Monday Morning Chartology 8/15/11 & Subscriber Alert
Steve Cook on Disciplined Investing

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Have You Seen This?


The Market
    
    Technical

     Monday Morning Chartology

    This S&P chart is a vastly different from the last Monday Morning Chartology.   You can see the vicious challenge of the 1172 level and the rapid bounce back.  The most troublesome aspect of this chart is Friday’s performance which was fairly tame relative to the prior four trading days versus a strong follow through on heavy volume--which would have made me feel much more confident that the worst was over.

    Had the latter been the case, I would be willing to make a big leap in committing cash.  As it is, I am willing to accept that there is some likelihood that the worst could be over; but I am unwilling to make a big bet on it.





    Notice that GLD is currently above the upper boundary (top blue line) of its long term up trend.  Historically, when a stock/index/etc has an intermediate term up trend (purple lines) accelerating through the upper boundary of a long term up trend (like GLD) has just done, it can push to the upper boundary of the intermediate trend but almost invariably returns to the long term trend.





    The VIX chart speaks for itself.




    Fundamental
   
      
    Scott Grannis points to Europe as the primary source of the recent malaise (short):
    http://scottgrannis.blogspot.com/2011/08/its-europe-stupid.html
 
    Barry Ridholtz has a different opinion (short):
    http://www.ritholtz.com/blog/2011/08/why-the-wild-stock-ride/

    And finally this interesting article on the psychology of investing at Market extremes (medium):
    http://www.psyfitec.com/2011/08/proper-etiquette-for-market-panics.html

    Subscriber Alert

    In my absence, the following stocks traded into their Buy Value Range and accordingly are being Added to their respective Buy Lists:

    In the Dividend Growth Portfolio: Federated Investors (FII), Schwab (SCHW), Avon Products (AVP), Medtronic (MDT), Nucor (NUE).

    In the High Yield Portfolio: Kinder Morgan Energy Ptrs (KMP), Federated Investors (FII), Mine Safety Appliances (MSA) and Sanofi Aventis (SNY).

    In the Aggressive Growth Portfolio: Schwab (Schwab), Avon Products (AVP), Medtronic (MDT). Staples (SPLS), Quality Systems (QSII), Staples (SPLS), CH Robinson  (CHRW)

    There remains a decent probability that the worse may not be over; and even if it is, there is likely a 50/50 chance of a re-test of the recent lows.  Still, there is also some likelihood that the worst is over and that stocks won’t re-test the recent lows.  In this confusing scenario, I want to continue to leg into stocks--not jump in with both feet but take another small move.  So at the Market open this morning, our Portfolios will continue the process of gradually Adding to their current holds that have either traded into their Buy Value range or have tested major support and held:

In the Dividend Growth Portfolio, small additions will be made to Federated Investors (FII), Schwab (SCHW) and Nucor (NUE) and new positions initiated in Medtronic (MDT and Avon Products.

In the High Yield Portfolio, small additions will be made to Federated Investors (FII), Mine Safety Appliances (MSA), 3M (MMM),  Kinder Morgan Energy Ptrs (KMP) and Sanofi Aventis (SNY),

In the Aggressive Growth Portfolio, small additions will be made to Schwab (SCHW), Staples (SPLS) and Amphenol and a new position initiated in Medtronic (MDT).
 
 
Economics

   This Week’s Data

    The NY Fed’s August manufacturing index came in at -7.7 versus expectations of +1.5.
    http://www.calculatedriskblog.com/2011/08/empire-state-survey-indicates.html

   Other

    Update on money supply growth--and it is not good:
    http://scottgrannis.blogspot.com/2011/08/money-supply-growth-alert-cont.html

Politics

  Domestic

    Here is an interesting piece on the amount of money the government spends on seniors (short):
    http://mjperry.blogspot.com/2011/08/mark-of-tired-nation.html

    This is another great editorial by Charles Krauthammer expressing optimism about our political process (medium and today’s must read):
    http://www.washingtonpost.com/opinions/the-system-works/2011/08/11/gIQAKPXc9I_story.html

  International

    Here is a summary of Italy’s attempt (and I use that word loosely) to get its fiscal house in order (medium):
    http://www.zerohedge.com/news/summarizing-terms-italian-austerity-or-here-comes-piazza-navona-strike-cam









Posted 08-15-2011 8:28 AM by Steve Cook