Much Ado About Nothing?: Dave's Daily
How much more tension can you give investors and still wind up with just a little "stick save" to close the session? Color me disappointed over the lack of any entertainment value Wednesday. Frankly, often markets will react to Fed decisions a day later which makes Thursday perhaps more interesting.
The election results came in about as advertised. Then the Fed's QE decision offered greater stimulus than expected but that didn't seem to move equity markets.
Bond markets were volatile as the yield curve rose sharply since the Fed is focusing their buying on shorter-term securities.
Commodity prices were mixed as precious metals were sold while the dollar fell somewhat. This was a rather strange or unusual result.
Earnings were still rolling-in better than expected while economic data was also better than expected (ISM, ADP, and Factory Orders). We still have Friday's unemployment report but the Fed is already done for now so who cares?
Oh, and just to keep us interested, the
is about to hit markets to the tune of $13 billion. It will be interesting to see how that goes. The selling group will be calling in a few favors and wringing some hands to get this sucker off the ground.
Volume increased sharply which is often the case on Fed days while breadth was mildly positive.
Continue to U.S. Sectors, Stocks & Bonds
Continue to Currency & Commodity Markets
Continue to Overseas Markets & ETFs
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.
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.
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
There was more tension and uncertainty from the election and Fed meeting than the results would indicate. Volume still remains light and may become the new normal.
Many retail investors are still avoiding stocks preferring CDs and bonds. This is understandable given recent events from May and the previous bear market. What will it take to bring them back? Cynically, as before, fear and greed will do the trick.
In the meantime, portfolio managers are intent on making the last quarter their time for making their year and bonuses.
Earnings may return to the forefront and after the close Qualcomm and Whole Foods reported good earnings and outlooks. Jobless data will be at the forefront Thursday and Friday but do we really care anymore? The Fed has done all it can do and high unemployment is something that is just endured for now. Perhaps in January this will change as a new congress is seated and battles begin anew despite the "make nice" rhetoric.
For most investors you need to go with the flow. The Fed wants higher prices so commodities and currencies should be on your menu. In addition, tech, emerging markets and bond avoidance should be your primary focus.
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: SPY, MDY, IWM, QQQQ, QLD, IYR, XLU, XLI, TBT, TBF, UDN, FXE, GLD, DBA, EFA, EEM, EWJ, EWA, EWC, EWZ, 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
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Dave Fry is founder and publisher of
, 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.
