Bulls Blind to Bad Data Again: Dave's Daily

Jobless Claims disappointed as they rose back to nearly 400K (399K vs expectations 375K & previous 375K revised higher) and this data from a shorter week. Retail Sales data was also surprisingly weak considering the holiday period (.1% vs .4% consensus & .4% previous. Ex-Autos .0% vs .2% expected and .2% previous.). Business Inventories also declined sharply (.3% vs .5% consensus and .8% previous.) meaning restocking isn't taking place.

The European Union chickened-out of imposing Iran sanctions for 6 months which must have been a blow to the WH. Does it surprise you the Europeans got weak in the knees? I thought not. That announcement caused crude oil to drop nearly $2.00 per bbl, while gold continued its rebound. Bonds were slightly lower in price.

In the eurozone today ECB president Mario Draghi decided the best defense is a good offense and cleverly spun a yarn that his policies are working. Draghi further states that "interest rates will remain low for an extended period"...where have we heard this before? This statement caused the euro to rally about 1% on the day perhaps squeezing some shorts.

Stocks just don't seem to care about much and are hopeful future earnings reports will justify their enthusiasm. As noted yesterday the trailing PE is around 13X for the S&P 500 which is low but not historically so. Forward earnings are what bulls should care about if the current rally is to have legs. Below is a chart indicating forward looking earnings are flattening out.

From the WSJ's analysis of FOMC Minutes Thursday is this nugget suggesting both Bernanke and Geithner were incompetent regarding the housing market decline beginning in 2006: "Bernanke, who took over from Alan Greenspan as Fed chairman in February 2006, is cautious in making forecasts about housing and the wider economy. But, together with then New York Fed chief Timothy Geithner, he believes the slowdown in housing is healthy and likely to end well." On this kind of ineffectiveness he gets reappointed and Geithner is promoted.

Volume remains so light that this condition in itself is becoming a greater risk with each passing day. Breadth per the WSJ is positive meaning we're becoming overbought.

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BAL - The Dow Jones-UBS Cotton Subindex Total ReturnSM is a sub-index of the Dow Jones-UBS Commodity Index Total ReturnSM and is intended to reflect the returns that are potentially available through an unleveraged investment in the futures contracts on physical commodities comprising the index as well as the rate of interest that could be earned on cash collateral invested in specified Treasury Bills. The Dow Jones-UBS Cotton Subindex Total ReturnSM is a single-commodity sub-index currently consisting of one futures contract on the commodity of cotton, which is included in the Dow Jones-UBS Commodity Index Total ReturnSM.
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JO - The Dow Jones-UBS Coffee Subindex Total ReturnSM is a sub-index of the Dow Jones-UBS Commodity Index Total ReturnSM and is intended to reflect the returns that are potentially available through an unleveraged investment in the futures contracts on physical commodities comprising the index as well as the rate of interest that could be earned on cash collateral invested in specified Treasury Bills. The Dow Jones-UBS Coffee Subindex Total ReturnSM is a single-commodity sub-index currently consisting of one futures contract on the commodity of coffee, which is included in the Dow Jones-UBS Commodity Index Total ReturnSM.
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EWY - The iShares MSCI South Korea Index Fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in the South Korean market, as measured by the MSCI Korea Index.
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EPHE - The iShares MSCI Philippines Investable Market Index Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the MSCI Philippines Investable Market Index.
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EWS - The iShares MSCI Singapore Index Fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in the Singaporean equity market, as measured by the MSCI Singapore Index.
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EWZ - The iShares MSCI Brazil Index Fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in the Brazilian market, as measured by the MSCI Brazil Index.
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RSX - The Russia ETF seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the DAXglobal® Russia+ Index. The Index provides exposure to publicly traded companies that are domiciled in Russia, and traded in Russia and/or on leading global exchanges. As such, the Fund is subject to the risks of investing in this country.
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EPI - WisdomTree India Earnings Fund seeks investment results that correspond to the price and yield performance, before fees and expenses, of the WisdomTree India Earnings Index.
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FXI - The iShares FTSE China 25 Index Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the FTSE China 25 Index.
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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

JP Morgan's earnings report will set the tone for Friday the 13 th barring any other news. I would say results are baked-in to current prices but it will be forward guidance from Jamie Dimon which will determine the action.

Beyond Dimon, the major risk to markets currently is there is no volume. This means markets are dominated by HFTs and program traders.

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. Active Portfolios: No Positions. Our Lazy & Hedged Lazy Portfolios maintain the follow positions: XBI, KRE, QQQ, QLD, PFF, CVY, EMLC, VT, MGV, BND, BSV, VGT, VWO, VNO, IAU, DJCI, DJP, VMBS, VIG, ILF, EWA, IEV, EWC, EWJ, EWG, & EWU.

 

 

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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