My smarmy images are becoming Costanza “do the opposite” theme. And, along those lines we took off our leveraged long positions Thursday while maintaining the “core” unleveraged positions. We did this as a DeMark 13 count (sell to close trend exhaustion indicator) was shown on the daily SPX (S&P 500 Index).

There’s little sense arguing with the tape. You could look at a miserable Philly Fed report (-5.8 vs .6 expected & prior 8.1) and conclude more economic contraction is on the way. But, wait, this must mean the Fed, which watches this report closely before their FOMC meetings, will assume more money printing is in order.

Bulls deservedly liked Jobless Claims report (335K vs 372K expected & prior 371K) which blew away estimates but ignored details that this report was a Holiday-quirk. (Remember the algos just trade the headlines not the details.) Housing Starts were also very good (.954M vs .887M expected & prior .861M).

Earnings news from Citigroup (C) and Bank of America (BAC) which most investors were anxiously awaiting both sucked and blowed, missing estimates badly. Those stocks along with closely associated financials (XLF) fell. There really has never been an enduring bull market without financials solidly in the mix; but, clearly we’re living in interesting times.

Bulls just chose to ignore negative news and cherry-picked that which they liked.

The dollar (UUP) was slightly weaker and gold (GLD) modestly higher. Commodities (DBC) rallied with higher Oil (USO) prices occasioned by declining inventories and the emerging African crisis (Mali and Algeria). Stocks were led higher across the board especially by homebuilders (ITB) and consumer discretionary (XLY) even as financials underperformed. Bonds (TLT) prices declined with the stock market boost.

Volume was only modestly higher and still quite below even recent 3 month averages of 145M shares. Breadth per the WSJ was positive.

 

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