T -7
Steve Cook on Disciplined Investing


Have You Seen This?


  • Make money by accessing all our Portfolios, the supporting research and Price Disciplines using our paid subscription blog, Strategic Stock Invetments. Our work is focused on making money for our Portfolios not as some academic exercise in Internet investing. Check our performance (audited)--our Dividend Growth Portfolio has beaten the S&P by 500 basis points per year for the last seven years but with a beta of only .62. (Mandatory Disclaimer: past performance is not a guarantee of future results.) We give you everything you need to duplicate our results, in particular, a strict price discipline for both Buying and Selling.

Have You Seen This?

The Market

    The indices (DJIA 12501, S&P 1331) closed down for the day but remained within their intermediate term trading ranges (11863-12919, 1263-1372). The right shoulder to a head and shoulders pattern is still forming; as I noted previously, a successful completion would be a negative for stocks.

    Volume was light; breadth actually improved a bit.  The VIX pushed back up through the upper boundary of its current trading range.  This is the fifth occasion that this has happened; the other four were failed breaks.  Given the past gravitational pull of this trading range, I will remain a skeptic that this break will prove to be the real deal.  That said, if it happens, it would not be good for stocks.

    I checked our internal technical indicator and it remains neutral.  However, within that neutral range, it has become less positive.  Indeed, several of our stocks have suffered major breakdowns in the last couple of days.  I view this as a warning shot. 

    GLD continues its run.  If it moves a bit higher, it may be time to take a little off the table.

    Bottom line: given the dueling puff pieces Monday night and the lack of any visible progress yesterday toward a potential debt settlement, I was surprised that investors didn’t take the Market down even more than they did as our political class continues to fail at compromise.  Of course, I also noted my surprise that the bulls couldn’t get the Market over the April highs when we thought there was a deal last week.  The simple answer is that investors knew (and know) that there would (will) be a deal and it is already in the price of stocks.  If that is the case, I will repeat my statement from last week: if stocks can’t go higher on resolutions of both the EU and US debt problems, I am not sure what takes us up from here.  My focus remains on our Price (Sell) Discipline.

    Margin debt and the S&P (medium):


    The economic news yesterday was mixed (what else is new?) weekly retail sales were neutral, May home prices were up a tad while new home sales were unexpectedly poor, the Conference Board’s consumer confidence index was better than forecast. 

None of that really made any difference because investors’ attention remains glued to the budget/debt resolution debate (?).  There was virtually no progress throughout the day though there was a lot posturing (what else is new?) including Obama stipulating that He will veto the Boehner plan.  Speaking of which: the congressional budget office scored the Boehner plan as cutting spending $150 billion less than was claimed.  That sent house republicans back to the drawing boards.  More importantly, it will require an additional $150 billion in ‘real’ cuts which will make reconciliation with the dems that much tougher. We are now at zero minus 7.

    Here is a concise summary of the current state of affairs (medium):

    The Club for Growth (conservative) on the Boehner plan (short):

    And in the interest of bipartisanship, here is the liberal perspective (short):

    The debt problem from a much different perspective (medium):

    P.S. Overnight it appears that Obama has come up with a ‘new’ plan (I will believe it when there is something the cbo can score) while the EU ‘old’ is unraveling.

    Bottom line: as of the close last night the S&P is slightly overvalued at least as calculated by our Model--and that assumes that the debt ceiling gets raised but in a half assed, intellectually dishonest way that keeps the economy muddling through until at least the 2012 elections.  Something different from that could cause me to adjust our Model.  In the meantime, it seems to me that caution is the better part of valor.

   This Week’s Data

    The International Council of Shopping Centers reported weekly sales of major retailers up 0.3% versus the prior week and up 4.2% versus the comparable period last year; Redbook Research reported month to date retail chain store sales down 0.6% versus the similar time frame last month but up 3.5% on a year over year basis.

    The May Case Shiller home price index rose 0.1%.

    June new home sales fell 0.2% versus estimates of a 0.3% increase

    The June Confidence Board’s index of consumer confidence came in at 59.5 versus forecasts of 55.8.

    Weekly mortgage applications declined 5.0% while purchase applications dropped 3.8%

    June durable goods orders fell 2.1% versus expectations of a 0.5% rise; ex transportation, the index was up0.1%.


    The argument for a ‘double dip’ (medium):

Posted 07-27-2011 8:26 AM by Steve Cook