Friday, March 23, 2012

The Morning Call, Is a slowing global economy reallly a surprise?


The Market
Technical


The indices (DJIA 13046, S&P 1392) finished down for the day, but continued within their short term up trends (13017-14328, 1372-1479). Obviously, the Dow is starting to toy with the lower boundary of its trend. Were a break to occur, the next support level is not far at 12919.

Volume was light; breadth weak. The VIX rose, closing within its short term down trend but back above the lower boundary of its intermediate term trading range (again). That negates (again) Wednesday’s break below that boundary.


GLD fell. Weirdly enough because the upper boundary of its short term down trend crossed below its secondary support level, GLD’s close put it above the upper boundary of its short term down trend but below the secondary support level. Obviously, not a clear directional signal. I wait for more price information.




Bottom line: stocks remain in an up trend, though the DJIA is nearing the lower boundary of its short term up trend. If it holds, our Portfolios will Add to VIG; if it breaks, our Portfolios will Sell their current VIG holding.

GLD is at a level that anything over a fractional move should provide some directional guidance. A move up will prompt a little buying; a move down will prompt some selling.

Will ‘sell in May and go away’ come a month early? (short):
http://blog.stocktradersalmanac.com/post/Perfect-DJIA-DIA-Storm-Brewing

Bullish sentiment declines (short):
http://www.bespokeinvest.com/thinkbig/2012/3/22/bullish-sentiment-declines.html

Percentage of stocks above their 50 moving average (short):
http://www.bespokeinvest.com/thinkbig/2012/3/22/percentage-of-stocks-above-50-days.html

Fundamental

Headlines


Yesterday’s US economic data was positive: both weekly jobless claims and February’s leading economic indicators came in better than anticipated.

Unfortunately, it was foreign economic indicators that attracted the most investor attention. As I noted in yesterday’s Morning Call, (our) Wednesday overnight China and several European countries reported their February PMI numbers; and they weren’t pretty. Concern resurfaced over a slowing global economy that will have spillover effects on the US and that got reflected in stock prices.

Is the LTRO helping in Europe (medium):
http://www.zerohedge.com/news/two-charts-why-ltro-real-failure

An a series of charts depicting China’s economy (short):
http://www.zerohedge.com/news/12-charts-chinas-chagrin

Bottom line: once again when the obvious risks to our economic recovery nail investors between the eyes, they react like the news is a surprise. That said, the negative reactions to the disappointing news of the last several days have been relatively muted. Equities are holding their short term up trend, at least as of last night’s close. So until I see some genuine signs of worry, I am sticking with our strategy of hedging our (30% cash) bets to the upside via purchasing a very liquid, easily tradable Market ETF (VIG).

Has the easy money been made? (medium):
http://www.minyanville.com/business-news/the-economy/articles/stock-market-trends-equity-risk-premium/3/22/2012/id/40023

The latest from TrimTabs (4 minute video):
http://www.zerohedge.com/news/bidermans-back-and-hes-not-bullish

The latest from Mohamed El Erian (must read):
http://advisorperspectives.com/commentaries/prosyn_32212.php

More from David Rosenberg (medium):
http://www.zerohedge.com/news/bursting-permabullish-bubble-11-out-13-economic-indicators-have-missed


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.