Bulls and portfolio managers often feel peer pressure to not be left out of any major market moves and thus will start chasing certain target levels to achieve market performance. We’re not immune to the pressure either but as disciplined trend followers, we’re aligned with the bulls for now. Many normally effective and reliable technical indicators can be easily steamrolled by the Fed and other central bank liquidity. Investors don’t know where to invest beyond stocks presently as alternatives don’t produce enough alpha (performance) than equity markets.

The chart below clearly displays the effect of ZIRP and QE on the most sensitive stock sector and others:

When the music (money printing) stops things could get quite ugly. Until then, even reluctant investors, must steel themselves up and go. Most portfolio managers, including us, are expecting some correction, but thus far none seems likely as every dip is bought. And, not much investing is being done unhurriedly, as frenetic episodes of trading continue as with Apple (AAPL) and Netflix (NFLX).

We’re starting to see interest rates rise along with stocks, which could feed on itself. Imagine what would happen to interest payments on U.S. debt if this should happen abruptly, not to mention stock markets. Well, that’s for another day. For now the Fed is feeding bulls.

In the UK, GDP growth fell to -0.3% vs 0.9% previously as the Olympic Games’ stimulus faded. This is why the Bank of England restarted its money printers to forestall the possibility of a recession. Business confidence in Germany rose once again. The ECB reported that LTRO loans are being repaid early, mostly from Spanish banks, to the tune of $184 billion. Asian shares were weaker first as South Korea and Samsung shares fell due to the strong won currency. China stocks (Shanghai Index) fell to a one week low as some investors there fretted about valuations.

In the U.S., New Home Sales fell (369K vs 388K expected & prior, revised higher, to 398K vs 377K) which didn’t seem to faze homebuilders (ITB) too much.

Earnings news from Procter & Gamble (PG) was well-received and Halliburton (HAL) beat lowered expectations even as profits fell 26%. That’s the old Wall Street game—CFOs downgrade expectations, analysts comply, then earnings beats become ubiquitous and stocks rise.

There is a good bit of rotation still taking place as U.S. shares are more in play at the expense of Asia and emerging markets for example. Risk assets, commodities (DBC) and precious metals (GLD) are less attractive if only currently as the drive toward stocks is primary. The dollar (UUP) was weaker as were bonds (TLT).

Volume is still substantially below the prior three-month average, which was also lighter than the previous three-month average. Breadth per the WSJ was positive.

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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.