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Central Bank Liquidity Props Markets: Dave's Daily



I would advise most to forget PEs, current earnings and dividends, global economic indicators and even Greece (if only temporarily). The number one factor driving global stock indexes higher are monetary policies and liquidity impact from the three central bank amigos. Sure markets are overbought and volume remains scant. The first condition is readily viewed by any number of respectable indicators: McClellan Summation Index (featured near the end of this posting), DeMark Indicators, Relative Strength Index and so forth). Light volume is due to ongoing investor flight as many sit on their hands.

Over the past month we've been adding to long equity positions but admit to holding our nose as we do so. Light volume, overbought conditions and exogenous events make markets "accident prone". It scares the hell out of most investors and when combined with animal spirits and pressure to perform it's a tough market to rationalize. Call it what you will, central banks are printing, adding liquidity and this will force stock prices to inflate. The results may be little different than seen with QE1, QE2 and now global QE3. It's Keynes on steroids.

So don't let the financial media BS you about this and that--know what's really going on and either surrender to it, as we must, or stay away as it seems many are.

Stocks were unchanged early, fell on Greek rumors and then rose again late abetted by algos and their HFT cohorts. It's the new normal folks.

Earnings news was led by Time Warner (TWX) which beat estimates ($.94 vs $.89 expected), Moody's (MCO) missed ($.43 versus $.49 expected) and Buffalo Wild Wings (BWLD) beating earnings Tuesday after the close ($.75 versus $.67 expected). BWLD shares were up nearly 17% on Wednesday. This must be what the USA is now about--gadgets, sports and fast food.

After the close much watched Visa (V) reported earnings that beat estimates ($1.49 versus $1.45) and the stock rose slightly in late trading. Whole Foods (WFM) reported earnings late which also beat estimates ($.65 versus $.60 expected). Cisco (CSCO) reported earnings ($.47 versus $.38 expected) after many adjustments. The stock rose over 3% in late trading. Groupon (GRPN) reported a loss (-$.08 versus $.03 expected) and the stock was down nearly 8% in late trading.

Gold prices fell as the dollar recovered most of its intraday losses. The same could be said for other markets like crude oil which was also higher early but gave back most its gains along with other commodities.  Bonds were only slightly lower.

Volume was once again light and breadth per the WSJ was mildly positive amping-up overbought conditions.

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