A Market Midsummer Slow Day
July 24, 2014

7-24-2014 4-38-55 PM You shall not fall 12

Markets overall didn’t do much Thursday.

Inside markets some individual stocks and sectors experienced some good rotation but headlines won’t note that unless it’s about Facebook (FB). After all, that sells soap.


On the other hand we have the poster child for stock buybacks and its effect on earnings—Caterpillar (CAT).

ZIRP has given corporations the gift of cheap financing with which to buyback stocks. So when one of the featured players like CAT reports poor revenues but better earnings we see then how this works. Frankly, it’s the biggest positive for the stock market presently. As long as the Fed keeps giving corporations the gift of cheap money they can play the financial engineering game. They’re only taking what the Fed has given them but the downside is they’re not investing for long term growth but only the enrichment of stock holders. So, what’s wrong with that? If you’re a holder, nothing’s much wrong with that in the short to intermediate term. But when companies don’t invest for growth they cheat the future and create income inequality since they’re not hiring either. This is the downside to what the Fed is and has been doing.

Earnings have been just okay with many merely beating much lowered estimates. Some like Facebook (FB) and Apple (AAPL) have done very well while others like many in the financial and industrial sectors have not.

Overseas market economic data was better than expected as China’s PMI was higher at 52 vs 51 while a collective assessment of the Eurozone was 54 vs prior 52.8. In the U.S. Jobless Claims were down sharply to 284K vs 310K expected & prior 303K. The comment about this B still follows A since you cut off “extended” benefits and those folks actually go out and find jobs. PMI Mfg Index Flash fell to 56 vs 57.6 expected & prior 57.5. And later New Home Sales plunged to 406K vs 475K expected & prior revised lower from 504K to 442K. This clobbered homebuilders naturally.

New terms are entering our lexicon including “macroprudential” which was dug up from somewhere at the very least to show how bright some people must be. Now another is tax “inversion” meaning companies are doing what they’ve been doing for almost a decade or so by relocating to tax friendly locales vs the tax hungry IRS. Now seriously, if you have higher taxes in another locale you would choose that wouldn’t you?  If you cut corporate tax rates wouldn’t you get more revenues as companies returned home?  

In after hours trading Amazon dropped nearly 6% on earnings; Pandora fell nearly 10%, and Visa dropped nearly 2%. That doesn’t bode well for Friday’s market but then who can predict such things especially when Durable Goods Orders are on tap.

Leading market sectors higher included: Banks (KBE), Regional Banks (KRE), China (FXI), Brazil (EWZ), Mexico (EWW), Latin America (ILF), Spain (EWP), Asia ex-Japan (AAXJ), India (EPI) Emerging Markets (VWO), Coal Producers (KOL), Natural Gas (UNG) and Copper (JJC).

Leading market sectors lower included: Homebuilders (ITB), Industrials (XLI), Healthcare (XLV), Biotech (IBB), Semiconductors (SOXX), Gold Miners (GDX), Silver Miners (SIL), Gold (GLD), Silver (SLV), Crude Oil (USO), Solar (TAN) and bonds (TLT).

The top 20 market movers by percentage change in volume whether rising or falling is available daily.

Volume was again quite light and breadth per the WSJ was negative.

7-24-2014 5-49-49 PM Diary

Charts of the Day












    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.



Closing Summary

I’m celebrating enduring my 40th year of being in the business. You bring your experiences along with you and think that would create some wisdom but we’ve not seen a manipulated period like this period.

Friday will feature Durable Goods Orders which are expected to be better than last month’s negative report.

Let’s see what happens.

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Dave Fry is founder and publisher of ETF Digest and has been covering U.S. and global ETFs since 2001.

He is the author of "Create Your own ETF Hedge Fund: A Do-It-Yourself Strategy for Private Wealth Management" published by Wiley Finance and "The Best ETFs: U.S. Equities, A Companion Guide to Building Your ETF Portfolio".


ETF Digest™

Disclaimer: The charts and comments are only the author's view of market activity and aren't recommendations to buy or sell only any security. Market sectors and related ETF's 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 annotation's 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


ETF Digest

Market Summary
NYSE Composite Index S&P 500 Index Nasdaq Composite Index Russell 2000 Small Cap Index NYSE Composite Index S&P 500 Index Nasdaq Composite Index Russell 2000 Small Cap Index 10 Year Treasury Note Yield Gold Bugs Index Morgan Stanley High Tech 35 Index Market Chart
Commodity Quote Change Change % NY
Gold1, % 08:14
WTI Crude Futr102.04-0.03-0.03 %13:53
Index Quotes Change Change % Local
CRB298.15-0.04-0.01 %14:08
US Dollar81.110.170.21 % 14:20
Index Quotes Change Change % Local
VIX12.670.837.01 % 14:08
MSCI Value Daily MTD YTD
Brazil2578.7050.91 %7.88 % 16.26 %
Russia686.308-0.43 %-7.17 %-12.78 %
India504.8300.41 %2.48 % 23.94 %
China65.0610.85 %5.81 % 3.10 %