Tuesday, February 12, 2013

The Morning Call--The sequester gets closer

-->
The Morning Call

2/12/13

The Market
           
    Technical

            The indices (DJIA 13971, S&P 1517) treaded water yesterday.  Both of the Averages finished (1) below, but very close to, the upper boundary of their short term uptrends [13341-13992, 1451-1520] and (2) within their intermediate term uptrends [13327-18327, 1408-2003].

            Volume fell; breadth was poor.  The VIX declined but remained within its intermediate term downtrend.

            GLD was down big.  That move broke the lower boundary of its very short term uptrend which is also the lower boundary of a pennant formation.  I have noted previously that a break of either boundary of that pattern would likely determine price direction over the short term.  Our time and distance discipline is now operative; but for a short term formation, the time element is only a couple of days.  So a close below the lower boundary of the very short term uptrend will be confirmed at the end of this trading day.  Clearly, that would not be  good technically for GLD.
           
            Ron Paul on gold (medium):

Bottom line: the Averages continued to bang against the upper boundaries of their short term uptrends---which have to date acted as a governor on the rate of the Market’s advance.  On the other hand, (1) the indices haven’t bounced off of those resistance points to any meaningful extent, indicating a firm bid remains under the Market and (2) the S&P has traded above the upper boundary of that tight two week trading range.

That suggests to me that 14140/1576 is still a reasonable objective though it may take some time to get there.  In the meantime, our Portfolios will continue to chip away as prices advance.

            Insider sales are soaring (medium):

    Fundamental
    
     Headlines

            No economic news yesterday.  The news flow focused on three much discussed issues of late:

(1)   a potential currency war.  The G20 meets at the end of this week and currency issues appear to be the lead item on the agenda.
                 Japan’s dilemma (medium):

(2)   problems in Europe.

               Update on Spain’s political scandal (medium):
                And Italy (short):

(3)   the fast approaching sequester ‘effective date’.  Obama gives His state of the union tonight.  Rumors are the He will propose new programs for government spending.  So nothing new on the dem side.  As for the GOP, it is remaining adamant that in the absence of targeted spending cuts equaling the sequestration amount [and no additional tax cuts], the sequester will go through.  I believe that it is imperative that they hang tough.

Bottom line:  March 1 (the effective date of the sequester) draws ever closer and neither the dems nor the GOP appear close to yielding on their respective positions.  I am sticking with my line in the sand thesis. Further, I remain encouraged by the latest GDP report that lower government spending does not mean disaster for the other sectors of the economy.  Hence, I am hoping that the sequester happens.

What I am not sure of, is how the Markets will react.  I don’t have to reiterate that I think that the sequester will be a positive for stocks long term.  Short term, who knows; but if stocks suffer some severe whackage as a result, the our Portfolios will likely put some cash back in the Market.

Conditions in Europe are not getting any better; and if there are any fireworks at the G20 meeting over (Japanese) currency policy, it may not be well received in the bond pits.

            Have the bond vigilantes been replaced by brent vigilantes? (medium):

            How sovereign defaults happen (medium):

            The latest from John Hussman (medium):

      Investing for Survival

            Continued currency debasement (long, but a must read):



Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973. His 40 years of investment experience includes institutional portfolio management at Scudder, Stevens and Clark and Bear Stearns. Steve's goal at Strategic Stock Investments is to help other investors build wealth and benefit from the investing lessons he learned the hard way.

No comments:

Post a Comment