The Morning Call
The Market
Technical
The
indices (DJIA 15445, S&P 1755) bounced off an oversold condition
yesterday. The Dow remained within a
short term downtrend (15345-15780), an intermediate term trading range
(14696-16601) and below its 200 day moving average. The S&P confirmed the break of its short term
uptrend and has re-set to a short term trading range (1746-1850). It continues to trade in an intermediate term
uptrend (1701-2381) and above its 200 day moving average.
Volume
fell (not a good sign on an up day); breadth improved. The VIX fell finishing within its short term
trading range and intermediate term downtrend.
On a positive note, yesterday’s decline marked the fourth time it has
backed off the upper boundary of its short term short term trading range and
the fifth time it has failed to penetrate its 200 day moving average to the
upside.
The
long Treasury fell but closed over the upper boundary of its short term trading
range for the third day, thereby re-setting the trend to a short term
uptrend. It also remains above its 200
day moving average. However, it is still
in an intermediate term downtrend.
GLD
declined, finishing within short and intermediate term downtrends.
Bottom line: the Market remains disoriented. The indices are not in harmony though they
edged a wee bit closer with the S&P re-setting to a short term trading
range. Volume fell which is not good on an up day in a lousy Market. Nonetheless, further technical deterioration
is needed before we can safely say that the Market has topped.
In the meantime,
we can only watch. It is too soon to be
Buying and too late to be Selling anything other than stocks that violate their
Stop Loss Prices or whose company has declined in quality and no longer qualifies
for inclusion in our Universe.
Will
the S&P hit new highs again soon (short):
This
is a good technical review (medium):
Fundamental
Headlines
Yesterday’s
economic data was again subpar: weekly retail sales were mixed to poor; December
factory orders were down less the anticipated though November orders were
revised down. The only news from
overseas other than falling markets was the Russian government pulling a bond
offering due to ‘Market conditions’.
Of
some interest, the CBO released its budget forecast. The good news is that it expects the budget
deficit to decline in FY2014. The bad
news is that it expects economic growth to slow (not likely to be well received
by investors in the current atmosphere).
Worse it confirms what we all knew, Obama’s protests to the contrary, to
wit, Obamacare will lead to higher unemployment and higher budget deficits.
And:
And
the White House’s pathetic response (medium):
Bottom
line: I think the best description of the pin action yesterday was: a relief
rally off of an oversold condition.
Little news of any kind plus low volume (absence of sellers) allowed
prices to drift higher. Certainly, there
was nothing happening that would mitigate concerns over turmoil in the emerging
markets or hint that the recent poor economic numbers were outliers. On the contrary, more and more pundits are stepping
up and expressing concern.
The Market rout
proves the failure of Fed policy (medium and a must read):
The
latest from Marc Faber (3 minute video):
The
latest from Bill Gross (11 minute video):
Why
emerging markets matter to the EU banks (medium):
However,
as I said in yesterday’s Morning Call, is far too soon to be altering our economic
forecast and seems more reasonable to simply assume that that investors are starting
to realize that stocks are very generously valued and acting accordingly.
Challenging
the consensus (medium and a must read):
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