Risk on as Markets Rally: Dave's Daily

The unique thing about the first day of trading for 2012 is that it's almost a carbon copy of 2011 for the S&P 500 Index--2011 (1271.87) and 2012 (1277.06). Better data caused a 1.55% rally in the index Tuesday first from the ISM Mfg Survey (53.9 vs 53.45 expected and 52.7 previous) and later from a notably friendly Fed Minutes report. European stocks rallied as the European PMI rose (46.9 vs 46.4 previous) which isn't that encouraging really. Swiss Manufacturing rose (50.7 versus 44.8) But things were better in Asia as manufacturing in Singapore rose 6.5% and manufacturing growth in Australia, China and India also improved.

Negative news regarding eurozone woes were silent, at least for now, but they'll be back to haunt us sometime in the first quarter. After all, the world's largest economies still face a $ 7.6 trillion tab for 2012.

Some, if not many in the financial media, put a lot of stock in the "January Barometer" and "First 5 Trading Days on January" but these are about as reliable as the Super Bowl indicator. This is also an election year and it will be ugly to watch.

Leading the way higher Tuesday were financial stocks (XLF), energy (XLE) and technology (XLK). Many financial stocks will report earnings over the next two weeks.

Gold and silver reversed course and rallied sharply higher as the dollar was weaker. Some of the selling in both metals may have been due to the unloading of large positions to meet hedge fund redemptions not to mention some nations selling to raise cash as noted HERE.

The Fed is now quite dovish and this can be viewed by how the new voting member's line-up as featured below:

The Fed also expects to be more transparent but that won't translate to being friendly to any embarrassing audits.

Volume was light to moderate while breadth per the WSJ was quite positive.

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SPY - The SPDR® S&P 500® ETF is a fund that, before expenses, generally corresponds to the price and yield performance of the S&P 500 Index. Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs.
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IWM - The iShares Russell 2000 Index Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the small capitalization sector of the U.S. equity market as represented by the Russell 2000 Index. The index represents the approximately 2,000 smallest companies in the Russell 3000 Index.
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QQQ - PowerShares Capital Management LLC is passionate about our goal of delivering the highest quality investment management available through one of the more benefit-rich investment vehicles ever created, the exchange-traded fund.PowerShares QQQ¿, formerly known as "QQQ" or the "NASDAQ- 100 Index Tracking Stock®", is an exchange-traded fund based on the Nasdaq-100 Index®. The Fund will, under most circumstances, consists of all of stocks in the Index. The Index includes 100 of the largest domestic and international nonfinancial companies listed on the Nasdaq Stock Market based on market capitalization. The portfolio is rebalanced quarterly and reconstituted annually.
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