The Closing Bell--the 'full Draghi'

Next week I am taking a belated Labor Day week vacation. So no Morning Calls or Closing Bell. I will be back on line Monday 9/17. In the meantime, I will have my computer and if action is needed will be in touch via Subscriber Alerts.

Statistical Summary

Current Economic Forecast

2012

Real Growth in Gross Domestic Product (revised): +1.0- +2.0%
Inflation (revised): 2.5-3.5 %
Growth in Corporate Profits (revised): 5-10%

2013

Real Growth in Gross Domestic Product +1.0-+2.0
Inflation 2.0-2.5
Corporate Profits 0-7%

The Morning Call-Draghi buys more time

The Market

Technical

The indices (DJIA 13292, S&P 1432) had a blowout day. The S&P busted through the upper boundary of its short term trading range (1266-1422) while the DJIA remains below its comparable boundary (12022-13302). That means that (1) our time and distance discipline becomes operative with respect to the S&P short term trading range and (2) the DJIA and S&P are in divergent trends. Both of these factors must be resolved before we can assume that the short term trend has been re-set from a trading range to an uptrend. Meanwhile, both Averages remain within their intermediate term uptrends (12311-17311, 1295-1875).

Volume rose but not significantly so; breadth improved. The VIX plunged 12% and closed below the former upper boundary of the short term downtrend. This was the fifth day since its break above that resistance level which means it was on the cusp of the time element of our discipline. I am not changing the call at this time but if the VIX continues its decline, I may reverse it.

I ran our internal indicator again last night with these results: in a Universe of 162 stocks, 61 were higher than their April 2012 highs, the time at which the Averages topped out at the 13302, 1422 level, 77 were not and 24 were too close to call. That is slightly worse than our review when the indices were DJIA 13250, S&P 1415.

GLD was up slightly, closing well above the lower boundaries of its newly re-set short term uptrend and the intermediate term trading range.

Bottom line: I hate being wrong and I am clearly in a position of being proven so if the S&P confirms yesterday’s upside break and the DJIA also confirms this move. However, before I club myself to death, both of those conditions need to be met. So for the moment, nothing changes. Clearly, the key is follow through.

Fundamental

Headlines

Yesterday got off to a roaring start with a better than expected ISM nonmanufacturing index plus upbeat weekly jobless claims and the ADP private payroll report. The latter two got investors jiggy about a positive nonfarm payroll report today (OOOpps). That probably makes sense; although I think that a firming employment picture only confirms that the risk of recession is declining and does not suggest that the economy is about shift into a higher gear. To be sure these numbers are a plus and certainly accounted for some of yesterday’s strong pin action. But they are already in our Model and therefore do nothing to improve valuations

The other Market moving event was the ECB meeting and more importantly, the revelation of more specifics of Draghi’s new plan. Highlights include: (1) no ECB bond purchases will occur until an individual country requests help from the EFSF/ESM and agree to their terms, (2) any ECB bond purchases will be within their mandate of price stability, (3) purchases will be unlimited and focus almost exclusively on buying short term bonds, (4) the purchases will also be sterilized fully, i.e. the will be no growth in the money supply [yeah, right---how in the world do they sterilize an open ended commitment?], (5) results of any borrowing will be published weekly which will include specify individual countries and the amounts borrowed, (6) the new bond purchases will be pari passu to other private holders.

I want to be as fair as I can about this plan. The good news is that it will almost certainly buys time for the problem countries and banks to implement plans that will effectively deal with their insolvency. Equally important, judging by yesterday’s pin action, investors are indicating their willingness to continue to give the eurocrats the benefit of the doubt. I had questioned the durability of that motivation earlier in the week; clearly, I was premature at best.
However, this plan does nothing to correct or reform the irresponsible fiscal policies that got the PIIGS in trouble in the first place. Yes, there is the element of conditionality; but every loan made to date has been conditioned on the recipient country following lender guidelines and we know how that has worked out.

Furthermore, as I noted above, sterilizing an open ended commitment sounds more like wishful thinking than reasoned policy.

Finally, what bank or country is going to want to beg for funds and then have the ECB publish a weekly tally on how much they borrowed? Remember our TARP---all the banks were required to take money so that the ones in trouble wouldn’t be stigmatized, i.e. risk losing deposits as investors fled a demonstrably weak institution. We have already seen a mass exodus of deposits from southern European banks. How much worse could it get if citizens/depositors can now get a weekly update of just how deeply in trouble these guys are?

Here is more: http://www.zerohedge.com/news/bundesbank-replies-ecb

And:
http://www.zerohedge.com/news/desperate-maladies-require-desperate-measures

Bottom line: price is truth and truth says that the EU will ‘muddle through’. God bless those euros because that is our forecast. However, (1) given that outlook, the S&P’s Fair Value today is roughly 1382 as calculated by our Model. So nothing about this ‘good news’ drives me to push money in the Market. Granted our Portfolios have more cash than would be normal at Fair Value [15%], but (2) the ‘tail risk’ remains of an EU catastrophe, notwithstanding Draghi’s comments to the contrary. To be sure, he bought time; but nothing in his plan moves Europe a short hair closer to solving the underlying problems of fiscal irresponsibility the spawned the crisis in the first place nor does lending more money to already too indebted nations/banks correct the condition of too much debt.

In the end, I am simply too risk averse to bet my money on the chance that this time the euros really mean it. As I have said before, I would rather pay an opportunity cost for the assurance that this time they mean business.

The root causes of the current economic malaise (medium):
http://advisorperspectives.com/commentaries/arp_9612.php

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.

The Morning Call + Buying gold

The Market

Technical

The indices (DJIA 13047, S&P 1403) turned in a mixed performance yesterday (Dow up, S&P down), finishing within both their (1) short term trading ranges [12022-13302, 1266-1422] and (2) intermediate term uptrends [12304-17304, 1295-1875].

Volume dropped again; breadth was mixed. The VIX was down slightly and therefore, remains between the upper boundary of a short term downtrend and the lower boundary of its intermediate term trading range. I should note though that its recent rise unaccompanied by any move in the Market is not a positive sign.

GLD was off fractionally but continued to trade above upper boundary of its short term downtrend for the third day. That confirms the break of this trend. Additional shares will be Bought at the Market open this morning (upping positions to 17% of total Portfolio). GLD remains well above the lower boundaries of a very short term uptrend and of its intermediate term trading range.

Bottom line: the Averages remain on auto pilot, avoiding a serious challenge to either the upper boundaries of their short term trading ranges or the lower boundaries of their very short term uptrends. Until we know which of these trends will dominate the other, my inclination remains to do nothing, largely as a result of lousy breadth numbers and the rising VIX.

The transports have broken down (short):
http://advisorperspectives.com/dshort/guest/Chris-Kimble-120905-Transports-and-Dow-Theory.php

Fundamental

Headlines

Yesterday’s economic news was neutral: weekly retail sales were mixed; second quarter productivity came in better than expected while unit labor costs were higher than forecast---nothing Market moving.

Indeed, investors were looking through the day and focusing on the big news items today (the ECB meeting) and tomorrow (nonfarm payrolls)---and as I noted in Tuesday’s Morning Call, the focus on the former is on any change the ECB may make in interest rates (***didn’t happen) and/or further comments by Draghi on his new plan (***press conference due any minute now).

The math of Europe’s (Draghi’s) dilemma (medium):
http://www.nakedcapitalism.com/2012/09/a-breakthrough-in-europe.html

Spain’s bankruptcy hell (short):
http://www.zerohedge.com/news/spains-hell-bankruptcy-lawyers-heaven

Greece’s unemployment rate climbing (short):
http://www.zerohedge.com/news/economic-death-greek-unemployment-rises-1-one-month

Ireland still has its problems (medium):
http://uk.reuters.com/article/2012/09/05/us-ireland-imf-idUKBRE8841IW20120905

Bottom line: the pre Labor Day trading lethargy extended through the early part of this week awaiting today---the first really big news day of what should be a busy September. How stocks react to today’s news out of the ECB could give a hint of the likely Market direction into the November election.

If all that occurs is more ECB money printing, it will do nothing to solve the EU sovereign/bank debt problems. So, the question will be whether investors will continue excuse the eurocrats from making fiscally responsible decisions. I speculated in yesterday’s Morning Call, that that game may be coming to an end; but clearly that is just my guess. In any case, I don’t consider easier money a viable solution to what ails Europe. Therefore, I would not be a buyer of stocks but I would be of GLD.

If the eurocrats actually take an adult action, I would consider it a positive in that it would support our ‘muddle through’ scenario. However, since that already is built into our Valuation Model, it likewise provides little reason to lift our Portfolios’ equity exposure; though I would have to reconsider the size of our GLD position.

In other words, whatever the ECB does, our Portfolios are not Buyers of stock except at lower price levels. However, if the policy is one of more money printing, they will likely Add even more to their GLD holdings.

The latest from Bill Gross (medium):
http://www.pimco.com/EN/Insights/Pages/The-Lending-Lindy.aspx

The latest from Todd Harrison (medium):
http://www.minyanville.com/special-features/random-thoughts/articles/todd-harrison-todd-harrison-minyanville-todd/9/5/2012/id/43715

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.

The Morning Call---Draghi's new plan

The Market

Technical

The indices (DJIA 13035, S&P 1404) experienced a somewhat volatile day, finishing on the downside. Nevertheless, they remain within (1) their short term trading ranges---though they are remain quite close to the upper boundaries [12022-13302, 1266-1422], and (2) their intermediate term uptrends [12302-17302, 1295-1875].

Volume declined; breadth weakened. The VIX closed above the upper boundary of its very short term downtrend for the third day, thereby breaking that downtrend. It remains well below the upper boundary of a short term downtrend but above the lower boundary of its intermediate term trading range.

GLD rose fractionally, ending above the upper boundary of its short term downtrend for the second day. One more close over this boundary will likely result in additions to this holding. GLD also finished above the lower boundaries of (1) a very short term uptrend and (2) its intermediate term trading range.

Bottom line: the Averages remain within their primary trends. The most important question at the moment is whether the resistance offered by the upper boundaries of the indices’ short term trading ranges will prove a stronger force than the momentum from their very short term uptrends. As you know our internal indicator along with a number of breadth measures suggest that 13302, 1422 will prove the more powerful.

Even if that were not the case, I am still hesitant to be buying stocks when they are in the proximity of a resistance level of a primary trend. I would rather hold fire and pay an opportunity cost should prices break through those resistance levels.

Update on ‘the best stock market indicator ever’ (short):
http://advisorperspectives.com/dshort/guest/John-Carlucci-Best-Indicator-Ever-Update.php

Fundamental

Headlines

Yesterday’s economic data was a bit disappointing: the August ISM manufacturing index came in below forecasts while July construction spending was down. These somewhat gloomy stats led to early day loses in stock prices---although a couple of lower than forecast numbers in a string of generally upbeat datapoints (such as what we have had) is to be expected.

Later in the day, Bill Gross gave a thumbs up to a (another) reported Draghi plan---this one to buy short term (less than three years) bonds of countries with faltering economies and budgets. This got investors feeling a little more upbeat and equities rallied in the afternoon, though they were unable to reach the flat line. Since the plan would be little more than money printing, it also triggered buying in the inflation plays.

The rather tepid investor response this latest Draghi proposal reminded me a bit of the response to QEIII, i.e. everybody knows it will happen; they know it won’t do much good; so the expectations for its implementation doesn’t spawn much of a Market reaction.

There is only one problem. The Fed is trying to pump up a sluggishly growing economy; and while there are political/economic issues, the US is not in danger of dropping off a cliff tomorrow. So yes, investors believe QEIII will occur; that it won’t do much good but the most negative outcome to Bernanke’s useless money printing is inflation.

On the other hand, the eurocrats are trying to paper over fiscal mismanagement on a scale that makes our political class’ handy work look like that of rank amateurs. As you know my fear is for that moment when investors know the eurocrats are simply going to throw more printed paper at the problem and that it won’t do much good. Because unlike the US situation in which investors yawn and buy more gold, once investors stop giving the eurocrats the benefit of the doubt, the EU will run off the tracks.

We should get a better feel for investor sentiment tomorrow when the ECB meets. Expectations are that interest rates will be cut and that more details will be forthcoming on Draghi’s new, new bond buying plan.

Has QEIII already started (medium):
http://www.minyanville.com/sectors/precious-metals/articles/monetary-policy-qe3-Quantitative-easing-gold/9/4/2012/id/43693

Draghi’s plan (or lack thereof) (medium and today’s must read):
http://www.zerohedge.com/news/mario-draghi-reprises-hank-paulson-demands-full-monetization-authority-or-else-threatens-end-eu

Thoughts on Draghi’s plan from JPM (medium):
http://www.zerohedge.com/news/what-happens-once-mario-draghi-unleashes-european-creosote-bank

And (short):
http://www.zerohedge.com/news/one-chart-explain-why-ecbs-short-dated-bond-buying-program-will-fail

***overnight, Germany throws a wet blanket over the whole plan (medium):
http://www.zerohedge.com/news/germany-steals-draghis-bazooka-main-event-monetization-mutiny-grows

And investors send an all too clear message to the Germans (medium):
http://www.zerohedge.com/news/german-10-year-bond-auction-suffers-technical-failure

Europe continues to contract (medium):
http://www.nakedcapitalism.com/2012/09/the-european-zombie-slouches-on.html

Bottom line: stocks continue to meander at a level roughly comparable to Fair Value as defined by our Model. That is not surprising. After all, nothing in the flow of economic data, the political scene or Fed policy would cause a shift in the factors determining equity values and pricing stocks at Fair Value makes sense.

As always the ’but’ is that Europe is a mess. The latest ‘plan’ is to print money and buy (more) bonds of near defunct sovereigns and banks. But creating more debt does not solve the problem of too much debt. Serious reform has to take place in the fiscal governance of the EU and its members or sooner or later the whole exercise will go down like the Titanic. And to date, the EU effort including the latest plan to buy more short term bonds is like putting a Band-Aid on a gunshot wound. The risk remains that the Market will call ‘bulls**t’ on the eurocrats, EU sovereign interest rates do a Titan III shot and severe economic consequences follow.

Thus the tail risk of a eurocrat f**kup is enormous and would quickly alter the Fair Value calculation of our Model. It is for this reason that our Portfolios have an above average cash position and a large holding of GLD.

A look at third quarter earnings (medium):
http://www.zerohedge.com/news/financials-hide-analysts-earnings-recession-expectations

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.

The Closing Bell-The presses will keep running full blast

Statistical Summary
Current Economic Forecast

2012

Real Growth in Gross Domestic Product (revised): +1.0- +2.0%
Inflation (revised): 2.5-3.5 %
Growth in Corporate Profits (revised): 5-10%

2013

Real Growth in Gross Domestic Product +1.0-+2.0
Inflation 2.0-2.5
Corporate Profits 0-7%

Current Market Forecast

Dow Jones Industrial Average

Current Trend (revised):
Short Term Trading Range 12022-13302
Intermediate Up Trend 12280-17280
Long Term Trading Range 7148-14180
Very LT Up Trend 4546-15148

2011 Year End Fair Value 10750-10770

2012 Year End Fair Value 11290-11310

The Morning Call--Bernanke's big day

The Market

Technical

The indices (DJIA 13000, S&P 1399) had a hiccup yesterday, closing down more than just fractionally. Nevertheless, they remain well within their primary trends (1) short term trading ranges [12022-13302, 1266-1422] and (2) intermediate term uptrends [12276-17176, 1292-1872].

The real question, of course, is, will there be follow through to the downside that would extend to the lower boundaries of one or the other of aforementioned primary trends? Lacking omniscience, I have no idea; but were it to occur, our Portfolios would be Buyers.

Volume was flattish; breadth declined with the on balance volume indicator just getting worse. The VIX spiked for the fourth day in a row and is up seven out of the last eight sessions. It closed above the upper boundary of the very short term downtrend. Our time and distance discipline is operative now; but this move is not a positive signal for stocks.
http://www.bespokeinvest.com/thinkbig/2012/8/30/breadth-remains-weak.html

Carter Worth, a favorite technician of mine, is not worried about the Market (I disagree)

Carter Worth's technical view of the stock market.


If you don't see the video go here -- Carter Worth

The Morning Call--the odds of an EU crisis have not diminished

The Market
Technical

The indices (DJIA 13107, S&P 1410) continued to drift yesterday, finishing the day slightly to the upside. The remain within (1) their short term trading ranges [12022-13302, 1266-1422] though they are in a position to challenge the upper boundaries and (2) their intermediate term uptrends [12266-17266, 1291-1871].

Volume was up modestly; breadth improved. The VIX rose again but is still below the upper boundary of its short term downtrend. However, its recent spike is a bit incongruous with stock prices meandering in a tight range---suggesting that investors are anticipating more volatility in the near future. It remains above the recently re-set lower boundary of its intermediate term trading range.

Don’t worry about the low volume (short):
http://www.marketwatch.com/story/low-volume-forgetaboutit-2012-08-29?link=home_carousel

GLD declined, falling below the upper boundary of its short term downtrend. Under our time and distance discipline, this close negates the recent break, leaving the downtrend in tact.

The technical picture on gold looks good (medium):
http://www.zerohedge.com/news/euro-gold-technicals-look-near-perfect

Bottom line: stocks seem to be in suspended animation right now awaiting news from Jackson Hole on Friday and from Europe in September. I am a bit surprised that investors are willing to hold equities when the most positive outcome is fully priced in. Clearly I could be wrong on that judgment; but I can’t come up with a plausible scenario that is more positive that which is currently expected. So I am holding to the position that stocks are near their near term highs and focusing on the Sell side in our Portfolios.

The Morning Call--Draghi's hopey, changey plan

The Market

Technical

Yesterday, the indices (DJIA 13102, S&P 1409) inched lower, remaining within (1) their short term trading ranges (12022-13302, 1266-1422) and their intermediate term uptrends (12258-17258, 1290-1870).

Volume fell; breadth was mixed though the flow of funds and on balance volume indicators are looking dicey. The VIX declined but continues above the (recently re-set) lower boundary of its intermediate term trading range and below the upper boundary of its short term downtrend.

GLD rose slightly but enough to put it back above the upper boundary of its short term downtrend as well as the lower boundary of its intermediate term trading range.
http://www.marketwatch.com/story/bullishness-rising-faster-than-gold-2012-08-28

Bottom line: the Averages seem to have lost momentum; and this with an easier Fed policy and the successful presentation of Draghi’s plan for bailing out Europe priced into the Market---both of which make most investors feel warm and fuzzy. That doesn’t leave much room for bad news. Given that we are transitioning from a dull, quiet August to an action packed September in which we will get a snoot full of news from both the Fed and the EU, I worry about a hiccup in one or both of these factors. Hence my conviction that 13302/1422 will hold and my focus on our stocks Sell Half prices.

Dow theory (short):
http://www.ritholtz.com/blog/2012/08/dow-theory/

Fundamental

Headlines

The flow of economic news picked up yesterday with the overall trend being mixed (surprise, surprise). Weekly retail sales and the most recent Case Shiller home price index were modestly positive, while consumer confidence and the Richmond Fed’s manufacturing index were disappointing. Probably the most impactful number was consumer confidence which was much below expectations and that got stocks off to a shaky start. That notwithstanding, the stats still confirmed the scenario of a sluggishly growing economy.

The rest of the day, investors spent with their thoughts on (1) the republican convention [they yawned], (2) hurricane Isaac [they were relieved that it is not as bad as it could be], (3) Jackson Hole [they hoped that if the Ber-nank, doesn’t give us QEIII on Friday, he’ll surely do it at the September FOMC meeting] and (4) Draghi’s next act [they said three Hail Mary’s, lifted their eyes to heaven and prayed but steadfastly refused to reduce their portfolio risk]. Well, good luck with all that:

Speaking of which [Draghi’s next act that is], he just wrote this hopey, changey op ed full of bulls**t signifying nothing (medium):
http://www.zerohedge.com/news/jawboning-fingerboning-mario-draghi-releases-op-ed-future-europe

QEIII and consumer confidence (medium):
http://www.zerohedge.com/news/guest-post-qe3-mechanism-broken

A not very encouraging update on Greece (13 minute video):
http://www.nakedcapitalism.com/2012/08/nonsense-economics-and-the-deepening-greek-crisis.html

More pain from Spain (medium):
http://www.zerohedge.com/news/spain-shall-bitterly-begin-his-fearful-date

Bottom line: stocks (as defined by the S&P) remain overvalued (as defined by our Model) while the narrative around Fed policy and salvaging Greece, Spain and Italy continues to focus on the good news scenario. That narrative could prove correct; but if it does, it is already in current prices. That would be OK if (1) the odds of it occurring were well above 50/50 and (2) the downside risks if it didn’t happen were not that great. Unfortunately, in my opinion, neither of the above conditions exists. That is why I want a decent sized cash position and a price cushion before committing it. I am not touting a doomsday scenario; I am simply saying that the risks at current price levels are sufficient to warrant a cautious approach to this market.

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.

The Morning Call--Get ready to strap yourself in

The Market
Technical

Yesterday, the indices (DJIA 13124, S&P 1410) meandered in a narrow range and finished down slightly. They closed within both primary trends: (1) their short term trading ranges [12022-13302, 1266-1422---clearly at the top of that range] and (2) their intermediate term uptrends [12252-17252, 1288-1868].

Volume continues to be quite low; breadth was down. The VIX rose, leaving it between the (my newly re-marked) lower boundary of its intermediate term trading range and the upper boundary of the short term downtrend.

GLD fell, closing right on the upper boundary of its short term downtrend and above the lower boundary of its intermediate term trading range.
http://www.minyanville.com/sectors/precious-metals/articles/GDX-SIL-GDXJ-255EHUI-precious-metals/8/27/2012/id/43513

The Morning Call--Monday Morning Chartology + Clarity on Merkel

The Market
Technical

Monday Morning Chartology

The S&P is solidly within a very short term uptrend (black line) and after Friday’s strong up day, looks poised to challenge 1422 again.

The Morning Call + Adding to our GLD position

Today in my 70th birthday; friends and relatives will start arriving this afternoon for a weekend bash. So no Morning Call tomorrow or Closing Bell on Saturday. I am hoping to be sober enough to do Monday’s Morning Call.

The Market

Technical

The indices (DJIA 13172, S&P 1413) turned in a mixed performance (Dow down, S&P up), remaining (1) within their short term trading ranges (12022-13302, 1266-1422) and (2) their intermediate term uptrends (12223-17223, 1285-1865).

Volume was lower; breadth was weak. The VIX was up fractionally, continuing to trade in its short term downtrend. However, as I noted yesterday, I am still not convinced that its recent performance isn’t either a ‘fat tail’ to our time and distance discipline or that the VIX simply shifted the lower boundary of the trading range to a slightly lower level.

GLD was up strongly again, closing within its intermediate term trading range. It is the second day above the level of the last lower high; however, it also faces resistance from the short term downtrend. I want to take our Portfolios’ GLD position from 15% to 20%---which will be done by Buying 2 ½% today at the open and an additional 2 ½% when GLD breaks the upper boundary of that short term downtrend.

The Morning Call-Close but no cigar

The Market
Technical

The indices (DJIA 13203, S&P 1413) challenged the upper boundaries of their short term trading ranges (12022-13302, 1266-1422) and fell back; but they remained well within their intermediate term uptrends (12212-17212, 1285-1865).

Volume rose; breadth fell. The VIX was up another 7% yesterday but it continued to trade in its short term downtrend. On the other hand, it finished near the former lower boundary of an intermediate term trading range. As you know, I was hesitant to call a break down of this trading range because of the VIX’s squirrelly price performance around the lower boundary. No sooner had I made a belated call, the VIX immediately spiked. I am not saying that the last two days’ price move is a reversal; but if the VIX follows through to the upside, it may be that its performance was either one of those ‘fat tails’ to our time and distance discipline or the VIX simply shifted the lower boundary of the trading range to a slightly lower level. I am making no call at the moment (and I recognize that my fundamental view point is influencing my analysis).

GLD rose and closed above the level of the last lower high. Our time and distance discipline is now operative. If there is follow through, then the downtrend will have been broken, the lower boundary of the intermediate term trading range will be strengthened and our Portfolios will likely Add to this holding.
http://www.zerohedge.com/news/what-30-years-gold-confiscation-us-government-looks

The Morning Call--The new investing paradigm

The Market
Technical

The indices (DJIA 13127, S&P 1418) had another lazy, hazy day of summer, finishing down fractionally, but (1) still within striking distance of the upper boundaries of their short term trading ranges [12022-13302, 1266-1422] and (2) well within the boundaries of their intermediate term uptrends [12202-17202, 1283-1863].

Volume remains anemic; breadth weakened. The VIX rose but remained within its short term downtrend (a positive for stocks).

GLD rose, closing above the lower boundary of its intermediate term trading range and once again approaching the level of the last of the lower highs.

The Closing Bell--Wait just a bit longer before getting jiggy

Statistical Summary

Current Economic Forecast

2012

Real Growth in Gross Domestic Product (revised): +1.0- +2.0%
Inflation (revised): 2.5-3.5 %
Growth in Corporate Profits (revised): 5-10%

2013

Real Growth in Gross Domestic Product +1.0-+2.0
Inflation 2.0-2.5
Corporate Profits 0-7%

The Morning Call-Will 1422 hold?

The Market
Technical

The indices (DJIA 13250. S&P 1415) finally showed a little life yesterday, closing a short hair away from the upper boundaries of the short term trading ranges (12022-13302, 1266-1422) and well within their intermediate term uptrends (12184-17184, 1281-1861).

Volume was up; breadth improved. The VIX was down, making it the seventh day closing below the lower boundary of its intermediate term trading range. I continue to believe the trading in this index sufficiently schizophrenic to avoid making a call confirming a break for at least another day.

Given the proximity of the Averages to the 13302, 1422 April 2012 trading high, I checked with our internal indicator to see if there was any sign of a penetration to the upside. In our 161 stock Universe, 58 are now trading above their comparable April price highs, 72 are not and 31 are too close to call. This is a fairly neutral reading; but clearly there is no hint of a break above 13302, 1422.

The Morning Call + Subscriber Alert

The Market

Technical

Is it getting boring to have me say, the indices (DJIA 13164, S&P 1405) had another flat, uneventful day (Dow down, S&P up)? Sorry, but they did, finishing (1) near the upper boundary of their short term trading ranges [12022-13302, 1266-1422] and (2) within their intermediate term uptrends [12176-17176, 1281-1851].

Volume decline; breadth was mixed. The VIX continues to perplex me, closing down slightly---the sixth day below the lower boundary of its intermediate term trading range. As I have made clear, I am not convinced its performance is confirming a break. I am holding off for another day before making the call.

GLD was up a bit, remaining well above the lower boundary of its intermediate term trading range but still no challenge to the level of the last in a series of lower highs.
http://www.minyanville.com/sectors/precious-metals/articles/precious-metals-market-precious-metals-stock/8/14/2012/id/43209

The Morning Call--Not much difference between Ryan and Obama budgets---unfortunately

The Market

Technical

The indices (DJIA 13172, S&P 1403) had another quiet, mixed day (Dow up, S&P down), leaving them (1) near the upper boundaries of their short term trading ranges [12022-13302, 1266-1422] and (2) well within their intermediate term uptrends [12162-17162, 1280-1860].

Volume was up a bit but still anemic; breadth improved somewhat. The VIX spiked (another unusual move, i.e. up big in a flat market). This is the fifth day of the original break under out time and distance discipline. I delayed a confirmation call Monday night because the first two days of the break were barely a break at all ($.12). I am going to delay it again because yesterday’s surge retraced most of the losses incurred Friday and Monday. I am not trying to dodge a confirmation call; but I do want a substantive enough breach for a clear call.

The Morning Call-Investors unimpressed by Ryan selection

The Market

Technical

The indices (DJIA 13169, S&P 1404) had another boring day, finishing just slightly to the downside. They remain (1) near the upper boundaries of their short term trading ranges [12022-13302, 1266-1422] and (2) within their intermediate term uptrends [12153-17153, 1279-1859].

Volume was down; breadth deteriorated. Surprisingly, the VIX was down 7% on a down Market day (usually the VIX is up on a fall in prices). This is the fourth day in our time and distance discipline challenge. Generally, that would mark confirmation of the break; however, as I noted last week, the first two days of this break were just pennies below the support level. I am going to wait one more day before making the ‘confirmation’ call.

What is volume telling us? (short):
http://advisorperspectives.com/dshort/guest/Bill-Hardison-120813-Market-Volume.php

GLD was off but remains well above the lower boundary of its intermediate term trading range. However, it backed off the level of the last in a series of lower highs.

Bottom line: yesterday was another typical late summer vacation day characterized by low volatility and low volume. I had thought that the Ryan VP selection might energize investors; wrong again. As a result, my original thought is probably correct; that is, we are likely to experience a typical late summer snooze fest through the Labor Day holiday.

The Averages remain in the upper quadrant of their short term trading ranges---not a level at which I want to be Buying. Indeed, my focus is on the Sell side---monitoring those holdings that are near to either their Sell Half Ranges or trading highs.

The Morning Call--Merkel is back

The Market

Technical

Monday Morning Chartology

The big question is which offers the more powerful resistance (1) the upper boundary of the short term trading range [top brown line] or (2) the upper boundary of the very short term up trend [top black line]