The Market
Technical
The indices
(DJIA 17912, S&P 2074) continued their advance, following their usual
pattern of late---down in early trading then up for the day. The Dow remained in uptrends across all
timeframes: short term (16157-18903), intermediate term (16124-20189) and long
term (5159-18521). The S&P did the
same for its short (1861-2225) and intermediate (1704-2420) term uptrends. However, it closed above the upper boundary of
its long term uptrend (783-2070) for a second time. As usual, our time and distance discipline kicks
in; if the S&P remains above the ascending upper boundary of its long term
uptrend through the close next Wednesday, the boundary will be subject to
change if the Dow also breaks above its comparable boundary. Both finished above their 50 day moving
averages.
Volume rose;
breadth was mixed although the flow of funds indicator broke out to the upside
(very positive for stocks). The VIX
declined for a second day, closing below the lower boundary of its short term
uptrend and its 50 day moving average. If it closes below that lower boundary today,
the short term trend will re-set to a trading range (also a plus for equities). It remained within an intermediate term
downtrend.
The long
Treasury recovered, finishing within its very short term trading range, a short
term uptrend, an intermediate term trading range and above its 50 day moving
average.
GLD bounced, remaining
above the lower boundary of its former long term trading range. It also closed very near to the upper boundary
of its short term downtrend; and it is back above its 50 day moving average.
‘So the battle continues over the validity
of the lower boundary of its former long term trading range. As I have noted, how this tension gets
resolved may determine where the bottom is in the current downtrend and will
likely indicate near term price direction.
Meanwhile, it finished within short, intermediate and long term
downtrends.’
Bottom line: the
momentum continues to the upside, driven, I am assuming, by the seasonal
optimism. I think that the upward move
by the flow of funds indicator reflects that momentum. Those boundaries (and whether or not they are
successfully challenged) which I have been discussing are all still relevant. At the moment it appears that the challenges
will be resolve to the upside; but our time and distance discipline must work
itself out before we know for sure.
Previously, I said
that I thought that the upper boundary of the S&P’s long term uptrend would
be a formidable barrier to successfully challenge. That thesis is being put to the test.
A technician
looks at oil (short):
Fundamental
Headlines
Yesterday’s
US economic data was slightly weighed to the upside: weekly mortgage
applications were down, but purchase applications were up, the November ADP
private payroll number was up but less than expected, third quarter nonfarm
productivity was up but less than estimates while unit labor costs fell and
November ISM nonmanufacturing index was better than forecast.
On
other economic related news,
(1)
US November filings for oil and gas permits fell 40%---that can’t be good for
cap spending
And what the
Saudis think (short):
(2) the Fed
released its latest version of its Beige Book which painted an improving
economy with positive movement in consumer spending, employment, manufacturing
and housing.
All
in all, the stats basically supported our slow, erratic growth forecast.
Overseas,
the EU November flash service PMI fell 0.3% while the composite index decline
0.9%. The good news is that this
discouraging trend is not impacting the US economy; the bad news is that the
fat lady hasn’t sung yet.
***overnight,
the ECB left interest rates unchanged.
Bottom line: the
US economy continues its halting advance, the rest of the world continues to
falter and oil is bouncing around like a Harlem Globetrotters routine. The consensus is that the lower energy are a
big positive. But consensus always makes
me nervous (think interest rates were going higher in 2014) and this is a
global phenomenum with geopolitical implications. I can’t believe that there aren’t some major
unknown unknowns yet to be discovered (hat tip Rumsfeld).
Meanwhile,
stocks are discounting the second coming of Jesus.
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.
More
to think about:
Changes
going on in bank reserves (short):
Reasons
to be cautious (medium):
Dividends
versus free cash flow (short):
Investing for Survival
Torturing
historical data (medium):
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