The Morning Call
1/8/15
The Market
Technical
The indices
(DJIA 17584, S&P 2025) finally rallied, but remained below their 50 day
moving averages. They closed within
uptrends across all timeframes: short term (16372-19172, 1889-2251),
intermediate term (16372-21541, 1727-2343) and long term (5369-18860,
783-2083).
Volume
fell; breadth improved. The VIX drifted
lower but finished within its short term trading range and intermediate term
downtrend.
The
long Treasury was off but continues in uptrends across all timeframes.
Shiller
on the bond rally (medium):
GLD
was also down, remaining within a very short term uptrend, a short term trading
range and an intermediate term downtrend.
Bottom line: today
is the fifth trading day of January.
Barring a Titan III shot to 17978, the first five days of January will
be down. That means that the Santa Claus
rally and the two day and five day indicators will imply a negative year for
the S&P. However, we still have the
month of January indicator before we take full measure of the January effect. In
addition, both of the indices remain below their 50 day moving averages. Further, stocks were getting oversold, so some
rebound was not surprising. The good
news is that the Averages remain firmly within uptrends across all timeframes;
and that is more meaningful than the January effect.
The
latest from Stock Trader’s Almanac (short):
Fundamental
Yesterday’s
US economic stats were mostly upbeat: the December ADP private payroll report
showed good job growth and the US November trade deficit was smaller than
expected. The bad news was weekly
mortgage and purchase applications fell, although Obama announced a reduction
in FHA (home) mortgage insurance rates.
Still the ADP number was by far the most important; so we should be
pleased.
***last
night, a voting member of the Fed commented that raising rates now would be
catastrophic (and ‘sugar plums danced in their heads’).
Overseas, the
numbers continue discouraging: the December Eurozone CPI fell 0.2% (indicative
of weak to no growth); November Italian and EU unemployment rose while German
unemployment declined slightly.
***overnight,
November German factory orders were reported down 2.4%.
The
factors that held the headlines yesterday and generally provided the positive
fundamental rationale for a Market rebound were:
(1)
the positive ADP employment report,
(2)
Germany announced that it was open to negotiations over
Greek debt, easing fears that some cataclysmic [series of] event could be
triggered by a Greek default/withdrawal from the EU (medium):
Not that there aren’t EU related risks
to the US economy (medium):
(3)
more fluff from the Fed in the release of its December
meeting’s minutes. Fluff equaling patience
[lack of courage] regarding the timing of interest rate increases [see below].
Another factor
of note is that decline in oil prices claimed its first casualty (medium):
Bottom line: the
tragedy in Paris notwithstanding, investors got some relief on factors that
were concerning them (Greece, oil) plus another boost from the Fed suggesting
that any further monetary tightening just isn’t in the cards unless certain ill-defined
circumstances occur in the forthcoming ill-defined time period. ‘Money for nothing’ remains an enduring theme
for investors however ill advised.
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.
Update
on securities based lending (short):
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