Have Bears Thrown in the Towel?: Dave's Daily

As long as you don't try to understand markets or see what's going on behind the curtain, just enjoy the ride for now, courtesy of JPMorgan, Intel and Apple.
Author:
Publish date:

Dave's Daily

By Dave Fry, founder and publisher of

ETF Digest

and author of the best-selling book

Create Your Own ETF Hedge Fund.

April 14, 2010

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HAVE BEARS THROWN IN THE TOWEL?

It's hard to argue with the tape since it doesn't lie.  Bears tossed in the towel a long time ago and are just annoyed spectators now.  Even with a big day like Wednesday, there was little in the way of volume which one would expect.  Where is everybody?  Shopping at the malls I guess since according to

Diana Olick of CNBC

with 6 million homeowners not paying their mortgage that's what they're doing while waiting to be bailed-out. 

But, as long as you don't try to understand markets or see what's going on behind the curtain, just enjoy the ride for now.  We're essentially long,

but nervously so

Markets took off higher Wednesday as earnings from Intel, Linear Technology and CSX Corp were "better than expected".  Retail Sales, CPI and the Fed's Beige Book were also in that now hackneyed category.  To add more sugar to the mix, Bernanke testified that everything is just "Goldilocks-like" unless you're not working. 

The idea is printing money, giving it to the trading desks on Wall Street will have the desired effect -- build up positive psychology so Americans will feel better about things.  The tab for all these positive feelings will be paid by others down the road.

Volume?  Who needs it!   C'mon folks, don't sweat these pesky details, just watch your 401K grow, feel good and stop paying your mortgage and get an iPad.  But seriously, volume was still on the light side for a day like this especially.  The three-month average volume for SPY for example is nearly 200M shares and we barely broke 150M Wednesday -- and that is high for the most recent period.  Nevertheless, breadth was positive and close to a 90/10 day per the WSJ data below.

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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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Per Investopedia:  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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Per Investopedia: 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 Major U.S. Markets

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

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Continue to Currency & Commodity Markets

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Continue to Overseas & Emerging Markets

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Continue to Concluding Remarks

We're long and not waving a white flag or anything similar.  The point is this rally is all about the Fed.  If I hear someone say the stimulus package did anything to contribute to this rally

I might puke

.  The punchbowl is having its intended result to boost stock prices and make the populace feel good about things.  One consequence is the banksters are getting away with murder and another is the big tab accumulating.  Who will pay and when? 

In the meantime, enjoy the ride and things may end when interest rates start rising in a meaningful way. 

YUM! Brands reported good earnings after the bell and the shares are up nearly 3% as higher margins from lower taxes boost results.  UPS also reported good results also not shown below with shares up 4%.

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Thursday we get the reality of Jobless Claims as if anyone cares and the Empire Manufacturing data. More earnings will roll-out from companies like Charles Schwab, Fairchild Semiconductor, PPG Industries, and after the close AMD and Google.  It should be fun.

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: RSP, VTI, MDY, IWM, TNA, QQQQ, USD, KBE, XLY, XLI, XLB, DGP, DBB, BDD, IYR, URE, AGQ, XME, XLE, EFA, DZK, EEM, EWJ, EWY, EWA, EWC, TUR, RSX, EPI 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

www.etfdigest.com

.

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.