Stock Market Groundhog Day: Dave's Daily

Stocks rebound from early declines. Next up: durable goods data and earnings from Honeywell, Ingersoll-Rand, Schlumberger and Travelers. Let's see what happens.
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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 22, 2010

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STOCK MARKET GROUNDHOG DAY

Markets were down hard early today only to reverse course with more style than even yesterday's "stick save". Most observers were at a loss to explain the rebound with one saying: "It has paid to buy pullbacks, since the market has done pretty well."  Duh!  He continued to comment when Greek troubles came up and answered: "It's like high oil prices, some days you walk in and it doesn't matter."  Whew! I'm not worried now.

The bottom line remains Fed monetary policy and the after effects of bailouts, also known as "the punchbowl" are still the bull's motivation. While this is still in place trading desks know what to do -- ignore bad news, cherry pick good news and buy. So, move along cowboy, nothing to see here.

Volume did increase on an up day for a change and breadth was positive especially on the Nasdaq per 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

The stock market is in bubble-land and has been since the fall of last year. This is why you read such lame comments as those cited in the intro.

The last time I saw rallies this powerful and sustainable was during the dot.com boom. Then, all technical indicators and common sense were blown away. The housing bubble that followed shared the same common stimulus, the Fed and other government policies. In this environment logic and even lengthy experience must give way to the tape. The one true thing remains unreasonably low interest rates and the after effects of bailouts and other stimulants. The trading desks are on crack and having a great time. Other institutions with captive assets generating fees are content and 401K assets are performing well making consumers feel better. This is the intent. What will follow is something truly ugly, but until then, party on dudes!

In after hours trading per MarketWatch you can see how poorly some big names are doing after reporting earnings. This bodes poorly for tomorrow but was the same look and worse last night for other companies.

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Friday will feature economic data from Durable Goods and more housing data. In addition a smaller array of earnings reports from companies like Honeywell, Ingersoll-Rand, Schlumberger and Travelers will be released.

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

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.