The Morning Call
7/21/15
The
Market
Technical
The indices
(DJIA 18100, S&P 2128) were flattish yesterday. They remained in the trading range marked by
their 100 day moving averages on the downside and their all-time highs
(18295/2135) on the upside. As you know,
I expect a challenge of at least the all-time highs, which if unsuccessful
would strengthen the bear case that the Market has been developing a top for
the last six months. The Averages are
also close to the upper boundaries of their long term uptrends (19175/2145);
and even if the all-time highs are taken out, as you also know, I don’t think
that those boundaries will be successfully challenged.
Longer term, the
indices are within their uptrends across all timeframes: short term (17605-20529,
2077-3056), intermediate term (17827-23968, 1864-2629) and long term
(5369-19175, 797-2145).
Volume fell; breadth
was mixed. The VIX (12.3) rose; a little
unusual for an up Market day. I continue to believe that a price below 12.0
represents good value as portfolio insurance.
The long
Treasury was down and closed below its 100 day moving average and within its
short term downtrend.
GLD got hammered---down
3%. It ended below its 100 day moving
average and the lower boundary of its intermediate term trading range for the third
day. However, on the distance element of
our time and distance discipline, it has negated this trading range; hence the
intermediate term trend will re-set to down.
Traders are
attributing this move lower to expectations of a rise in rates (gold often
declines as rates rise) which is supported by the falling Treasury and rising
dollar. However, industrial commodities
are also declining which suggests slowing economic growth---a contradiction to
the notion of a Fed rate increase in the near future. All in all, a bit confusing.
And,
seven reasons why gold is plunging (medium):
Oil was down, finishing below its 100 day
moving average and near the lower boundary of its short term trading
range. The dollar continues strong. Yesterday it moved the 100 day moving
average from resistance to support. It
is also within short and intermediate term trading ranges.
Bottom line: the
pin action notwithstanding, volume has been low and divergences continue to
appear. Right now the key is whether or
not the indices can successfully challenge their all-time highs. If not, the bear case for a topping formation
is strengthened. If they do, then they
will almost certainly test the upper boundaries of their long term
uptrends---which I believe will be unsuccessful.
Something
for the bulls (short):
Something
for the bears (medium):
Fundamental
Headlines
No
economic data reported yesterday either here or abroad. In fact, this is going to be a very slow week
for economic releases.
For
better or worse, Greece and China continue to fade from investor consciousness
as the current headlines remain positive.
Yesterday, (1) the Greek banks re-opened and the IMF and ECB loans are
going to be repaid. Unfortunately, the
Greek people are just as poor and the Greek economy is just as crippled as it
was last Monday, and (2) the Chinese government sounded the all clear on its
stock market. So why are 20% of the
listed stocks still suspended from trading?
China
destroyed its stock market (medium):
***overnight,
the Greek government submitted further legislation to parliament that was
demanded by the Troika.
Bottom line:
barring some new surprising development in Greece and/or China, this will
likely be an uneventful week (having just said that, I know that the gods are
going unleash WWIII today at 2:45). The
big news will likely be in the earnings reports and in the pin action
itself. As I noted last week, this lack
of macro headlines leaves investors little to consider other than valuations---which
as you know, our Valuation Model indicates as excessive.
I continue to 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.
The Morning Call
7/21/15
The
Market
Technical
The indices
(DJIA 18100, S&P 2128) were flattish yesterday. They remained in the trading range marked by
their 100 day moving averages on the downside and their all-time highs
(18295/2135) on the upside. As you know,
I expect a challenge of at least the all-time highs, which if unsuccessful
would strengthen the bear case that the Market has been developing a top for
the last six months. The Averages are
also close to the upper boundaries of their long term uptrends (19175/2145);
and even if the all-time highs are taken out, as you also know, I don’t think
that those boundaries will be successfully challenged.
Longer term, the
indices are within their uptrends across all timeframes: short term (17605-20529,
2077-3056), intermediate term (17827-23968, 1864-2629) and long term
(5369-19175, 797-2145).
Volume fell; breadth
was mixed. The VIX (12.3) rose; a little
unusual for an up Market day. I continue to believe that a price below 12.0
represents good value as portfolio insurance.
The long
Treasury was down and closed below its 100 day moving average and within its
short term downtrend.
GLD got hammered---down
3%. It ended below its 100 day moving
average and the lower boundary of its intermediate term trading range for the third
day. However, on the distance element of
our time and distance discipline, it has negated this trading range; hence the
intermediate term trend will re-set to down.
Traders are
attributing this move lower to expectations of a rise in rates (gold often
declines as rates rise) which is supported by the falling Treasury and rising
dollar. However, industrial commodities
are also declining which suggests slowing economic growth---a contradiction to
the notion of a Fed rate increase in the near future. All in all, a bit confusing.
And,
seven reasons why gold is plunging (medium):
Oil was down, finishing below its 100 day
moving average and near the lower boundary of its short term trading
range. The dollar continues strong. Yesterday it moved the 100 day moving
average from resistance to support. It
is also within short and intermediate term trading ranges.
Bottom line: the
pin action notwithstanding, volume has been low and divergences continue to
appear. Right now the key is whether or
not the indices can successfully challenge their all-time highs. If not, the bear case for a topping formation
is strengthened. If they do, then they
will almost certainly test the upper boundaries of their long term
uptrends---which I believe will be unsuccessful.
Something
for the bulls (short):
Something
for the bears (medium):
Fundamental
Headlines
No
economic data reported yesterday either here or abroad. In fact, this is going to be a very slow week
for economic releases.
For
better or worse, Greece and China continue to fade from investor consciousness
as the current headlines remain positive.
Yesterday, (1) the Greek banks re-opened and the IMF and ECB loans are
going to be repaid. Unfortunately, the
Greek people are just as poor and the Greek economy is just as crippled as it
was last Monday, and (2) the Chinese government sounded the all clear on its
stock market. So why are 20% of the
listed stocks still suspended from trading?
China
destroyed its stock market (medium):
***overnight,
the Greek government submitted further legislation to parliament that was
demanded by the Troika.
Bottom line:
barring some new surprising development in Greece and/or China, this will
likely be an uneventful week (having just said that, I know that the gods are
going unleash WWIII today at 2:45). The
big news will likely be in the earnings reports and in the pin action
itself. As I noted last week, this lack
of macro headlines leaves investors little to consider other than valuations---which
as you know, our Valuation Model indicates as excessive.
I continue to 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.
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