The Morning Call
2/11/14
The Market
Technical
The
indices (DJIA 15801, S&P 1799) had a quiet day, trading in a narrow
range. They both remain in short term
trading ranges (15330-16601, 17746-1858).
The Dow is in an intermediate term trading range (14696-16601) while the
S&P is in an uptrend (1702-2485).
Both are in long term uptrends (5050-17400, 728-1900).
Volume
was really anemic; breadth mixed. The VIX
was off, closing within its short term trading range and intermediate term downtrend.
The
long Treasury was up, finishing within a newly re-set short term trading range
and an intermediate term downtrend.
Short term breadth looks strong, suggesting more upside potential.
GLD
also rose, also on good breadth. It
broke the upper boundary of that very short term uptrend. A close Wednesday above that boundary will
confirm the break. However, as I pointed
out yesterday, of late GLD has had a dismal record of follow through after a
break; so I think a little extra caution is warranted before getting too
jiggy. GLD remains in both a short and
intermediate term downtrend.
Bottom line: I think that yesterday’s dull session was largely
a function of investors not wanting to make any bets ahead of Janet Yellen’s
first congressional testimony which takes place today. That leaves stocks in a short term trading
range.
While last week’s
recovery from a terrible Monday was a plus, it was on declining volume---which
was even more pathetic yesterday. In
addition, breadth hasn’t been much for the bulls to brag about. Nevertheless, stocks bounced off of a very
visible support level; so there is good news and bad news---not atypical in a
trading range.
For now, we just
sit back and wait for either a break over the prior highs or for the S&P to
follow the Dow and break the lower boundary of its intermediate term uptrend.
The only
potential action that would be needed is if any price strength pushes one of
our stocks trades into its Sell Half Range and our Portfolios act accordingly.
Fundamental
Headlines
No
economic news either here or abroad yesterday.
As I mentioned above, Yellen gives her first congressional testimony
today. I suspect many investors held their
fire yesterday out of concern that she could say something unexpected.
****Yellen’s
opening statement was just released and there was nothing surprising in her
comments.
In
the meantime, the White House announced a delay in the implementation of the Obamacare
employer mandate for companies with under 100 employees. That is clearly a short term positive; although
if nothing is done to fix the problems, it simply postpones the agony.
In
addition, republicans were in conference, addressing their strategy for dealing
with the rapidly approaching debt ceiling.
Consensus is that they will avoid a confrontation over the issue. Again, that is good news in the short run;
but does nothing to curb their long term penchant for spending more of your and
my money.
Bottom line: the
two pieces of political news are somewhat encouraging for the short term though
I suspect they will have little impact on equity prices. Everything else was status quo yesterday: the
economy is growing but the yellow light is flashing and stocks are very richly
valued.
I
can’t emphasize strongly enough that I 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.
Death
by finance (medium):
Are
commodities breaking out (short:
The
latest from John Hussman (medium):
The
latest from John Mauldin (medium):
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