Market news Friday wasn’t as great as the upbeat performance would suggest.
China stocks fell the most with Shanghai Composite falling 1.7% for the week, the most in four months. The housing bubble in China is also popping as 69 of 70 major cities reported price declines. In Europe the Eurozone reported GDP may only reach 0.2% while the UK reported GDP growth of only 0.7%. An astounding 25 banks in Europe also failed their (open book) stress tests. And not to be forgotten, French unemployment made a new high with 3.43 million out of work.
In the U.S. headlines hailed better New Home Sales which was frankly amusing when even a cursory look at the numbers would make you scratch your head. The data showed New Homes Sales of 467K vs 460K expected & prior 466K reduced from prior 504K. That’s right, based on prior adjustments New Home Sales beat prior and expectations which is one of those “how to lie with statistics” deals.
So why did stocks rally?
In the midst of all this crummy data, CNBC rolled-out some commentary from one of the chief QE talking head proponents, the ECB’s Mario Draghi. His comments lit a fire under bulls and algos where terms like “more stimulus” are in the code.
DRAGHI CALLS FOR STIMULUS: CNBC
DRAGHI SAYS JOINT EFFORT NEEDED TO AVOID RECESSION: CNBC
DRAGHI SAYS INFLATION TO REMAIN LOW IN THE NEAR TERM: CNBC
This is really all you need to know beyond the fact that as of now, October is still in the red. And, no matter all the talk, QE in the U.S. is scheduled to end this month. And, unless they have a change of heart, that’s what’s going to happen. We’ll see how the markets deal with this unless bulls rely on the less than reliable Draghi to grab the Fed’s baton and launch a real effort.
For those who must invest, following the tape and putting the BS out of your mind is the only way to fly.
Leading market sectors higher included: S&P 500 (SPY), Tech (QQQ), Dow (DIA), Financials (XLF), Materials (XLB), Industrials (XLI), Semiconductors (SMH), Healthcare (XLV), Biotech (IBB), Consumer Staples (XLP), Utilities (XLU), Transportation (IYT) Emerging Markets (EEM), EAFE (EFA), Brazil (EWZ), Australia (EWA), Malaysia (EWM), UK (EWU), Europe (IEV), Russia (RSX), Thailand (THD), India (EPI) and Agriculture Producers (MOO).
Leading market sectors lower included: Junior Gold Miners (GDXJ), Energy (XLE), Retail (XRT), Taiwan (EWT) Indonesia (IDX), Crude Oil (USO), Base Metals (DBB), Agriculture (DBA), Commodity Tracking (DBC) and Natural Gas (UNG).
The top 20 market movers by percentage change in volume whether rising or falling is available daily.
Volume was comparatively light and breadth per the WSJ was positive.
The month of October is still in the red but that can be changed quickly with 5 trading days left in the month. Many earnings beats we’ve witnessed over the past couple of weeks have featured companies who succeeded in doing so as they reduced share float through stock buybacks. I know for many investors this isn’t as important as the end result. But this is short-term thinking since companies aren’t investing in long term growth rather than short-term gains. But senior executives, paid by lucrative stock options, love it.
Next week is loaded with more earnings and economic data so bulls have a chance to reclaim the tape just as they did this week. This is the best season as most know.
Let’s see what happens.
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".
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
|WTI Crude Futr||81.30||-0.79||-0.96 %||17:14|
|US Dollar||85.79||-0.17||-0.19 %||10/24|
|Brazil||2072.284||4.41 %||-4.52 %||-6.58 %|
|Russia||570.304||0.13 %||-6.68 %||-27.52 %|
|India||500.116||0.00 %||-0.10 %||22.79 %|
|China||62.128||-0.12 %||0.75 %||-1.55 %|