David Fry's blog

The weak dollar trend has lasted long enough to become embedded in diversified portfolio models used by financial advisors as many have accepted typical non-dollar ETFs as a common investment inclusion for most diversified portfolios.

But things are changing.

My muse today was from the movie Network from nearly 40 years ago. In this clip you merely need to substitute global central banks (Fed, ECB, BOE, BOJ and etc) and mega-banks (GS, JPM, C and etc) into the mix.

Stand By Your Man.

Did you know there was a large POMO Thursday? And, did you know Friday is quadwitching? Do you care?

The table is set for a counter-trend rally Friday given these events.

But, as with any oversold or overbought condition, markets can remain that way for longer than you expect—just look at gold as an example.

We’ll know more next week Wednesday when the Fed meeting concludes with a language parsing contest. In the meantime, stock market volatility is increasing as we’re experiencing alternating triple digit days now.

This was one helluva week. Nevertheless current markets are still hooked on QE.

Sell in May and go away will be on every investor’s mind after Friday’s week performance. It’s always been when you sell that’s been the measure for this maxim to be effective. If so the high for SPY would have been May 21^st at $167.17. Then there’s the reappearance of the Hindenburg Omen but that’s for another day’s discussion.

The market’s performance Thursday and Friday are misleading since there is so much destruction in many sectors globally. But the media depends on selling what’s going on with the DJIA. It’s just window dressing for the tourists frankly.

Aside from light volume there’s no argument with the tape. It’s quite positive but much overbought. Earnings news is beginning to wane leaving less for bulls to respond to. Many previous reliable technical indicators are succumbing to all the money printing. Looking at those markets where QE is not taking place perhaps reveals the real market conditions.

The Bernanke Chicago speech became little more than a side show Friday. He did say the Fed was keeping a watchful eye on yield risk-taking given ZIRP. He’s a little late to that observation methinks.

“… current policies come with a cost even as they act to magically float asset prices higher…, a bond and equity investor can choose to play with historically high risk to principal or quit the game and earn nothing."  Bill Gross, PIMCO

Bulls are still in charge of markets despite the shallow 2 to 3% correction the previous week. The conundrum for most investors remains, where else are you to put your money despite obvious risks and deceptive conditions? The Fed is forcing people into stocks, period.

With stocks short-term oversold it certainly wasn’t much of a surprise that options expiration Friday could manipulate volume and performance. Da Boyz in the options pits (mostly electronic now) were hunting down strike prices to exercise existing options as they can. It’s a technical event with an outcome that surely can mislead Main Street.

Friday saw panic selling in gold as the metal broke $1,500 in a free-fall move. Is this a sign of “risk on” or something more sinister? Perhaps Cyprus is a major seller or there’s a large margin call somewhere. Some even assert some countries with debt problems are selling gold to raise capital to finance their country’s needs.

The big driver of market declines Friday was led by the Non-Farm Payrolls report. The jobs data was a dreadful miss which leads to the major “disconnect” we’ve been seeing between stock prices and overall economic data which we posted just last week. This is the nagging and confounding reality of the QE and ZIRP grand experiment for many investors.