The Morning Call
7/14/14
The Market
Technical
Monday Morning Chartology
Last
week’s news induced volatility in bonds and gold notwithstanding, the growing
number of divergences notwithstanding, there was hardly a blip in the S&P’s
trend on whatever time frame you want to consider. As little sense as this makes to me, the
momentum is there. I just want our
Portfolios exposure limited.
The
long Treasury had a terrific week. On
Friday, it confirmed the break above the upper boundary of a very short term downtrend. Clearly,
momentum has moved to the upside. I
suspect that the lousy economic news out of Japan, the EU and China coupled
with the Portuguese bank problems have investors concerned about a global
growth slowdown and/or a liquidity crisis in the EU banking system. Either would lead to money seeking safety in
the US Treasury.
If that proves
accurate, we can expect TLT to move above the upper boundary of its short term
trading range. On the other hand at this
point in time, we have no idea if the global slowdown/EU banking crisis
scenario is just a temporary phenomenon or if it will ultimately overshadow the
easy money/growth/inflation outlook. Clearly both can’t be right; and
unfortunately, each points to an entirely different direction for bond prices. I guess my bottom line here is that I remain
confused as to what bond investors are discounting, assuming that even they
know.
GLD
was up on Friday, finishing above the upper boundary of its very short term downtrend
for the second day; thereby confirming the break. It remains in a short term trading range, in an
intermediate term downtrend and above its 50 day moving average. Like bonds, I think last week’s pin action
was probably a function of its value as a safety trade. That said, I think GLD could go up under
either a high inflation or a flight to safety scenario---the big difference
being the relative length of the time horizon.
Subscriber Alert
Accordingly, our
Portfolios will nibble at gold at the open this morning. The High Yield Portfolio will Buy the Gamco
Natural Resources, Gold and Income Trust (GNT---yields approximately 10%); the Dividend
Growth Portfolio will Buy GLD and the Aggressive Growth Portfolio will Buy the
Gold Miners ETF (GDX). It is important to
note that these purchases are trades and will have very tight Stop Loss levels
The VIX also had
a volatile week, closing up 15% and above the upper boundary of a very short
term downtrend for a second day, thereby confirming the break of that
trend. It is also above its 50 day
moving average. On the other hand, it is
also well within short and intermediate term downtrends. Certainly, there is the potential that the VIX
may be pointing to an increase in volatility for longer than a day or two. At this point, all we can do is watch.
Fundamental
Investing for Survival from Barry Ridholtz
What
to do in a market correction (medium):
News on Stocks in Our Portfolios
Economics
This Week’s Data
Other
Does
the GDP number reflect the real economy (medium)?
Eurozone
still in recession (short):
Politics
Domestic
Computer
modelling as evidence (medium):
International War Against Radical Islam
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