Big Blue Dominates Friday Trading: Dave's Daily

Let's not kid around, IBM is nearly an 11% weight in the price-weighted Dow Jones Industrial Average. What happens to it on any given trading day matters and can potentially mislead investors over the true performance of markets overall.  This is why the DJIA is often referred to as "window dressing for the tourists" and why most market strategists focus on the S&P 500 Index instead. It gives a better picture of conditions than does the DJIA. Below is the breakdown of current weightings.

IBM's current earnings report "met" expectations but the guidance was positive so the stock was bid up.

Microsoft (MSFT) also basically "met" expectations and the share price also rallied sharply Friday. Other earnings reports weren't as rosy as Fifth Third Bank (FITB) disappointed as did General Electric (GE) another low ranked DJIA component. Google's (GOOG) earnings disappointment still hurt the tech sector overall but IBM and MSFT cushioned the decline.

Existing Home Sales 4.6M vs 4.4M expected. It would be interesting to know the breakdown of this data by REOs, short sales, foreclosures, regions and just conventional stuff.

Late in the day stocks, especially the DJIA, rallied sharply on some end of day buy programs. It was options expiration for January and distortions, particularly at the end of trading are caused by floor brokers and specialists hunting down strike prices into the close. This kind of action is pretty transparent and just an embarrassment to rational investing.  HFTs and algos stepped on the gas late hoping to pull in some money from those still sitting in checking accounts. Frankly, it's this kind of insane manipulative behavior that has driven investors away and to the sidelines. The NYSE should be ashamed to be sponsoring and subsidizing self-destructive HFT behavior.

Bulls love QE and there is a rumor going around the Fed will launch another round of QE sometime this month. If so, expect stocks to rally even further on the added liquidity to what's left of trading desks and the Primary Dealer network.

Gold was slightly higher as was the dollar. Crude oil prices fell as some were suddenly concerned about ongoing Greek bailout discussions. This was suddenly an excuse to sell most commodity sectors including base metals which continues erratic behavior among investors. U.S. bonds continued to sell-off seemingly disconnected from eurozone issues. It was a strange Friday that's for sure.

Volume remains incredibly light while breadth per the WSJ remains positive but now certifiably overbought.

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