Bad News Bulls: Dave's Daily

There's nothing like bad news to get bulls fired up. Clearly, there's a large crowd which ascribes to the previous theme: "bad news is good, good news is better". This has dogged bears and encouraged bulls since late summer 2010 as QE2 began and zero interest rates remained entrenched. This encourages risk taking given poor alternatives. Wednesday, the hint of more QE post June 30 th contributed to a short-lived intraday bounce. Thursday featured more dreadful economic news with Jobless Claims once again higher and GDP data confirming weak growth. As to the latter, the WSJ noted the report featured more inventory versus consumer spending--this is a bad sign.

So what perked up the bulls today? Microsoft (MSFT) did as hedge fund operator David Einhorn pushes that CEO Steve Ballmer needs to go. So MSFT being a large weight in the NASDAQ and QQQ (NASDAQ 100 ETF) lifted tech Thursday. Also, per many reports, MSFT is a large hedge fund holding so Einhorn has plenty of supporters.

Not much else was going on as investors focused more on a few other winners with good earnings from NTAP (Network Appliance). Another retailer SYMS (Syms Corp. also the owner of Filene's Basement) said it wanted to "enhance shareholder value" and possibly sell the company.

It didn't hurt stocks that POMO totals for the last week of trading now exceed $30 billion with another round Thursday. That's a significant amount for the Primary Dealers to trade.    

Ten-year U.S. bonds rallied to levels where yields are negative if you ascribe to headline inflation data. So why not cash then? Commodity markets closed mostly flat while the dollar was slightly weaker.

Volume continues along its weak path and will become even lighter before the Memorial Day holiday Friday. Breadth per the WSJ was positive.

 

 

You can follow our pithy comments on twitter and join the conversation on facebook.

 

Continue to U.S. Sector, Stocks & Bond ETFs

Continue to Currency & Commodity Market ETFs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continue to Overseas Sectors & 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

If past holiday trends hold true, stocks are setting up to finish the week with a boost. After all $30 billion in free money to the Primary Dealers isn't chicken feed. They know what they're supposed to do with it and that's to buy stock.

It shouldn't surprise anyone that an investor like Einhorn would want to maximize his holdings in MSFT. We may be going back to corporate raider days. If reports of hedge fund holdings are correct overall, MSFT is one of the largest holdings among these funds. That's a lot of stock and Einhorn would have plenty of support for any move on getting rid of Ballmer. It's clear MSFT has lost its technological leadership role. Many suggested years ago the company would be better off split up letting creativity in to once again emerge. It's the super nova theory of investing--the sum of the parts are greater than the whole.

Friday markets will get very quiet as the day wears on. A little portfolio window dressing is in order and Da Boyz have the house money to make it happen.

Let's see what happens.

Disclaimer: The ETF Digest maintains active ETF trading portfolio and a wide selection of ETFs away from portfolios in an independent listing. Current positions if any are embedded within charts. Our Lazy & Hedged Lazy Portfolios maintain the follow positions: VT, MGV, BND, BSV, VGT, VWO, VNO, IAU, DJCI, DJP, VMBS, VIG, ILF, EWA, IEV, EWC, EWJ, EWG, EWU, BWD, GXG, THD, AFK, BRAQ, CHIQ, 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.

More from ETFs

What Bad Weather? Kohl's Shares Spike as Same-Store Sales Jump

What Bad Weather? Kohl's Shares Spike as Same-Store Sales Jump

Listen: Here's What You Need To Know About ETFs Today (Hint: They're on Fire!)

Listen: Here's What You Need To Know About ETFs Today (Hint: They're on Fire!)

Bitcoin Today: Bears Rear Their Heads as Prices Continue Downward Spiral

Bitcoin Today: Bears Rear Their Heads as Prices Continue Downward Spiral

Cannabis Stocks Are Screaming Sells After Seeing This Deal: Doug Kass Insider

Cannabis Stocks Are Screaming Sells After Seeing This Deal: Doug Kass Insider

60 Seconds: What's the Difference Between an ETF and a Mutual Fund?

60 Seconds: What's the Difference Between an ETF and a Mutual Fund?