The news is about as good as it is going to get; is the Market?
Steve Cook on Disciplined Investing

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Have You Seen This?

News

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Have You Seen This?


The Market
    
    Technical

    The indices (DJIA 12724, S&P 1343    ) had another good day, closing just shy of Tuesday’s high and therefore, near the upper end of their intermediate/short term trading range (11863-12919, 1263-1372).  Any follow through would negate the developing head and shoulders pattern and possibly challenge the upper boundary of the trading ranges.

    Volume rose a bit; breadth improved.  The VIX decline 8%, placing it near the mid point of its current trading range.

    GLD traded off but remains near its recent highs and, therefore, within its intermediate term up trend.

    Bottom line: we now have the good news from both the Three Stooges and the Three Blind Mice.  If the bulls can’t push stocks higher today, current levels may be all she wrote.  Of  course, they may take stocks to new heights; but I will deal with that problem when it arrives.  In the meantime, I am focused on our Price Disciplines.

    Update on individual investor sentiment (chart):
    http://www.bespokeinvest.com/thinkbig/2011/7/21/bullish-sentiment-rebounds-still-below-april-highs.html

   Fundamental
         
     Headlines

    Yesterday’s economic news was mediocre: the Philly Fed index was good, the leading economic indicators were in line and weekly jobless claims were lousy.  Corporate earnings reports were pretty good. But not enough in my opinion to drive stock prices up 1.25%. 

    Investor focus continued on the US and EU economic/political developments which on the surface were good.  The eurocrats appear to have finalized a Greek bailout which among other things (1) writes down some debt and (2) extends the maturity of much of the remaining debt.  The plan also incorporates a measure of relief for the other PIIGS.  It would seem that investors have embraced this bail out as a significant step in the right direction.

    Here are the details (medium):
    http://www.zerohedge.com/article/goldmans-complete-summary-european-council-decisions

    And:
    http://www.zerohedge.com/article/fitch-first-downgrade-greece-speculative-default-greek-cds-tumble-most-ever-analysts-balk-ba

    In addition, as I write this there are rumors of a grand spending cut/tax reform/debt ceiling increase  deal.  The general theme of the rumors, given the lack of any substantive facts, is that the plan will reduce the deficit by $3.7 trillion over the next ten years and that there are no new taxes.  I have a tough time believing that the dems will sign off on such a deal; but I have been wrong before.  In any case, events could move very fast today if in fact the parties that count have reached an agreement on terms 
   
    Bottom line: the Market now has the ‘good news’ scenarios for both the EU sovereign debt crisis and the US budget/debt ceiling problem.  The Greek solution is about in line with the assumptions in our Models (though I feared something much worse); the potential US solution is more positive.  We now have to see if (1) the two plans can be implemented and (2) how the Market reacts to the success or failure of that implementation. 

I am not sure how the news could get much better; so if the bulls can’t get this Market cranked up, I am not sure what could propel it higher.  To be sure, I want to be hopeful; but hope is not an investment strategy.  So I will opt for being skeptical that so many politicians can agree on so many controversial issues in such a short time.  If  that causes me to be late to the party and costs me a percent or two in performance, it will be worth it to avoid the risk of getting suckered in on some false hope.

   News on stocks in our Portfolios

    Earnings reports:

                               Reported        Expected

CR Bard                 $1.57            $1.57
Eli Lilly                      1.18              1.19
Nuecor                       .94                .81
Pepsico                    1.21              1.21
Phillip Morris Int’l     1.34              1.21
Sherwin Williams    1.66              1.77
VF Corp                   1.12              1.02

Economics

   This Week’s Data

    The June leading economic indicator rose 0.3% in line with expectations and versus up 0.8% reported in May.

    The June Philadelphia Fed index of business conditions came in at 3.2 versus estimates of 1.0 and -7.7 recorded in May.

 









Posted 07-22-2011 8:03 AM by Steve Cook