Earnings and Punchbowl Beat Poor Data: Dave's Daily

With alternative yields low, fund managers are willing to ignore bad news and go with what they must do -- buy stocks.
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Stocks rallied strongly Thursday. Investors wonder how the continuing litany of poor economic data can be so easily ignored. It's understandable. But, with alternative yields low, fund managers are willing to ignore bad news and go with what they

must

do -- buy stocks. 

Jobless Claims, Leading Indicators and Home Sales were poor by any measure. At the same time market leaders like MMM, CAT and UPS beat earnings by a wide margin and issued good guidance.

The only fly in the ointment, not that the media will report it, was light volume which has been typical for these melt-ups. Breadth was quite positive but not quite a 90/10 day.

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Continue to Major U.S. Markets

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SPY:

There was heavy volume in the last 10-15 minutes of trading Thursday with most on the downside. Otherwise volume was light throughout the day.

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MDY & IWM:

Higher betas in these sectors allow for outperformance and underperformance with market swings.

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QQQQ:

Tech has a great day Thursday as did the heavyweights like AAPL and QCOM.

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

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QCOM, MSFT, AMZN & AAPL

: Some mixed news after hours for AMZN and MSFT while the others shine Thursday.

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XLF:

Financials went along for the ride but not without some difficulty until later in the day.

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XLI:

Just what is an industrial company? CAT is one which along with its peers made the week look great.

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XLV:

Defensive sectors are ignored for now.

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XLB:

Even when markets were lower Wednesday materials held their own. Perhaps growth overseas is kicking-in more than the U.S.

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XRT:

They must be expecting an early Christmas this year.

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IYR:

REITs had a great Thursday because they're in the buy program basket. Beyond that, I haven't the foggiest.

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IYT & $BDI:

UPS earnings were strong and gave IYT something to rally on. On the other hand, the Baltic Dry Index is moving higher after a sharp decline. It's controversial since new container ships have come on line during a slowdown increasing their numbers while perhaps shipments haven't changed overall.

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IEF & TLT:

Bonds gave back some ground as stocks rallied but the overall economic theme is still negative.

Continue to Currency & Commodity Markets

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$USD/DXY, FXE, ULE & FXY:

Weak U.S. data vs stronger European data drives the dollar index lower while the euro benefits.

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GLD:

We're off support on a falling dollar which makes sense for a change. But support is close.

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DBC:

The commodity tracking funds are still stuck in a long trading range held back primarily by volatile energy prices.

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$WTIC/CRUDE OIL & XLE:

Energy stocks in the buy program basket as product prices rise on weaker dollar.

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DBB:

Demand for base metals must be improving and this can only come from one source -- China.

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JJC:

Dr. Copper is an economic forecaster who may be indicating better days ahead.

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XME:

Base metals stocks reflect the same enthusiasm for positive demand overall.

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DBA:

The trading range for agricultural commodities continues.

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MOO:

Agricultural stocks like Monsanto, Mosaic, Potash and Deere are also doing well and farmers need their products.

Continue to Overseas & Emerging Markets

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EFA:

EAFE-based sector rallying on better news from Europe -- especially Germany.

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EWG:

German stocks rallied Thursday on good earnings & (gulp) economic data.

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EEM:

EMs are rallying with base metals and other commodities.

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EWJ:

Japan's markets are lagging without question.

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EWY:

Samsung will make most of Apple's chips. Sounds like a winner to me.

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EWA:

Australia shares rise sharply with base metals.

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EWC:

Canada, like Australia, moves higher with commodities in general.

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EWZ:

It's all about base metals and natural resources period.

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RSX:

Russian shares also moving with commodities.

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EPI:

India ETF seems less like a volatile third world market while so-called developed markets have become more volatile

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FXI:

China markets are stronger while the government denies any hint at relaxation, investors think otherwise.

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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 Concluding Remarks

A parallel universe? It sure seems that way when economic data is severely in conflict with earnings. Which is the more forward-looking? To me it's economic data since earnings are old news while data is a good predictor of future trends. But, let's remember, the alternative investment route for most money managers isn't cash or bonds (unless that's part of their mandate) given the low yields. They're desperate for returns and jump on any good news.

Most individuals, unless they're locked-in to certain investment plans have either left stock markets or want nothing further to do with them. You can tell this is true based on light volume. It's been a "traders" market making it understandable most individual investors wish to avoid it.

In After Hours trading Thursday evening, things aren't looking great with AMZN getting hit pretty hard while MSFT, despite good headline earnings does little. Semi's look especially weak.

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We've seen the above trading before in the evening coming to no result the next trading day. That's why sometimes it's called the Amateur Hours.

There isn't much left for earnings and economic data Friday. We'll have to see how bulls finish the week.

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, ULE and UDN.

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.