The Morning Call
The Market
Technical
The
indices (DJIA 14127, S&P 1525) moved higher yesterday, staying within both
their (1) short term uptrends [13562-14217, 1418-1597] and (2) their
intermediate term uptrends [13455-18455, 1423-2017].
The S&P
close again right on 1525, a level which has acted as barrier over the last two
weeks. If this move continues to the
upside, it would point to a run at 1576; a continuing inability to do so is suggestive
that a major top is forming. So follow through
is the thing to watch today.
Volume
fell; breadth was mixed---and is giving no sense of which way this Market could
break. The VIX declined and remains
within its short and intermediate term downtrends---this is a positive for
stocks.
GLD
was off fractionally, once again closing right on the lower boundary of its
short term downtrend.
Bottom line:
stocks are still trying to resolve the question, is the Market in a topping
process or positioning itself for an attack on the 14190/1576 levels (note: I
am embarrassed to point out that my
inability to read my own writing led me at some point to transcribe 14190 as
14140. The correct number is 14190 and I
apologize for a silly error)? Whatever
occurs, our strategy will remain the same: lighten up if prices move higher; if
they move lower, do nothing until stocks are at least back to Fair Value.
Some
interesting stats on the size and frequency of corrections (short):
The
S&P and the CRB indices (short and a
must read):
Stocks
March trading pattern (short):
The
Shanghai composite breaks 50 day
moving average (short):
Fundamental
Headlines
It
was a pretty dull day overall. No
economic data. Not much fall out and
little discussion on the sequester---which I am interpreting as investor
agreement that the sequester is much ado about nothing. Little news out of Europe ,
leaving investors in a state of ignorant bliss.
The sequester
and the trend in government spending (short):
10
reasons why the euro crisis may be incurable (medium):
There
was some concern about future Chinese growth based primarily on a 60 Minutes editorial
Sunday night regarding overbuilding in housing and a (coincidental) change in
that policy announced overnight (Sunday)---which Stephen Roach poo poos in this
link (skip ahead to the 3 minute 30 second point):
***over
night Chinese leaders set more moderate growth objectives for the economy; and
in Europe , the service PMI ’s
came in better than expected.
Bottom
line: with little upon which to comment,
I simply summarize my point of view: the economy is growing sluggishly, as
expected; the government remains a burden to that growth rate, though the
sequester could (operative word) be a
harbinger of less spending and less debt as a percent of GDP . Based on those two factors, stocks are over
priced (circa 7% on the S&P).
Regrettably,
there is more: the Fed is digging a deeper hole daily---and as Warren Buffett
noted yesterday morning, when the Fed starts tightening, stocks are going down;
Europe is a mess and will require a lot of luck to
escape a crisis because its political class is fiddling. So our Portfolios are carrying more cash than
would other wise be appropriate at current price levels.
I like our cash
position.
The
latest from Jeff Gundlach (medium):
The
latest from John Hussman (medium):
Another
great must read bit of analysis from Lance Roberts (medium):
Update
on Doug Short’s valuation analysis:
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