Yesterday's pin action notwithstanding, the Market is still directionless
Steve Cook on Disciplined Investing

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Economics

   This Week’s Data

    The November leading economic indicators rose 0.9% versus expectations of a 0.7% increase.
    http://mjperry.blogspot.com/2009/12/leading-indicators-rise-for-8th-month.html

    The December Philadelphia Fed monthly business outlook survey came in at 20.4 versus estimates of 16.0 and November’s reading of 16.7.

   Other

    Global trade is improving (chart):
    http://www.businessinsider.com/chart-of-the-day-2009-12?utm_source=Triggermail&utm_medium=email&utm_campaign=Clusterstock%20Chart%20of%20the%20Day%2C%20Thursday%2C%2012%2F17%2F09

    Credit default spreads are narrowing (short):
    http://scottgrannis.blogspot.com/2009/12/credit-default-swap-spreads-are.html

    222 economists sign statement opposing stimulus II:
    http://www.clubforgrowth.org/perm/?postID=12203

    TIPS derived expected inflation (chart):
    http://mjperry.blogspot.com/2009/12/tips-derived-expected-inflation-about-2.html

    Commercial real estate jingle mail.  Now the big boys are following in the footsteps of individuals who are underwater on their mortgage. (short):
    http://www.ritholtz.com/blog/2009/12/morgan-stanleys-commercial-jingle-mail/

    A look at M3 (chart):
    http://www.ritholtz.com/blog/2009/12/have-you-seen-m3-lately/

    Detailing Treasury bill purchases.  Why do you think this is happening? (short):
    http://www.ritholtz.com/blog/2009/12/detailing-t-bill-purchases/

    Here is an interesting thought: a shrinking trade deficit means fewer dollars in foreigners’ hands to buy US Treasuries which in turn means that the Fed will really have to crank up its money printing (medium):
    http://www.zerohedge.com/article/dark-gray-swan-no-more-foreign-dollars-which-buy-us-treasuries
    
Politics

  Domestic

Mitch McConnell’s statement on the senate healthcare says everything:
http://www.powerlineblog.com/archives/2009/12/025179.php

In case you missed the latest insanity from Copenhagen.  (Note: the US generally contributes one third of UN assessments.  So Hillary is volunteering $33 billion of our dollars per year to give to third world countries most of which are kleptocracies):
http://www.powerlineblog.com/archives/2009/12/025176.php

    An absolutely marvelous quote on the role of government from a nineteenth century English economist (must read--short):
    http://cafehayek.com/2009/12/more-macaulay.html?utm_source=feedburner&utm_medium=email

  International War Against Radical Islam

The Market
    
    Technical

    The DJIA (10308) closed the day below the lower boundary of the up trend of the March low (10484-12486), while the S&P (1096) finished even further below the comparable level (1121-1415).  Yesterday the lower boundary of the S&P trend (1121) was above the intraday high (1120) reached during the recent sideways movement.  Short term support exists at 10239/1084. 
     
    Breadth weakened while volume picked up (not a good sign).  The dollar (Thursday scoreboard: dollar up, stocks down, gold down, oil up) was very strong breaking through its former resistance level and setting it up to transition into an up trend (remember I want some time and distance before declaring a trend change).  The VIX spiked--a much more natural action than yesterday’s big decline in an essentially flat Market.  Nevertheless, it remains between the upper boundary of the down trend off the March high and a former support level (directionless).

    Despite yesterday’s negative pin action, it in no way signaled that the current directionless phase is over.  This ordeal is going to take more patience before we know whether stocks are in a pause in an up trend or in need of much more serious consolidation.

    The latest from TraderFeed:
    http://traderfeed.blogspot.com/2009/12/cumulative-nyse-tick-line-and-short.html

    The latest AAII sentiment survey (chart):
    http://www.bespokeinvest.com/bespoke/2009/12/aaii-sentiment-survey-fewest-bears-since-may-2008.html

   Fundamental

    The latest thoughts of David Rosenberg (long):
    http://www.ritholtz.com/blog/2009/12/year-ahead-can-you-handle-the-truth/

    Headlines

(1)    as I suggested in yesterday’s Morning Call, investors were not happy about the Citigroup stock pricing and that got the Market off to a poor start.  Later in the day Meredith Whitney added to concerns about the banking group by making some negative comments on Goldman Sachs and Morgan Stanley.  Remember that the financials led stocks off the March bottom; if they suffer a decline that is likely to damage stocks in general,

(2)    sovereign debt concerns resurfaced with more lousy news out of Greece.  Plus Italy was added to the countries where debt repayment problems could arise.  That helped drive the dollar up; and the on again/off again inverse dollar/stock relationship was on again [see above].

(3)    the most promising news of the day occurred after the close: Research in Motion and Oracle reported much better than expected quarterly sales and earnings and their stocks spiked after hours.  One would think that this would set an upbeat early tone to the Market this morning; yet as you know of late, positive fundamentals have often had no impact--my assumption being that the reason is that all the good news is in the price of stocks.  Today’s pin action will be an interesting test of that thesis.
    
     Thoughts on Investing--more from The Money Game
     
    Markets are only a tiny facet of society, but being made by mass psychology,  they are a good litmus paper of what is going on.  Markets only work when they believe, and this confidence is based on the idea that men can manage their affairs rationally.  The longest period of prosperity in the last few hundred years came when everyone believed that the king was on the throne, that the pound was worth a pound, that God was in His Heaven, and that all these things would continue for ever and ever.

    In the longer run the actions of all the investors, individual and institutional, professional and nonprofessional, have to be based on the belief that leadership know what it is doing and that rational men are handling the nation’s business rationally.  If that belief fades, then so do the markets.  They do not merely dive, they dive and then disappear.  It happened here in the blight of the spirit from 1930 to 1933, and it has happened in other countries.

    Can it all come tumbling down?  In a paper market, based on belief, this fear is universal, no matter how deep it is buried.  Sure, it can all come tumbling down.  All it takes is for belief to go away.  

    News on Stocks in Our Portfolios

    Nike (Dividend Growth Portfolio) reported its second fiscal quarter earnings per share of $.76 versus expectations of $.71 and $.80 recorded in last year’s second fiscal quarter.

    A positive write up on Rockwell Collins (Aggressive Growth Portfolio):
    http://seekingalpha.com/article/178758-rockwell-collins-dividend-up-thanks-to-resurgent-growth

    General Mills (Dividend Growth Portfolio) reported second fiscal quarter earnings per share of $1.66 versus expectations of $1.48 and $1.08 reported in the comparable 2009 fiscal quarter.

    Accenture (Aggressive Growth Portfolio) reported first fiscal quarter earnings per share of $.67 versus estimates of $.65 and $.74 reported in the first fiscal quarter last year.
       









Posted 12-18-2009 8:28 AM by Steve Cook