All American In...'s  Instablog

The Market

Technical

Monday Morning Chartology

The S&P closed right on the lower boundary of its short term uptrend. While it appears to have escaped from the very short term downtrend, it can't generate any momentum to the upside. Amid confusion and volatility, the best thing to do is nothing.

(click to enlarge)

GLD is still holding above its double bottom and the lower boundary of its long term uptrend. Like the S&P, it seems to have successfully challenged the very short term downtrend but can sustain no upward momentum.

http://www.zerohedge.com/news/2013-06-14/stunning-images-china-ten-thousand-people-waiting-line-buy-gold

(click to enlarge)

The VIX continues to battle with the upper boundary of its short term downtrend but can't hold on to any break. However, if it does successfully push through that boundary, it would be a bad sign for stocks.

(click to enlarge)

Update on 'the best stock market indicator ever':

http://advisorperspectives.com/dshort/guest/John-Carlucci-Best-Indicator-Ever-Update.php

Fundamental

The latest from David Rosenberg (medium):

http://www.zerohedge.com/news/2013-06-13/10-nagging-concerns

The latest from Bill Gross (medium):

http://www.zerohedge.com/news/2013-06-14/pimcos-bill-gross-which-way-bonds

Revenue and earnings expectations continue to decline (medium):

http://www.zerohedge.com/news/2013-06-14/stocks-headwinds-are-clear-and-seem-be-strengthening

Update on the big four economic indicators:

http://advisorperspectives.com/dshort/updates/Big-Four-Economic-Indicators.php

Investing for Survival

What a crisis feels like (medium):

http://www.zerohedge.com/news/2013-06-12/guest-post-what-crisis-feels

News on Stocks in Our Portfolios

Economics

This Week's Data

The NY Fed June manufacturing index came in at a surprising 7.84 versus expectations of 0.5.

Other

Politics

Domestic

A potentially damaging disclosure in the NSA phone/email monitoring scandal (medium):

http://www.zerohedge.com/news/2013-06-16/nsa-admits-warrantless-wiretapping-according-house-judiciary-committee-member

International

Spain's debt hits new high (medium):

http://www.zerohedge.com/news/2013-06-14/spains-debt-surges-record-high-accelerating-pace

The Syrian conflict ramps up another notch (medium):

http://www.zerohedge.com/news/2013-06-16/iran-sends-4000-troops-aid-syrias-assad

Note: Tonight my #2 granddaughter (9) and #3 grandson (7) arrive for a weekend of frolicking. Since they move faster and longer than I, I will be fighting to keep up and, hence, won't be writing a Morning Call on Friday or the Closing Bell on Saturday. As always, I will be paying attention to the Market and if action is needed, I will be in touch via a Subscriber Alert.

The Market

Technical

Another lousy day in stock land which served to cloud the technical picture for the indices (DJIA 14995, S&P 1612). The good news is that they closed within their intermediate uptrends (14134-19134, 1500-2088) and their long term uptrends (4783-17500, 688-1750).

The not so good news:

1. the S&P fell below the lower boundary of its short term uptrend [1622-1701]. This re-starts our time and distance discipline; a close below this boundary on Friday, the short term uptrend will be confirmed as broken. However, the Dow remains within its short term uptrend [14741-15452]. So the action of the S&P now puts the Averages out of sync. To confirm a downturn in the Market, the DJIA also has to break its short term uptrend,

1. the S&P also fell back below the upper boundary of the very short term downtrend. That negates the break to the upside and confirms the very short term trend as down,

1. the S&P closed right on its 50 day moving average. It has bounced off this support line four times in the current uptrend; so it clearly represents very strong defense. A break would be very negative for stocks and a bounce quite positive,

http://advisorperspectives.com/dshort/updates/Current-Market-Snapshot.php

1. another technical underpinning went down, to wit, until yesterday there has not been three down days in a row in the DJIA since 1/1/13,

1. worse still, the Market rallied early in the day [buy the dips] and then got crushed. A couple more of those will have the bulls re-thinking their position,

1. the former S&P all time high [1576] is not far away. Like the 50 day moving average, this level provides major support; so it is another critical level to which we must pay attention,

1. suddenly, bad news is not necessarily good news,

1. not helping the bulls, over night the Nikkei was down 6% and the Shanghai Composite joined the rout, down 2.5%---which puts it negative for the year.

Volume remains low; breadth was mixed. The VIX was up 9%, closing above the upper boundary of its short term downtrend. To confirm this break, it must sustain current levels through the close Friday. If that happens, it would be a negative for stocks. Meanwhile, the Market is back to a very heavily oversold condition; so a bounce here is likely.

GLD rose, finishing above the double bottom, the lower boundary of its long term uptrend and the upper boundary of its very short term downtrend---but the chart remains broken.

Bottom line: the technical outlook got a bit more confusing yesterday. The S&P is threatening the break its short term uptrend and its 50 day moving average, has confirmed a very short term downtrend while the VIX is challenging its short term downtrend, the five and a half month streak of no 'three down days in a row' has fallen by the wayside and it turns out the bad news is not always good news. Even if we get a bounce today and the aforementioned breaks are negated, the Market's upward momentum has been curbed. This kind of action is typical of a Market top---though to be clear, it will take a good deal more technical damage before that comes to pass. Nonetheless, a top formation has to start somewhere; and this is as good a start as any.

Any move to the upside that pushes our stocks into their Sell Half Range offers the opportunity to do just that.

Fundamental

Headlines

Yesterday's economic news was interesting: weekly mortgage and purchase applications rebounded even as interest rates are moving up; the May US budget deficit was a blow out number---much bigger than expected; indeed it witnessed the fourth largest month for government spending ever---repeat, ever.

That along with continuing huge gyrations in the Nikkei, the apparent unraveling of the Greek economy (again) and more racket out of the German press on the pending high court ruling on the constitutionality of several ECB programs kept investor anxiety at high levels. Hence, another sloppy day to the downside.

More trouble in Greece (short):

http://www.zerohedge.com/news/2013-06-12/samaras-says-won%E2%80%99t-backdown-greek-broadcaster-closure-coalition-splinters

http://www.zerohedge.com/news/2013-06-12/market-update-easy-come-immediately-go

Bottom line: despite an all American attempt to rally off of Tuesday's decline, the Market kept getting hit with bad news; and as I noted above, at least yesterday, bad news was bad news. However, I think that at this moment, technical factors are probably more important than fundamentals (barring Greece going toes up, the bankruptcy of a major banking institution, etc.) simply because the S&P is at point of confluence of several trends and a move either way will likely bring buyers/sellers out.

So at this point, I think that the best thing to do is nothing---even if you are a bull. Just wait and be sure, there is no break to the downside before doing anymore buying. And if the Market breaks lower and you have followed my lead, then our cash position is going to look mighty good.

Bank of England official warns of 'biggest bond bubble in history' (medium):

http://www.zerohedge.com/news/2013-06-12/bank-englands-haldane-weve-intentionally-blown-biggest-bond-bubble-history

For those who believe that the rise in interest rates reflect better economic conditions (medium):

http://www.zerohedge.com/news/2013-06-12/tapering-currency-wars-interest-rate-wars

S&P revenue and earnings expectations (short):

http://blog.yardeni.com/2013/06/s-500-revenues-earnings-review-excerpt.html

Subscriber Alert

The stock price of CF & Co (CF-$183) has traded below the upper boundary of its Buy Value Range. Accordingly, it is being Added to the Aggressive Growth Buy List. The Aggressive Growth Portfolio owns a full position in CF; so no new shares will be Bought.

Investing for Survival

I continue to do my homework on ETF's including those holding foreign stocks and bonds. Here is a summary of some positive aspects of ETF's containing foreign, dividend paying stocks. (short):

http://advisorperspectives.com/commentaries/isharseblog_061213.php

Company Highlight

Lorillard Inc produces and markets Newport, Kent, True, Maverick and Old Gold cigarettes. The company has grown profits per share from $1.58 in 2006 to $3.05 (est.) in 2012 and dividends per share from $.61 in 2008 to $2.20 in 2013 (est.), earning a 60%+ return on equity. LO should continue to produce above average returns as result of:

(1) increasing market share,

(2) the strength of its Newport brand enables it to raise prices,

(3) investment in tobacco alternatives,

(4) a stock buy back program.

Negatives:

(1) governments around the world are imposing restrictions on tobacco use,

(2) a highly competitive industry,

(3) the industry is not allowed to advertise.

Lorillard is rated A by Value Line, has a 600% debt to equity ratio but is working hard to reduce this figure. Its stock yields 5.3%

Statistical Summary

Stock Dividend Payout # Increases

Yield Growth Rate Ratio Since 2008

LO 5.3% 11% 68% 5

Ind Ave 4.2 9 54 NA

Debt/ EPS Down Net Value Line

Equity ROE Since 2006 Margin Rating

LO 600% NA 0 17 A

Ind Ave 61 48 NA 17 NA

Chart

Note: LO stock made good progress off its March 2009 low, quickly surpassing the downtrend off its January 2007 high (straight red line) and the November 2008 trading high (green line). Long term, LO is in an uptrend (blue lines). Intermediate term, it is a trading range (purple lines). The wiggly red line is the 50 day moving average. The High Yield Portfolio owns a 75% position in LO. It is currently on the High Yield Buy List. The lower boundary of its Sell Half Range is $62.

http://finance.yahoo.com/q?s=LO

6/13

News on Stocks in Our Portfolios

Economics

This Week's Data

Well, so much for the miracle of sequestration and tax hikes. The May Treasury budget deficit came in at $138.7 billion versus expectations of $110.0 billion. Of course, there was much for sequestration et al to overcome; like, say, the fourth largest spending month in US government history; proving once again that the power of the executive branch trumps everything.

http://www.zerohedge.com/news/2013-06-12/government-celebrates-austerity-fourth-largest-spending-month-ever

Weekly jobless claims fell 13,000 versus expectations of a 4,000 increase.

http://advisorperspectives.com/dshort/updates/Weekly-Unemployment-Claims.php

May retail sales rose 0.6% versus estimates of +0.5%; ex autos and gasoline, they were up 0.3%, in line.

http://advisorperspectives.com/dshort/guest/Lance-Roberts-130612-Spending-verus-Retail-Sales.php

Other

Are soaring bond yields good news? (medium):

http://scottgrannis.blogspot.com/2013/06/soaring-real-yields-are-good-news.html

More macro data (short):

http://www.capitalspectator.com/archives/2013/06/macromarkets_ri_6.html#more

Politics

Domestic

More perspective on the NSA/phone records brouhaha (medium):

http://www.nationalreview.com/article/350799/rand-pauls-heres-crime-act-andrew-c-mccarthy

The problems with the immigration bill passed Tuesday by the senate (medium):

http://www.powerlineblog.com/archives/2013/06/the-gangs-immigration-bill-makes-security-worse-not-better.php

One of the major risks to the economy and the Markets that I list in The Closing Bell is a banking system less financially sound and more poorly managed than is the accepted consensus. This article on the trashing of Gary Gensler, head of the CFTC, is perfect example of why---government incompetence and institutional malfeasance combined to derail regulation that would put a stop to the inappropriate assumption of risks backstopped by the US taxpayer (medium):

http://www.nakedcapitalism.com/2013/06/obama-axes-bank-harrassing-gary-gensler-at-cftc-plans-to-install-lightweight-ex-goldmanite.html

International

Disclosure: I am long LO.

The Morning Call

The Market

Technical

The indices (DJIA 15122, S&P 1626) had another tough day, as the recent increase in volatility manifested itself again. However, they closed within their major uptrends: short term (14741-15452, 1620-1699), intermediate term (14134-19134, 1498-2086) and their long term uptrends (4783-17500, 688-1750).

As you can see, the S&P finished the day fairly close to the lower boundary of its short term uptrend; it also closed right on the upper boundary of its very short term downtrend. In this case under our time and distance discipline, that would not qualify as having negated the break above that boundary. However, I am extending the time element one more day. In sum, if the S&P closes above this boundary today, then the short term downtrend will be deemed broken; if not, then the downtrend will still be in play.

Volume was again quite low; breadth was dreadful. The VIX jumped 10% but remained within its short and intermediate term downtrends. However, it is once again within striking distance of the upper boundary of the short term downtrend---a break of which would be negative for stocks.

GLD has off, but still finished above its double bottom, the lower boundary of its long term uptrend and the upper boundary of the very short term downtrend. Nevertheless, the GLD chart is broken.

http://www.zerohedge.com/news/2013-06-11/jpm-vault-gold-drops-284-overnight-slides-fresh-record-low-withdrawals-accelerate

Bottom line: volatility is keeping the technical picture clouded. If the S&P is down today, then its very short term downtrend will remain in tact plus the lower boundary of its short term uptrend will again be threatened. An up day will negate the very short term downtrend and pave the way for the potential challenge of the S&P 1675-1687 level (the upper zone of the May 22 'outside down day').

Any move to the upside that pushes our stocks into their Sell Half Range offers the opportunity to do just that.

Fundamental

Headlines

Yesterday's economic data was passable: weekly retail sales were mixed, April wholesale inventories were up in line but wholesale sales were much stronger. Nothing to be negative about here.

However, bad news abounded from other sectors:

(1) in the US, a research report predicted that Citi would take a loss of as much as $7 billion in its currency trading operation. To be clear, this is a forecast not a fact. However, it keeps alive the nagging doubts about the viability of our banking system and the manageability of the large banks. (medium)

http://www.bloomberg.com/news/2013-06-11/citigroup-facing-7-billion-currency-hit-on-dollar-peabody-says.html?cmpid=yhoo

Over night, we learn this---more price rigging (medium):

http://www.zerohedge.com/news/2013-06-12/banks-rig-47-trillion-day-currency-markets-profit-clients

(2) continuing worrying over how the German constitutional court will rule on ECB bank bailout measures (see yesterday's Morning Call),

(3) more carnage in the Nikkei following a BOJ decision to not expand its QE. This appears to be a continuation of the unwind of the yen carry trade which has negative implications for every asset that was bought with the funds from the cheap yen loans. The worry among investors is that the aggressive selling of the Nikkei finds its way to our shores,

http://www.reuters.com/article/2013/06/12/us-asia-debt-idUSBRE95A16A20130612

(4) political turmoil in Turkey. By itself, this is the least worrisome. However, when investors get nervous, rioting and mayhem don't help their disposition.

Bottom line: rumblings worldwide are suggesting that all is not well in stock land: economic/financial conditions are deteriorating in Europe---again, the Chinese economy is weakening more than many expected, the Japanese monetary policy is Bernanke on steroids and it is developing some cracks, our own government is so plagued by scandal that no serious public discussions are being had with respect to critical issues (did you know that the senate voted on an immigration bill, yesterday---a half assed one at that) in particular a doomed fiscal policy and do I need to add the near universal confusion over 'tapering'.

Of course, investors have thrived of late on bad news so equity prices could continue to advance. Gosh only knows, if they love bad news, they now have a snoot full. I remain a skeptic.

Lance Roberts on the EU and impending disaster (medium):

http://www.zerohedge.com/news/2013-06-11/eurozone-crisis-set-flare

Investing for Survival

The One Thing Everyone Should Know Before Moving Overseas

By Dan Prescher

Over the last 11 years of living throughout Latin America, my wife, Suzan, and I have missed lots of things we had back in the States. The first one for me was roasted red peppers. Eight brands in the supermarket back home... none in the first two countries we lived in. (For Suzan, it was Triscuits.)

There have been many more. Decent power tool bits, boneless chicken breasts, punctuality, customer service...

But none of these things have been deal-breakers for us. Suzan and I are lucky this way... we quickly learned to go with the flow and enjoy the novel and unusual things our new locations offered... AND to savor the challenge of replacing or working around the things we wanted but couldn't find.

That's why we make a habit of advising anyone considering a move abroad to do one simple thing-ruthlessly assess yourself. Before you do anything else, be completely honest with yourself and think hard about the things you actually need to be happy. Ask yourself what you'd do if you couldn't find these things in your new home or had to come up with your own replacements for them.

To aid in this assessment, we came up with this little exercise.

Imagine that when you get up tomorrow morning, you will board a plane and fly away to live permanently in a foreign country.

What is the one thing you would make sure to take with you if you could? In other words, what's the one thing you'd miss the most if you arrived without it and couldn't find the same thing in your new country?

Your 4G smart phone? Your non-stick cookware? Your 50-inch high-def TV? Your nicotine gum? Your hybrid SUV? Your memory foam pillow? Your favorite contact lens solution? Your "Swedish steel" woodworking tools? The English language?

The point is to identify your deal-breakers. It doesn't matter if it's ultra-pasteurized half and half for your coffee or a particular brand of denture cleanser or high-thread-count sheets or easy-to-scoop kitty litter.

If you don't have it or can't do it, and you can't find it or get it done, and it makes you miserable... then it won't make much difference if you're swinging in a hammock on a pristine white-sand beach in a tropical paradise. You'll be unhappy.

And here is what all the successful expats Suzan and I have ever known have in common: They don't have any real deal-breakers because they stay flexible, they improvise and they keep things in perspective.

If they can't find good Ranch-style dressing, they make their own from scratch with ingredients they can find.

If unfamiliar local procedures or bureaucracy means they can't get all the chores on their daily to-do list done, they don't rant and rage... they make shorter lists.

If they can't grill an acceptable steak with the grass-fed beef from the local mercado, they grill chicken and fish and use the beef for chili and stew.

If they don't know enough Spanish or Portuguese or French to order a pizza over the phone, they learn it... or learn to enjoy making pizza at home.

Over the years we've met a few expats who never wanted to do that. They spent most of their time trying to make their lives in Mexico or Ecuador or Belize or Uruguay exactly the same as they were back home...and complained when they weren't.

This is the biggest deal-breaker of all, of course, because the only place on earth exactly like back home is... back home.

That's why this exercise is helpful. It brings your expectations into focus...and clarifies the reasons you're considering a move abroad in the first place.

And if, after being honest about your own deal-breakers, you can say that you're still up for an adventure that will constantly challenge and endlessly entertain you with new ways of living, thinking, and seeing-then the expat life just might be for you.

Economics

This Week's Data

The International Council of Shopping Centers reported weekly sales of major retailers down 2.9% versus the prior week but up 2.2% versus the comparable period a year ago. Redbook Research reported month to date retail chain stores sales up 0.5% versus the similar time frame in May and up 2.8% on a year over year basis.

April wholesale inventories rose 0.2%, in line with expectations; wholesale sales increased by 0.5%.

Weekly mortgage applications rose 5.0% as did purchase applications.

Other

State of the economy in 17 charts:

http://www.zerohedge.com/news/2013-06-11/state-macro-17-simple-charts

Abenomics and the bond market (medium):

http://www.telegraph.co.uk/finance/comment/jeremy-warner/10111544/What-Abenomics-tells-us-about-the-great-bond-market-asset-bubble.html

Data update on China (medium and not pretty):

http://www.macrobusiness.com.au/2013/06/chinese-economy-slowing-fast/

More (short):

http://www.zerohedge.com/news/2013-06-11/3-charts-china-bulls-do-not-want-you-see

Politics

Domestic

From my favorite liberal, on immigration (medium):

http://dailycaller.com/2013/06/11/wake-up/

More on our sick education system (medium):

http://www.aei-ideas.org/2013/06/oregon-high-school-has-29-graduating-valedictorians-welcome-to-todays-lake-wobegon-educational-system/

George Will on agriculture subsidies (medium):

http://www.jewishworldreview.com/cols/will060813.php3#.UbdmHdLVCAg

Putting the NSA phone and email mining in some perspective (medium):

http://www.nationalreview.com/article/350405/time-dial-some-healthy-skepticism-jonah-goldberg

http://www.nationalreview.com/article/350702/why-president-obama-became-snoop-rich-lowry

International

Krauthammer on Syria (medium):

http://www.washingtonpost.com/opinions/charles-krauthammer-message-from-the-ruins-of-qusair/2013/06/06/32b64cc0-ced9-11e2-8f6b-67f40e176f03_story.html

Pimco's outlook for Asia (medium):

http://advisorperspectives.com/commentaries/pimco_061113a.php