Investors Biding Their Time: Dave's Daily

While the earnings still come in with the ubiquitous "better than expected" label, most markets are just waiting for the Fed announcement Wednesday afternoon.
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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 26, 2010

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INVESTORS BIDING THEIR TIME

While the earnings still come in with the ubiquitous "better than expected" label, most markets are just waiting for the Fed announcement Wednesday afternoon. Will they change the language? Hint at raising interest rates? Or, just slip in some nuance for the talking heads to parse? It sells soap either way.

The government reportedly started selling

its

our 7 billion share stake in Citigroup. Over a billion shares traded today driving the stock down. I don't know if the government is as skilled in selling stocks as they are in buying stock index futures but Citigroup shares were down over 5% today. Supply tends to do that particularly when you tell investors your intentions.

Warren Buffett

was busy with congress trying to get his $65 billion in derivatives exempted from any financial reform regulation even though he called them weapons of mass destruction. He'd like to take that phrase back just for now anyway. The democrats say they'll leave it in anyway and the man from Omaha will have to get some help from his arch foes in the GOP. Hypocrisy is best nurtured from self-interest while disarmament is for others.  

Meanwhile, while we're waiting, volume slowed considerably and, barring other events, will stay around these levels until Wednesday afternoon. Breadth was unremarkable and flat.

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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 are just waiting around for the Fed decision. Bond markets, like all other sectors, are a captive to whatever the Fed does or says. Bloomberg put out

an interesting article

regarding the surrender of the bond vigilantes to low interest rates. The key to the article is the "acceptance" by many that inflation is dead but only if believe in the "ex" factor food and inflation don't matter. This is poppycock to put it mildly. Remember, firms quoted within the article are mandated to buy bonds for institutional investors who "must" own them. If you accept that so-called "core-inflation" is a valid measure, then knock yourself out and buy all you can. We'll sit this one out.

Tomorrow we'll get Consumer Confidence data. Good grief! If these numbers aren't "better than expected" by a wide margin it makes XLY and XRT bullish actions seem silly and without merit.

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: MDY, BGU, IWM, QQQQ, XLE, DIG, DVY, IVE, UUP, GLD, DGP, YCS, EUO, EFA, EEM, EWJ and RSX.

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.