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. March 17, 2010 WHEN THE FED TURNS OFF THE TAP We're seeing follow-through from bulls which gives sympathetic headline writers plenty of material. For me, I'm with this guy who states current conditions better than me--besides he saves me time. Just remember, assuming they're true to their word; the Fed will stop buying mortgage-backed securities (cash for toxic waste) at the end of this month. But, all these Fed activities are the reason all ships have risen with this tide. This means a large amount of liquidity for Da Boyz should dry-up. The primary reason markets are where they are is due to this overwhelming money printing the Fed has then injected to banks and others. It has led to low volume rallies as Main Street isn't an eligible beneficiary of this largesse and hasn't participated. Of course you can accept the trickle-down effect where your 401K is now in better shape. Markets are overbought from virtually every view and indicator. This can continue longer than anyone expects so enjoy it while it lasts. Volume Wednesday was also rather light with some sell programs taking place of the afternoon express. Breadth was quite positive per the WSJ. Continue to Major U.S. Markets
Continue to U.S. Market Sectors, Selective Stocks & Bonds
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Continue to Concluding Remarks
Dozens of important sectors are posted in this commentary yet many look the same. The reason remains how much money has been supplied to banks and others to trade a limited supply of sectors to buy. With volume on the light side you can deduce from this activity is just for those who get this largesse. The mortgaged-backed securities the Fed is buying is to markets and Primary Dealers what the "cash for clunkers" program was like--except on steroids. The impact has been a one year rally in anything that trades. When the tap is turned off an important supplier of fuel will be gone. The hope then is you'll make up the difference.
Thursday is Jobless Claims, Leading Indicators and the Philly Fed. Let's see what happens. You can follow our pithy comments on twitter and become a fan of ETF Digest on facebook. Disclaimer: Among other issues the ETF Digest maintains positions in: MDY, VTI, IWM, QQQQ, RSP, XLF, XLY, XLI, DVY, UUP, USL, EWC and EPI. 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 .