Monday, June 11, 2012

The Morning Call-The pain in Spain sends more money down the drain

The Market


Monday Morning Chartology

The S&P has now closed above the downtrend off the May high for the second day. If this break is confirmed, it probably sets 1266 (brown line) as the lower boundary of its short term trading range. If not, I think it leaves open the question of whether the short term trend is down or a trading range. Note the lower boundary of the intermediate term uptrend (purple line) has pushed through the old 1230 support level.

GLD’s chart also raises questions versus providing answers. It traded above the short term down trend for four days---usually sufficient to confirm a break. However, on the fifth day, GLD got rocked and closed back below that trend line---which under our time and distance discipline makes any call of a confirmation of a break a bit iffy. Friday’s trading didn’t do a lot to clarify the situation, so I am leaving open for another day the option to call either a successful or unsuccessful challenge of short term downtrend. The good news is that GLD remains above the lower boundary of its intermediate term trading range (purple line).

The VIX is the least confusing of all the charts. It remains above the lower boundaries of both its short term up trend and its intermediate term trading range.

Update on ‘the best stock market indicator ever’:


The big news over the weekend is, of course, the EU financing being provided to the Spanish banks. While this undoubtedly will help in the short run, I can’t find anyone who thinks this gets the EU any closer to a long term solution. And that seems to be reflected in the Market’s rather tepid response to the news.

Frankly, I thought that any plan to bail out the Spanish banks would have set up the Market for a real moon shot---which shows what I know. Of course, it could still happen once the Market opens. But right now, it appears that either this bail out was either already in the price of stocks or much more comprehensive solution was expected. Either way, I think we hold our fire. The Greek and French elections are coming soon; and the Market’s current lack of reaction gives us the opportunity to wait for the results of these elections without incurring a huge opportunity cost.


This Week’s Data


Household balance sheets continue to improve (short):

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.