Friday, February 03, 2012

The Morning Call + Subscriber Alert + The fact pattern

The Market

The indices (DJIA 12705, S&P 1325) had a mixed day (S&P up, DJIA down) but both closed within their intermediate term trading ranges (10725-12919, 1101-1372) and above the lower boundary of their short term up trends (12315, 1272).

Volume remains anemic; breadth fell. The VIX declined and continues in its short term down trend.

GLD sparkled again. I keep saying that our Portfolios will Add to their holdings on weakness; but we don’t get any.

Bottom line: a bevy of technical factors point to more upside momentum; and I have no reason to doubt it. I continue to believe as a result of the resistance offered by 12919, 1372, along with the fact that stocks will be overvalued at those levels, prices will stall out and be will unable to successfully challenge the upper boundaries of the current trading range.

The record of stock performance in February following a strong January (short):


Yesterday’s economic news was mildly positive: weekly jobless claims fell more than anticipated and fourth quarter productivity was a bit better than expected. Investors were more concerned about today’s nonfarm payroll report and watching the Ber-nank’s house testimony; hence, the quiet day.

Here is some analysis of recent Fed policy (short):

And here is what one regional Fed president is doing about it (short):

Bottom line: in sum, the economic data point to an economy growing at a below average secular rate burdened by an over regulating, over spending, over taxing political class that is more concerned with feathering its own nest than addressing the critical issues. The eurocrats are doing what they have been doing since the beginning of the twentieth century--everything possible to avoid facing the existential threats to their status quo.

In my opinion, however positive the technicals, however positive the spin from the main stream media, there is nothing in the fact pattern that argues for anything beyond mild optimism--which I would argue is our forecast. Certainly, those global PMI numbers Wednesday may be a harbinger of an improving global economy. But one day’s data does not a trend make.

I am not pessimistic about the growth prospects for the US; I am not pessimistic about the Market. I just don’t see the case for equity prices being materially higher than they are at present. So my focus continues to be on those stocks that have ‘gotten ahead of themselves’.

Update on the fourth quarter earnings ‘beat’ rate (short):

Subscriber Alert

The stock price of CME Group (CME-$266) traded above the upper boundary of its Buy Value Range. Accordingly, it is being Removed from the Dividend Growth and Aggressive Growth Buy Lists. Both Portfolios will continue to Hold this stock.

The stock price of CH Robinson (CHRW-$64) traded below the lower boundary of its Buy Value Range. Therefore, it is being Removed from the Aggressive Growth Buy List. It remains well above its Stop Loss Price and, hence, the Aggressive Growth Portfolio will continue to Hold CHRW.

With the stock price of Illinois Tool Works within its Sell Half Range, the Dividend Growth Portfolio will Sell additional shares at the Market open this morning. This will bring the holding to a 50% position.

Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973. His 40 years of investment experience includes institutional portfolio management at Scudder, Stevens and Clark and Bear Stearns. Steve's goal at Strategic Stock Investments is to help other investors build wealth and benefit from the investing lessons he learned the hard way.