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 23, 2010


You know things are overbought when there's a struggle to explain this advance.  Still up on Yahoo/Finance at 4PM is: "Stocks Rally After Homes Sales Data Top Expectations".  They only met expectations and only because of seasonal adjustments.  The only explanation for today's action comes from Fed Governor Lacker who restated the Fed refrain--"interest rates would remain low for an extended period."  And Janet Yellen echoed that stating "record low rates needed to rev up recovery".  So that's the green light to party on!

The headline for DJIA is 11K is within sight and that's the window dressing Main Street needs to see.  Retail investors are still withdrawing money from stock funds and more interested in bonds.  Since many believe they're always wrong a switch back to stocks at this time may be a confirmation.

Nevertheless, financials, industrials and tech led markets higher Tuesday.  Volume was still on the light side while breadth was positive.

Continue to Major US Markets

Continue to US Sectors, Selected Stocks & Bonds

Continue to Currency & Commodity Markets

Continue to Overseas & Emerging Markets

Continue to Concluding Remarks

Everyone is stretching for thoughtful reasons why markets are rallying now.  The latest is the uncertainty surrounding health care legislation is removed and there will be winners and losers.  But, there's really only one story, the punchbowl continues to get refilled and reinforced by Uncle Sugar.  They're creating a new bubble and it does feel a lot like 1999.  Volume remains so-so while we're now much overbought on an intermediate term basis.  PE's are high and dividends low.  Earnings will have to be really good to justify current prices. 

There's an emotional disconnect between government deficits, consumer spending, high unemployment and continued housing weakness with the stock market.  So far for the quarter the indexes are up 4% but grinding higher with each passing day.  Further investors seem to be more focused on US indexes versus overseas markets.  We have a better network of Kinko's and HAL 9000s to keep the good times going.

I had mentioned something about "ten-year swap rates" in my bond commentary and here's the story from Bloomberg.  It's complex but it's a negative sign as if anyone's paying attention.

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: RSP, VTI, MDY, IWM, QQQQ, XLY, XLI, XLF, IYR, KBE, UUP, 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 .