Thursday, March 29, 2012

The Morning Call-So maybe things aren't so great


The Market

Technical


The indices (DJIA 13126, S&P 1405) had another down day, but remained within both their short term (13085-14512, 1386-1494) and intermediate term (11349-16349, 1190-1757) uptrends--although clearly the DJIA is again nearing its lower boundary.

Volume rose slightly; breadth fell. The VIX declined (unusual for a Market down day), closing right on the lower boundary of its intermediate term trading range.

GLD fell along with everything else but finished well over the lower boundary of its short term trading range. However, its decline marked a failure to successfully penetrate its 200 day moving average--and that’s not good.

Bottom line: stocks are in an up trend. If the Averages bounce off the lower boundaries of their short term up trend, our Portfolios will nibble some more pushing cash towards the 25% level (now 27%). On the other hand, if that boundary is broken, VIG is history.

More on the seasonal stock price patterns of late March/early April (short):
http://blog.stocktradersalmanac.com/post/Last-Two-Days-Q1-Bearish-SPX-SPY-DJIA-DIA-Last-Day-Bullish-COMPQ-QQQ-RUT-IWM

Another divergent indicator (short):
http://advisorperspectives.com/dshort/guest/Chris-Kimble-120328-Commodity-Update.php

Fundamental

Headlines


Yesterday’s US economic data was mixed at best: weekly mortgage applications were down though purchase applications were up; February durable goods orders were disappointing, however, ex transportation, they were in line. These stats got the Market off to a rocky start.

Adding weight on stock prices were continuing worries about (1) recession in China, (2) strikes in Spain which should ongoing as this being read and (3) Moody’s downgrade of four Portuguese banks.

The latest on Spain (medium):
http://www.nakedcapitalism.com/2012/03/spain-follows-greece.html

Looks like the eurocrats are about to issue more debt to.........well, pay off debt. Think that they will ever learn? (medium):
http://www.zerohedge.com/news/europe-leaks-it-will-fix-crushing-debt-problem-%E2%82%AC940-billion-more-efsfesm-debt

Not so far (medium):
http://advisorperspectives.com/commentaries/pimco_32712.php

Bottom line: have you noticed that the news is getting a bit more ‘mixed’; and all those issues about which I have been worried are starting to re-surface. The economy is not smoking but rather performing exactly per our forecast. Europe is not out of its sovereign debt mess no matter what the fantasies of the eurocrats. Oil is still too high; and our own political class spends more time either ignoring or obfuscating the truth than addressing it.

Our budget charade (short):
http://www.washingtontimes.com/blog/inside-politics/2012/mar/28/obama-budget-defeated-414-0/

And Israel cancels all military Passover leaves (medium):
http://www.zerohedge.com/news/israel-army-cancels-passover-vacation-while-korea-begins-fuelling-missile-test-rocket

Of course as I have noted, that doesn’t mean that these concerns aren’t already in the price of eggs. But it does keep me at defcon 4, meaning that any break in the current investor euphoria is a signal to beat a hasty retreat.



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.