Bad News Thursday: Dave's Daily

The news was enough to drive markets into the toilet but machines took stocks higher again at the close Thursday.
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THE BAD NEWS BEAR BULL

Bad news Thursday but the stock market shrugged it all off. This tells me we're just setting up for quad-witching tomorrow. Volume was higher as options and futures related activity starts to take place.

The bad news? Jobless Claims rose substantially coming in at 12K over the previous week and 22K over expectations. The Philly Fed survey was a total stinker coming in at "8" versus an expected reading of "20". Also, the CPI declined .2% meaning there's no inflation. If that's so, why did TIPs (Treasury inflation protected bonds) and gold breakout to new highs? Obviously, those in the know don't believe the garbage the government is selling.

Volume did increase slightly today while breadth was flat to mixed.

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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. Did the machines get things just under overbought conditions to ramp it tomorrow? Could be.

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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. Everything seems set-up well for anything Friday.

Continue to Major U.S. Markets

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SPY:

You can't make this stuff up but then again there it is. Crummy news and we rally. Bulls would say a rally is the sign of a bull market when stocks rise on bad news.

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MDY & IWM:

So we march on higher no matter the news and future obstacles. Perhaps the economy can grow despite government and phony data.

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QQQQ:

It's just AAPL and semi's walking on every other company. In the late 1970s when inflation was roaring commodities and natural resource sectors were the place to be but so was tech since earnings were outpacing inflation.

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

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SMH

: Semi's continued to pace gains as the perception is demand for new phone and PC technology will drive demand.

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XLF:

Financials saw some weakness late as Barney Frank implied that the Volcker Rule would be put back in the House bill. We'll see.

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XLP:

There was a move toward more defensive consumer staples Thursday led by PG for example.

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XLV:

Healthcare would be another defensive sector that was much in play Thursday.

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XLB:

Materials were weak Wednesday and Thursday as at least here poor economic data translated to logical results.

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XLY:

The consumer discretionary sector is still quite strong led by DIS, which as you can see, offers a similar appearance to XLY since it's a heavyweight. You going to Orlando with the kids this summer?

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IEF, TLT & TIP:

Gains in bonds while stocks have a good week is strange. Further, as noted in the TIPs chart, if there's no inflation per the CPI & PPI why are inflation protected securities of any interest to investors? Answer: they don't believe the BS data from the government.

Continue to Currency & Commodity Markets

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$USD/DXY & FXE:

There's nothing much to like about the euro (a rally there based on another Spain auction) frankly and little to admire about the dollar either. That's why gold is rallying.

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GLD:

Gold is rallying in spite of low inflation data because investors don't trust paper money due to government data they don't believe and a mountain of debt that needs financing.

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DBC:

Commodity markets overall are showing mixed strength as the dollar falls but base metals suffer with perceived weak demand from poor economic data.

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$WTIC/CRUDE OIL:

Crude oil prices fell moderately on Thursday along with ideas economic growth and demand would slow.

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XLE, UNG & BP:

It's interesting we'd rally sharply in BP reversing losses since oil is still spilling into the Gulf and the dividend is gone. Most suggest BP has tremendous reserves of energy amounting in the trillions of dollars. But then there are the lawyers to deal with. UNG has another day to complete its breakout which looks likely.

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DBB:

Base metals took the hit the past few days as economic data was poor meaning lower demand.

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DBA:

Agricultural commodities rally due to declining dollar and rising softs (cocoa, coffee and sugar) over the past week.

Continue to Overseas & Emerging Markets

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EFA:

It rallies with euro and a temporarily suspension of disbelief.

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EEM:

EM's responding higher off support with overall rally in markets and especially higher prices in commodities.

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Continue to Concluding Remarks

So the machines took stocks higher again at the close today. Not much of a shock really. The news was enough to drive markets into the toilet but this market is dominated by robot trading operations that could care less about fundamentals.

This article in the Atlantic

has captured the attention of investors since it well summarizes the condition our condition is in.

Another mystery is the rapidly disappearing retail investor from the scene as noted by ongoing withdrawals from stock mutual funds which now total $27 billion year to date.

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The market focus is not on the news; it's on quad-witching which completes tomorrow. This makes this report shorter than usual since the combination of robo-traders and options nonsense will keep our heads spinning most of the day tomorrow.

The other strange circumstance is what's happening with gold and TIPs which are rallying sharply as economic indicate slowing while the powers that be tell us there is no inflation. Investors there don't believe a word of it.

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: GLD, UUP, EFZ & 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.