Another Round of POMO: Dave's Daily
Only a few powerful players in markets today but Bernanke's powerful concoction greases Da Boyz wheels. From the FOMC meeting is the direct conclusion the Fed wants to reflate prices in general. This combined with near zero interest rates, ongoing POMO operations
, and an impending change or diminution of congressional power gives bulls the green light so they think.
This also means trash the dollar which of course leads to currency intervention from Japan, Brazil and even Peru to maintain their dollar pegs.
Bulls liked the only slightly better Durable Goods report and drew some bullish conclusions about positive future capital investment. Meanwhile New Home Sales were flat.
But volume was pathetically low for a day featuring such a large rally and highlights who's playing the game and who's not. Breadth was quite positive and perhaps a 90/10 day.
SPY
: Sometimes tech analysis must give way to the obvious reality that the government wants higher prices across the board. Will higher prices and currency trade wars lead to more jobs and rescue housing? Or, just create another bubble? I just ask the questions.
MDY & IWM
: Down into the bowels of the markets we see upside despite the lack of volume. It's difficult to maintain the H&S top with correlations being high.
QQQQ & AAPL
: Is it a good thing for this heavy weighting? The NASDAQ thinks so since the feedback they get from "institutional" investors (read: Hedge Funds) like it this way since it's said Apple represents their largest holding.
Continue to U.S. Sectors, Stocks & Bonds
SMH, ORCL & AMD
: Just a rumor for a short squeeze?
XLB
: The Fed wants prices to inflate then that's what they'll get. Is this a good thing? It "could" be.
XLF
: Financials overall are boring and stuck in the trading range.
XLY & XRT
: Consumers will like higher prices for TVs, clothes, housing and etc right?
XLI
: Industrials rise with Durable Goods report even though there really wasn't that much there.
IYR & XHB
: For REITs a turn away from yield this week while homebuilders are counting on inflation (another bubble) to rescue them.
IYT
: Not much excitement within transports but they are up on the week and at resistance.
XLU
: Utilities not very exciting but moving higher nevertheless.
XLV & IBB
: Healthcare and biotech are in the same general area but are vastly different with the former about earnings with the latter about promise.
IEF, TLT & TIP
: Bonds sell-off some with stock rally and Ben tips his hand.
Continue to Currency & Commodity Markets
$USD/DXY
: Trashing the dollar is the result of current monetary policy which will be inflationary if continued.
FXE, FXY & FXF
: Currency wars are similar to trade wars and almost like a tariff especially when interventions are solitary efforts.
GLD & SLV
: You want to inflate Mr. Ben? This is the result.
DBC
: Still in the trading range but if its inflation they want, they'll get it.
$WTIC & XLE
: Energy prices move higher with a sinking dollar.
DBB & JJC
: Base metals continue their upward thrust as Mr. Ben promotes inflation.
XME
: Metals, miners and stocks push XME higher.
DBA & JJG
: Here it's also about the weak dollar driving commodity prices higher.
MOO
: Ag and stock prices overall higher.
Continue to Overseas Markets & ETFs
EFA
: Plenty from the short memory department as yesterday's news is quickly put in the old news category.
EEM
: EMs breakaway mostly with commodity market rally.
EWJ
: Japan markets treading water but higher nonetheless.
EWA
: Base metals, particularly iron ore, drive markets higher.
EWY
: Samsung still struggling but they don't care since that's old news.
EWC
: Canadian shares struggling at resistance more than others.
EWG
: German shares rocket higher with stronger than expected business confidence.
EWD
: Sweden is one of the stronger European markets because (gasp!) they may go conservative.
EWZ
: Up with commodity markets.
EPI
: India previously meeting profit-taking most of the week rallies late.
FXI
: China markets are driving most nuts since progress over the past year plus have been unproductive.
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.
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.
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 Concluding Remarks
If the bartender is this determined to reflate all markets and prices, he'll get what he wants in the end. Creating new bubbles has been a dangerous game, but perhaps the current maestro will let someone else deal with it down the road.
To know only a few players are in the game and getting "served" is in the light volume Friday. Nevertheless this might be the "new normal" for markets unless retail investors cast off bonds and head back into stocks. The Da Boyz might happy to sell them their accumulated shares.
It's unnerving and disappointing to watch Uncle Buck be the fall guy for current monetary policy.
Friday after the close brings another remarkable seizure by the Feds of a troubled institution. The
reports (subscription required) the government basically took over troubled credit unions and backstopped their toxic waste to the tune of 30 billion. But, they will try to manage $50 billion in poor mortgages. There's nothing they won't do.
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: XLU, IYR, TIP, GLD, DGP, SLV, AGQ, DBB, BDD, EEM, EWA, EWG, EWD, EWJ, EWY and FXI.
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
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Dave Fry is founder and publisher of
, 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.
