There's nothing like bad news to get bulls fired up. Clearly, there's a large crowd which ascribes to the previous theme: "bad news is good, good news is better". This has dogged bears and encouraged bulls since late summer 2010 as QE2 began and zero interest rates remained entrenched. This encourages risk taking given poor alternatives. Wednesday, the hint of more QE post June 30
contributed to a short-lived intraday bounce. Thursday featured more dreadful economic news with Jobless Claims once again higher and GDP data confirming weak growth. As to the latter, the
the report featured more inventory versus consumer spending--this is a bad sign.
So what perked up the bulls today? Microsoft (MSFT) did as hedge fund operator David Einhorn pushes that
. So MSFT being a large weight in the NASDAQ and QQQ (NASDAQ 100 ETF) lifted tech Thursday. Also, per many reports, MSFT is a large hedge fund holding so Einhorn has plenty of supporters.
Not much else was going on as investors focused more on a few other winners with good earnings from NTAP (Network Appliance). Another retailer SYMS (Syms Corp. also the owner of Filene's Basement) said it wanted to
and possibly sell the company.
It didn't hurt stocks that POMO totals for the last week of trading now exceed $30 billion with
. That's a significant amount for the Primary Dealers to trade.
Ten-year U.S. bonds rallied to levels where yields are negative if you ascribe to headline inflation data. So why not cash then? Commodity markets closed mostly flat while the dollar was slightly weaker.
Volume continues along its weak path and will become even lighter before the Memorial Day holiday Friday. Breadth per the WSJ was positive.
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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.
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.
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 past holiday trends hold true, stocks are setting up to finish the week with a boost. After all $30 billion in free money to the Primary Dealers isn't chicken feed. They know what they're supposed to do with it and that's to buy stock.
It shouldn't surprise anyone that an investor like Einhorn would want to maximize his holdings in MSFT. We may be going back to corporate raider days. If reports of hedge fund holdings are correct overall, MSFT is one of the largest holdings among these funds. That's a lot of stock and Einhorn would have plenty of support for any move on getting rid of Ballmer. It's clear MSFT has lost its technological leadership role. Many suggested years ago the company would be better off split up letting creativity in to once again emerge. It's the super nova theory of investing--the sum of the parts are greater than the whole.
Friday markets will get very quiet as the day wears on. A little portfolio window dressing is in order and Da Boyz have the house money to make it happen.
Let's see what happens.
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Dave Fry is founder and publisher of
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