Rally Led by the Usual Suspects: Dave's Daily

If, as the Fed and WS pundits assert, the economy is growing and even employment is improving, why continue POMO operations? This is hard to understand unless the Fed is just willing to tolerate another bubble for stocks. So, with all systems go another round of POMO commences with nearly $9 billion of bonds monetized. Some suggest another $25 billion in excess weekly liquidity will push stocks higher. This is the admitted Fed goal--higher stock prices.

Once again the DJIA raced higher Monday on ultra-light volume led by the usual suspects for a price-weighted index: IBM, CAT, BA and AA. The NASDAQ followed led by AAPL and semis like INTC.

The dollar fell, gold rallied modestly and crude oil dropped on Saudi threats to increase supplies.

Volume on this renewed melt-up was ultra-light with SPY barely exceeding 100M shares. Breadth per the WSJ was 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

Equity markets are led higher by the DJIA with just 4-6 stocks leading the way on ultra-light volume. The market is managed by POMO activities primarily and it's steamrolling most technical indicators not to mention logic. Therefore, it truly is a "more money than brains" market. It's the stupid person (myself included) who doesn't deal with it well. Further, we're now in a highly U.S. big cap centric mode as previously stronger markets like Asian sectors struggle.

Earnings are good and generally beating expectations which is to be expected in this environment. Texas Instruments, American Express and CSX Corp all report results after the close that beat estimates but these were all sold by 6 PM EST.  More earnings news will roll-out Tuesday with MMM, BLK, GLW, DD, HOG, JNJ, KMB, ERIC, TRV and X among many others reporting. Many of these are important DJIA stocks so we'll see if this index can keep the momentum going.

Tomorrow's economic data probably doesn't even matter anymore as buying any news seems the order of the day for the few that are trading.  

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: XLF, TBF, PHO, VT, MGV, BND, BSV, VGT, VEWO, VNO, IAU, DJCI, DJP, VMBS, VIG, IEF, ILF, EWA, EWC, EWJ, EWG, EWU, BWX, GXG, THD, AFK, BRAQ, CHIIQ, TUR, & VNM

 

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 .

 

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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.

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