A Market Show About Nothing: Dave's Daily - TheStreet

A Market Show About Nothing: Dave's Daily

When folks ask, "What moved markets today?" The only intelligent answer is "nothing" except perhaps some program trades, high frequency algos, trading desks and hedge funds.
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JERRY: Well what's the show about? GEORGE: It's about nothing. JERRY: No story? GEORGE: No forget the story.

JERRY: You've got to have a story.

There wasn't really a story in markets Friday. The news items, mostly bad, didn't register as such. The machines have things under control and spent the day cherry picking news they liked (slightly better Consumer Confidence) and ignoring news they didn't (horrible Retail Sales data). Some, like permabulls at

CNBC

had to dream-up ways to rationalize poor Retail Sales against Consumer Confidence. Frankly, it's a laughable exercise; but, they have soap to sell.

So when folks ask, "what moved markets today?" The only intelligent answer is "nothing" except perhaps some program trades, high frequency algos, trading desks and hedge funds. The rest of us are left to scratch our heads watching another end of day light volume jam job.

In fact, volume is roughly 30-40% below normal and this allows a few players with their HAL 9000s to manipulate prices all they want. The market now has become a private casino for a few with machines, formulas and cash to push things around. Breadth was positive.

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The NYMO is a market breadth indicator that is based on the difference between the number of advancing and declining issues on the NYSE. When readings are +60/-60 markets are extended short-term.

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The McClellan Summation Index is a long-term version of the McClellan Oscillator. It is a market breadth indicator, and interpretation is similar to that of the McClellan Oscillator, except that it is more suited to major trends. I believe readings of +1000/-1000 reveal markets as much extended.

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The VIX is a widely used measure of market risk and is often referred to as the "investor fear gauge". Our own interpretation is highlighted in the chart above. The VIX measures the level of put option activity over a 30-day period. Greater buying of put options (protection) causes the index to rise.

Continue to Major U.S. Markets

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SPY:

Most of the volume this week came early with the last few days just keeping things alive for bulls. We've touched support more times than one would imagine possible without a break lower or a move higher. This is why so many suggest markets are manipulated.

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MDY & IWM:

These sectors are more volatile in either direction and reflect better future economic development.

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QQQQ:

Tech still leads the U.S. economy with innovation and new products. But, here too we're in a volatile environment.

Continue to U.S. Market Sectors, Selected Stocks & Bonds

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XLF:

Financials had a "stick save" sort of week. JPM and MS got the GM deal from the government mostly because Jamie Dimon is an administration friend and GS has a PR black eye. And, speaking of GS, they were victims of more probes. Mostly likely it was GS and any of the others in the futures pits jamming stocks as best they can.

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XLB:

Materials led most sectors higher this week which started with a new GMO soybean seed approval for DD and spread to ideas that Chinese demand for raw materials wouldn't fall sharply.

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XLY:

The consumer sector rallied with everything else because it's in the buy program basket and when these occur participants aren't selective over which sector they're in or not. They must match the index and the futures contract.

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IYR:

Search though I may for news the only news from research firm Reis shows rents still going down but at a slower pace and with interest rates low many developers can refinance at lower rates. So, other than conditions being "less bad" and using the dreaded term "stable" there isn't much news out there to account for the rally. Perhaps it's just about the hunt for yield--always a dangerous enterprise.

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IEF, TLT, HYG & BWX:

Treasury auctions were by and large well-received. The high yield sector though is suffering large redemptions and Europe is...well, Europe.

Continue to Currency & Commodity Markets

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$USD/DXY, UUP & FXE:

The euro rallied some this week on ideas from China (again) that their pension plans would continue to own euro securities and by direct intervention in markets by the Swiss.

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GLD:

The powers that be don't like rising gold prices. China said it didn't want gold to be a large amount of their reserves which I believe is just a smokescreen to please other central bankers and perhaps a bid to buy more cheaper. The other news was GLD's counterpart IAU announced a 10-1 split. This will make IAU more attractive to financial planners pursuing asset allocation strategies but in the end is meaningless.

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DBC:

Commodities were up on the week overall as news from China was encouraging to base metals and energy demand concerns. The China economy is still growing. Who knew!?!

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$WTIC/CRUDE OIL:

Again, oil prices rebounded with less economic uncertainty from China.

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XLE, UNG & BP:

Natural Gas looks like it wants to make a move higher but, if only by a penny, it hasn't broken through support I had indicated as important previously. BP is an ongoing tale that now involves foreign relations with our closest ally and the pensioners dependent on BP's dividend largesse.

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XME:

The rally in base metals shifted well to stocks in the sector.

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DBA:

The big rally here today occurred given a weaker dollar and a large rally in "softs" like Coffee.

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MOO:

With grains on the move higher and the stock market rallying higher it doesn't surprise to see MOO on the move.

Continue to Overseas & Emerging Markets

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EFA & IEV:

European markets were oversold so we rallied. Now markets need to move to the next level and that will occur because of what?

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EEM:

Commodity markets rally and China concerns fade to the back burner lifts EM's.

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EWY:

Thoughts that U.S. consumers would be okay and buying more stuff from abroad got Korea markets going. Further, they don't seem to care if the North blows up their entire navy.

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EWA:

Overdoing things in both directions. But, China (them again!) seems to most okay for now and will continue to buy raw materials from their better sources.

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EWC:

Well, what correction?

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EWZ:

Brazil is no different with regard to China as Australia. Raw materials to the Chinese is a big deal.

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RSX:

Russian markets at support and it's more apparent here than many other markets.

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EPI:

India seems immune from global conditions not to say they don't have their own problems.

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FXI:

Mainland China markets are still in a bear market no matter how FXI looks; but, things are what they are, right?

Continue to Concluding Remarks

No question, the machines are in charge and most others sit on the sidelines. It may very well be that investors have looked at even crummy data and realized, "Hey dummy! Interest rates are low and the punchbowl is still present, so buy stocks!"

Volume was as light as we've seen in a long time making it easy for Da Boyz to shove things around to suit them. Next week is quad-witching and then we prepare for window dressing before the quarter ends. It's all going the bulls' way with the calendar in their favor and without volume.

There wasn't any good news today other than the tape action in the last half hour. So a show about nothing? It seemed that way to me but you have to remember, they don't put volume data in your profit and loss statement. So, in that sense the impression is inappropriate I suppose. But I make no apologies.

Let's see what happens. You can follow our pithy comments on

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Disclaimer: Among other issues the ETF Digest maintains positions in: SPY, SH, SDS, SMN, UUP, EUO, EFZ and EUM.

The charts and comments are only the author's view of market activity and aren't recommendations to buy or sell any security.  Market sectors and related ETFs are selected based on his opinion as to their importance in providing the viewer a comprehensive summary of market conditions for the featured period.  Chart annotations aren't predictive of any future market action rather they only demonstrate the author's opinion as to a range of possibilities going forward. More detailed information, including actionable alerts, are available to subscribers at

www.etfdigest.com

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Dave Fry is founder and publisher of

ETF Digest

, Dave's Daily blog and the best-selling book author of

Create Your Own ETF Hedge Fund, A DIY Strategy for Private Wealth Management

, published by Wiley Finance in 2008. A detailed bio is here:

Dave Fry.