Bulls Launch Santa Rally
0
December 18, 2014

12-18-2014 7-02-35 PM surrender

What’s behind this two day market rally is hard to pin down.

Some suggest it’s due to algo traders who dominate much of the current market trading.

For example, algos are focused on various words when the Fed speaks.

Yesterday many likely had “considerable time” regarding interest rates as a primary focus. As Bloomberg noted, “…a quick search of the Fed’s announcement found the two words “considerable time” would remain in the central bank’s statement in reference to how long policy makers intend to keep their benchmark interest rate near zero. A quick search of the document found the phrase, and so some of the fastest typists dutifully reported its presence. Yet taking the time to actually read the paragraph showed that the Fed was moving away from those two words. The Fed was saying it would be ‘patient’ when it comes to normalizing monetary policy, guidance it then said was consistent with the previous ‘considerable time’ language.”

Any way the algos were already down the road investing and squeezing shorts.

And, with ZIRP fully in place it won’t take long for companies to borrow on the cheap and buy back shares making earnings look better on the reduced float. CVS to announce a $10 billion share buy back on borrowed money.

All stocks rose today including the beleaguered energy sector which rallied despite crude oil being down for another day.

In Europe stocks rose sharply as investors remain convinced central banks will support markets.

Economic data was mixed again. Jobless Claims declined slightly to 289K vs 295K expected & prior 295K. Yellen surprised me anyway, when she said that better employment was the result of Fed policies (this worth an argument) but only gave lip service to amount of part time jobs and huge amount of people not in the work force. Philly Fed Survey was weak 24.5 vs 25 expected & prior 40 and Leading Indicators were flat at 0.6% vs 0.6% expected & prior revised lower to 0.6% from 0.9%.

Leading market sectors higher included: Everything.

Leading market sectors lower included: Crude Oil (USO), Base Metals (DBB), Bonds (TLT), Russia (RSX) and the VIX (VXX).                                                                      

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

Volume was heavy once again as algos threw caution to the wind and bought with both hands. Breadth per the WSJ was quite positive but not quite a 90/10 day.

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12-18-2014 7-07-43 PM Diary

Charts of the Day
  • SPY 5 MINUTE

    SPY  5  MINUTE

  • SPX WEEKLY

    SPX WEEKLY

  • INDU WEEKLY

    INDU WEEKLY

  • RUT WEEKLY

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  • NDX WEEKLY

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  • XLB WEEKLY

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  • XLE WEEKLY

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  • XLF WEEKLY

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  • XRT WEEKLY

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  • XLU WEEKLY

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  • IYT WEEKLY

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  • IYR WEEKLY

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  • ITB WEEKLY

    ITB WEEKLY

  • LQD WEEKLY

    LQD WEEKLY

  • HYG WEEKLY

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  • TLT WEEKLY

    TLT WEEKLY

  • UUP WEEKLY

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  • FXE WEEKLY

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  • FXA WEEKLY

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  • GLD WEEKLY

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  • GDX WEEKLY

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  • SLV WEEKLY

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  • JJC WEEKLY

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  • USO WEEKLY

    USO WEEKLY

  • DBC WEEKLY

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  • EFA WEEKLY

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  • EEM WEEKLY

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  • EWY WEEKLY

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  • EWZ WEEKLY

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  • EPI WEEKLY

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  • RSX WEEKLY

    RSX WEEKLY

  • FXI WEEKLY

    FXI WEEKLY

  • NYMO DAILY

    NYMO  DAILY

    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.


     

  • NYSI DAILY

    NYSI DAILY

    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.

  • VIX WEEKLY

    VIX WEEKLY

    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

You really can’t win when thinking logically.

You must yield to the central banks even when they say nothing supportive—really it’s all quite amusing. Here we are trying to make sense of things as humans but the algos and HAL 9000s are running the show.

I for one am entering my 40th year of dealing with markets and adapting to the whims of the powerful computers and PhD’s operating them is challenging.

But that’s the way of things these days.

One has to believe the Santa rally is now balls to the wall. Portfolio managers wanting to make their year have done so before things slow down markedly next week probably.

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"



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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
Gold1,198.10-0.80-0.07 %11:30
WTI Crude Futr56.101.993.68 % 10:52
Index Quotes Change Change % Local
CRB239.271.400.59 % 11:07
US Dollar89.720.270.31 % 11:23
Index Quotes Change Change % Local
VIX16.42-0.39-2.32 %11:08
MSCI Value Daily MTD YTD
Brazil1776.4730.88 %-14.07 %-19.91 %
Russia412.9245.41 %-22.44 %-47.52 %
India486.6592.29 %-7.83 %19.48 %
China63.4981.24 %-2.74 %0.63 %