbought; so
softness at any point in time shouldn’t come as a surprise. However, with the indices re-syncing to the
upside on all timeframes, any weakness should be limited.
That
said, if stocks continue to move higher, I will continue to use this rise in
prices to Sell stocks that are near or at their Sell Half Range or whose
underlying company’s fundamentals have deteriorated.
Fundamental
Headlines
No
US economic data yesterday. Nothing out
of Europe. There was a report that the
Japanese government may delay its second sales tax increase---a plus in the
sense that it won’t be just another anchor on the Japanese economy. Of course, my seven year grandson could have
figured that out three months ago; so in another sense it is not so good as it
typifies the bureaucratic sclerosis that got Japan in its current mess in the
first place.
Bottom line: in the
midst of this day of calm, there is nothing to add to our current 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.
I
am looking at potential hedges for the Aggressive Growth Portfolio in the form
of buying volatility (VXX), the S&P Market short (SH) and the Gamco Gold
and Income Trust (GNT). ‘Looking’ is the
operative word. I have done nothing to
date.
Three
reasons to underweight high yield debt (short):
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