Dave's Daily: Bond Vigilantes At Work - TheStreet

Editor's Note: 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. Fry has devoted over 35 years to the business of trading and portfolio management. Check back each morning for the latest installment of Dave's Daily to get a unique ETF market overview.

December 10, 2009

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BOND VIGILANTES AT WORK

As the old saying goes, "you can fool some of the people some of the time, but ________"  In other words, don't mess with bond traders since eventually the shell game of bond auction switcheroos (Treasury sells to dealers and dealers sell to the Fed) will come to an end.  The Fed's balance sheet which carries these instruments as assets will eventually fill.

Stock market bulls can turn a blind eye to the immense flow of government deficit financings, remember it's December and since 2000, markets have climbed around 7% during this month.  Ho, Ho, Ho, tis the season to ignore stubborn facts for another day.

I really don't know what stimulated yesterday's rally beyond "hope" and the season. MarketWatch stated markets rose due to "a decline in continuing unemployment claims." This seemed like spin since claims were much higher than expected and we're losing jobs every day. Others stated the low dollar was helping exports as the trade deficit narrowed to

only

$32 billion last month. Is that low?

No matter, the tape is the tape and bulls have things in hand.

Volume was incredibly light while breadth was positive.

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The news Thursday was sketchy and not anything real you could get your arms around.  You can see that in the creative headlines regarding bullishness.  The bottom line today is the continuation of previous bullish reasons to buy stocks including zero short-term rates, peer pressure, excess liquidity and a continuation of the dollar carry trade even as the latter weakens somewhat.

Today's an important day data wise.  Retail Sales are on deck before the open followed by Consumer Sentiment and Business Inventories shortly after the open.  These results should move markets.

Let's see what happens and you can follow our pithy comments on

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Disclaimer:  Among other issues the ETF Digest maintains positions in: VTI, SPY, XLY, XLB, IYR, GLD, DBC, EWW and EFA.

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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