Keep the Wind at Your Back: Dave's Daily

Is it better to be making money without giving it any thought? Jesse Livermore famously said: "You don't need a weatherman to know which way the wind blows."
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 23, 2010

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KEEP THE WIND AT YOUR BACK

Yes, it's all about the Fed.

Yes, we're overbought.

Yes, there's another bubble building.

And, yes, it seems a waste of time trying to be thoughtful as it's apparent to see easy money from Uncle Sugar lubricates trading desks and fosters speculation.

Or, as Jesse Livermore famously said: "You don't need a weatherman to know which way the wind blows."

So, get on board the bubble train while you can or take up farming.

Stocks continue to "melt up" as sellers are absent and trading desks are firmly in control. Disappointing earnings are ignored while good earnings and data are the featured headlines. You may recall earnings announcements after the close the past two evenings were sold hard in extended trading but have been just buying opportunities for trading desks. Microsoft, Qualcomm and Amazon are just recent examples.

Volume declined some today while breadth was quite positive.

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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

Is it better to be making money without giving it any thought?  Yes, would be Livermore's assertion. Then there are really thoughtful investors like Jeremy Grantham who has recently penned

this letter

telling all investors are playing with fire. He has a good track record and an excellent argument. But, those going with the wind at their backs would just say he's a party pooper. Livermore would just read it and say: "It's a bull market." 

The bottom line is investors are enjoying easy money policies of the government. Eventually the tab will come and there will be hell to pay. For now, the smart person has the fatter wallet. That's just the way things are.

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, VTI, IWM, QQQQ, XLE, DVY, DAG, SCO, EFA, EEM, EWY, EWJ, TUR 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

.

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.