Central Bank Liquidity Keeps Bulls Happy: Dave's Daily

NEW YORK ( ETF Digest) -- As Marc Faber reported Monday, two separate packages of over $1.3 trillion LTROs (Long-Term Refinancing Operations: dba "bailouts") in the U.S. & Europe are bullish for stocks. Further, rumors remain the Bank of Japan is privately conducting similar operations and no one really knows what the Chinese (PBOC) are doing.

ISM Mfg Data (53.4 vs 53.2 expected & prior at 52.4) indicates continued slow and steady economic expansion. Unfortunately prices paid remains higher at the same time. Construction Spending (-1.1% vs .7% expected & prior -.8%) was lower and some blamed this on the weather which isn't intuitive.

Stocks rallied as the new quarter began on the back of ISM data primarily and secondarily as new funds get reinvested to begin the month and quarter. Tech once again led markets higher with Apple (AAPL) recapturing its momentum after Friday's selling. Perhaps some were thinking and there were some rumors some index rebalancing could occur which would hurt the shares and indexes where it's a heavyweight. The rally was fairly widespread with only homebuilders (ITB) down on weaker Construction Spending. As commodity prices rebounded on ISM data, materials (AA & XLB) strengthened

Oil (USO) prices rallied nearly 2.2% on back of the ISM report. The dollar was slightly weaker and commodity prices (GLD, JJC & DBC) rallied overall. Bond prices rose modestly even as stocks rallied.

Meanwhile in Europe economic conditions continue to deteriorate. Unemployment has climbed to a 15 year high with nearly 17 million out of work. Further there is more bailout and restructuring chatter regarding Spain, Italy and Greece. In China a contraction remains underway which should be bearish for emerging markets but not Monday as prices rose.

Perhaps some late-day selling in equities came after the Royal Bank of Canada was accused in a CFTC lawsuit of a massive and illegal trading scheme.

Insiders continue to sell into strength but the chart below doesn't necessarily breakout the details. Nevertheless, what do insiders know we don't?

Volume was moderate but the heaviest selling came into the close. 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 - 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. See more details

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

XLK - The Technology Select Sector SPDR® Fund, before expenses, seeks to closely match the returns and characteristics of the Technology Select Sector Index (ticker: IXT). Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs.
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SOXX - The iShares PHLX SOX Semiconductor Sector Index Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of U.S.-listed semiconductor stocks as represented by the PHLX Semiconductor Sector Index ("the Index").
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XLB - The Materials Select Sector SPDR® Fund, before expenses, seeks to closely match the returns and characteristics of the Materials Select Sector Index. Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs.
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XLY - The Consumer Discretionary Select Sector SPDR® Fund, before expenses, seeks to closely match the returns and characteristics of the Consumer Discretionary Select Sector Index. Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs.
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ITB - The iShares Dow Jones U.S. Home Construction Index Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Dow Jones U.S. Select Home Construction Index.
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IYR - The iShares Dow Jones U.S. Real Estate Index Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, to the performance of the real estate sector of the U.S. equity market, as represented by the Dow Jones U.S. Real Estate Index.
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IEF - The iShares Barclays 7-10 Year Treasury Bond Fund seeks to approximate the total rate of return of the intermediate-term sector of the United States Treasury market as defined by the Barclays Capital U.S. 7-10 Year Treasury Bond Index.
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HYG - The iShares iBoxx $ High Yield Corporate Bond Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the iBoxx $ Liquid High Yield Index, a corporate bond market index compiled by the International Index Company Limited.
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Continue to Currency & Commodity Market ETFs

UUP - The PowerShares DB US Dollar Bullish Fund (Symbol: UUP) is based on the Deutsche Bank Long US Dollar Index (USDX®) Futures Index¿ (DB Long USD Futures Index). The Index, which is managed by DB Commodity Services LLC, is a rules-based index composed solely of long USDX® futures contracts. The USDX® futures contract is designed to replicate the performance of being long the US Dollar against the following currencies: Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona and Swiss Franc.
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FXE - CurrencyShares Euro Trust is designed to track the price of the euro net of Trust expenses, which are expected to be paid from interest earned on the deposited euros.
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GLD - The objective of the SPDR® Gold Trust¿ is for the Shares to reflect the performance of the price of gold bullion, less the Trust's expenses.
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SLV - The objective of the iShares Silver Trust is for the value of the shares of the iShares Silver Trust to reflect, at any given time, the price of silver owned by the iShares Silver Trust at that time, less the iShares Silver Trust's expenses and liabilities.
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DBC - The PowerShares DB Commodity Index Tracking Fund (Fund) is based on the Deutsche Bank Liquid Commodity Index -- Optimum Yield Diversified Excess Return¿ (Index) and managed by DB Commodity Services LLC. The Index is a rules-based index composed of futures contracts on 14 of the most heavily-traded and important physical commodities in the world. You cannot invest directly in an index. Ordinary brokerage commissions apply.
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JJC - The Dow Jones-UBS Copper Subindex Total ReturnService Mark is a sub-index of the Dow Jones-UBS Commodity Index Total ReturnService Mark and reflects the returns that are potentially available through an unleveraged investment in the futures contracts on physical commodities comprising the index plus the rate of interest that could be earned on cash collateral invested in specified Treasury Bills.
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USO - The United States Oil Fund, LP ("USO") is a domestic exchange traded security designed to track the movements of light, sweet crude oil ("West Texas Intermediate").
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UGA - The United States Gasoline Fund LP (UGA) is an exchange traded security that is designed to track in percentage terms the movements of gasoline prices.
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XLE - The Energy Select Sector SPDR® Fund, before expenses, seeks to closely match the returns and characteristics of the Energy Select Sector Index. Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs.
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JJG - The Dow Jones-UBS Grains Subindex Total ReturnService Mark is a sub-index of the Dow Jones-UBS Commodity Index Total ReturnService Mark and reflects the returns that are potentially available through an unleveraged investment in the futures contracts on physical commodities comprising the Index plus the rate of interest that could be earned on cash collateral invested in specified Treasury Bills. The Index is currently composed of three futures contracts on grains traded on U.S. exchanges.
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Continue to Overseas Sectors & ETFs

EFA - The iShares MSCI EAFE 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 European, Australasian and Far Eastern markets, as measured by the MSCI EAFE Index.
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EEM - The iShares MSCI Emerging Markets 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 emerging markets, as represented by the MSCI Emerging Markets Index.
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EWJ - The iShares MSCI Japan 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 Japanese market, as measured by the MSCI Japan Index.
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EWA - The iShares MSCI Australia 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 Australian market, as represented by the MSCI Australia Index.
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ECH - The iShares MSCI Chile Investable Market Index Fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the MSCI Chile Investable Market Index.
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EWW - The iShares MSCI Mexico Investable Market 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 Mexican market, as measured by the MSCI Mexico Investable Market Index.
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ENZL - The iShares MSCI New Zealand Investable Market Index Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the MSCI New Zealand Investable Market Index.
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TUR - The iShares MSCI Turkey Investable Market Index Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the MSCI Turkey Investable Market 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

Tuesday will feature Factory Orders and the much watch Fed Minutes in the afternoon. Why does the latter matter? It shouldn't really since Fed governors and the Bernank have been busy promoting their agenda in public.

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: 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.

 

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 .

 

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