The Morning Call
The Market
Technical
The
indices (DJIA 15179, S&P 1639) had one of those see saw days, but ended up
on the day. Both finished within all
major uptrends: short term (14786-15534, 1632-1711), intermediate uptrends
(14175-19175, 1501-2089) and their long term uptrends (4783-17500,
688-1750).
The
S&P has now made a higher low (6/12) versus the 6/5 low (the bottom of the
decline off the 5/22 high). The key now
is, can it make a higher high versus the most recent 6/10 rebound high
(1648). If it does, the S&P is
probably headed to the upper boundary of its short term uptrend. If not the lower boundary of its short term
uptrend as well as the 6/12 higher low are the levels to watch.
Volume
picked up; breadth improved. The VIX
declined, finishing within its short and intermediate term downtrends.
GLD
declined but closed above the recent double bottom and the lower boundary of
its long term uptrend. However, short
term, it is directionless.
Bottom line:
volatility persists; and while all major trends remain in tact, the lower
boundary of the S&P short term uptrend has been under assault and the
sustainability of upside momentum is in question. I am not saying that the current advance is
over; but I am saying that it is breathing hard and without another shot of
adrenalin, the risk grows that it may be ending.
Any move to the
upside that pushes our stocks into their Sell
Half Range
Fundamental
Headlines
Only
one economic indicator was released yesterday---the NY Fed June manufacturing
index which was much stronger than anticipated.
That along with an improvement in the Nikkei overnight made for a great
first couple of trading hours.
However,
in the background there was a lot of chatter about Wednesday’s FOMC meeting
with the undertone that the Fed wouldn’t be tapering anytime soon. Then mid afternoon, an article in the
Financial Times suggested that the Fed would indeed be chatting up the
likelihood of tapering sometime in the future.
That pushed prices down in another big price swing. Then in the last hour, sentiment gyrated back
to the ‘no tapering’ scenario and stocks recovered.
Bottom
line: the point of the above is not a blow by blow description of intraday
trading but (1) to illustrate the degree and sensitivity of investor
schizophrenia over Fed tapering and (2) to suggest that it is a genie that is
unlikely to be pushed back into the bottle, no matter what the Fed says
Wednesday or any other time.
That
said, given the Fed’s current stated guidelines on unemployment and inflation,
I can’t imagine them starting any tapering process any time soon. So I would expect the statement coming out of
the Wednesday meeting to be dovish. Nevertheless,
it appears that investors are starting to worry about what the end game to the
current unprecedented Fed easing looks like.
If so, they may at last be checking the history books, figuring the odds
of a successful transition from easy to tight money and concluding that they
are not high. No one knows if this
affair ends in recession or inflation; but they may be realizing that neither
will be good for stocks at current valuations.
The
latest from JP Morgan (medium and today’s must read):
The
latest from John Hussman (medium):
The
latest from Lance Roberts (medium):
The
latest from David Stockman (medium):
More
on current valuations (short):
How
is this for correlation (short):
What
higher interest rates may mean (medium):
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