The Morning Call
The Market
Technical
The
indices (DJIA 12811, S&P 1377) failed to sustain an early rally yesterday
morning, finishing (1) below the lower boundaries of their short term trading
ranges [12873-13661, 1395-1474] for the second day, (2) below their 200 day
moving averages [12991/1380]---the Dow for the second day, the S&P for the
first, (3) above the lower boundaries of their intermediate term uptrends
[12714-17714, 1342-1938].
Volume
declined. Oddly enough for a sizeable down
day, breadth was mixed and the VIX actually declined. The performance of both indicators is counter
to what one would expect for a negative day; that may be an indication that
stocks are oversold and could get a bounce here.
GLD
rose, busting through the interim resistance level (167.3) and closing very
near to its 50 day moving average. Another positive day today and our Portfolios
will start re-building their trading positions in GLD.
Bottom
line: the Averages challenge of the
lower boundaries of their short term trading ranges has become a good deal more
serious---they are less than 1% away from fulfilling the distance element of
our time and distance discipline and they have violated their 200 day moving
averages to boot. As I noted above the
breadth and VIX indicators suggest some sort of oversold bounce near term. But given the rather pathetic attempt
yesterday morning, I am not sure how far up that it will carry.
With the degree
of technical damage done over the last two days, it is not unreasonable to
assume that there is more to come.
However, as you will see below, some of our stocks are entering their Buy
Value Range
Fundamental
Headlines
The
economic news yesterday was positive: weekly jobless claims fell versus the forecast
of an increase and the September trade deficit was less than anticipated. So near term, everything remains upbeat.
The latest from
Lance Roberts (medium):
Of
course, investors don’t appear to care because they have suddenly and inexplicitly
discovered that the fiscal cliff may actually occur and that Europe
is a mess as the recession metastasizes and Athens Benghazi
I
continue to believe that the fiscal cliff won’t occur and if it does that it
will be short lived. On the other hand,
it will likely not be any kind of ‘grand bargain’ but rather it will be
reflective of the inane economic policies foisted upon by our political class
over the last twelve years---the end result being some Frankenstein fix that
will avoid disaster but keep the economy burdened with too much government
spending and too high taxes.
A
pessimistic view of what the election means (medium):
The
latest from my favorite presidential candidate (6 minute video):
Brace
yourself, the budget deficit isn’t the only thing going to the moon (medium):
That
said, the EU is still the 800 pound gorilla.
If the eurocrats don’t address the economic and social degeneration of
southern Europe , we are apt to get multiple bank and sovereign
bankruptcies and the consequences would likely have negative global
implications.
***overnight
(1) despite the successful Greek austerity vote, a German official said that
there is no way its parliament can approve the dispersal of funds before a
Greek 11/16 debt payment is due and (2) industrial production numbers across
the continent were disappointing.
Draghi’s
one year anniversary (short):
Three
fiscal cliffs (medium):
Bottom line: the
economic fundamentals ex the fiscal cliff and the euro disaster are progressing
as well as we could hope given the burdens the economy must shoulder. I do believe that the fiscal cliff gets fixed
however dysfunctionally; and as a result, ex the significant downside presented
by a failure in Europe , our Portfolios would be starting
to nibble at current levels.
However, the
aforementioned downside in Europe is of such a magnitude
that I think that stocks prices need to suffer an additional haircut before
they compensate us for assuming the risk of ownership.
Three
key themes from third quarter earnings (medium):
Subscriber Alert
With
the recent decline in stock prices, a number of the stocks in our Universes
have traded into their Buy Value
Ranges
In
the High Yield Portfolio: Pioneer
Southwest Energy Ptrs (PSE-$24)
In
the Dividend Growth Portfolio: Target (TGT -$62)
In
the Aggressive Growth Portfolio: Atrion
(ATRI -$192) and Balchem (BCPC-$32)
The
stock price of Tim Horton (THI-$49) has fallen out of its Buy
Value Range
Investing for Survival
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