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Markets Rally on Bernanke Re-Clarification

David Fry's picture





 

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.

As I indicated in last night’s post, Bernanke intended to transmit to markets there was no intention by him to end accommodative policies. He also stated a 7.6% unemployment rate “understates” real labor market conditions. Yes, we pointed this out last night as well as through May the Jolt Survey showed only 130K new full-time jobs but an eye-popping 557K part-time jobs were added. Nevertheless in this upside down world of “bad news is good” all that matters are ever higher stock prices. However this being the case, the fact remains higher stock prices have not made the employment situation significantly better.

The only accomplishment is corporations have used low interest rates to finance share buybacks reducing float which enhance earnings per share. Further to compete they continue to cut jobs as they outsource those overseas. Further with Obamacare and other regulations facing them they cut full-time workers to protect profit margins. These are all dumb policies but corporations are just taking what the market and Bernanke has given them.

The big investment funds and HFTs don’t give a rip about what corporations are doing in the short-term; they just want to make money now. Lay-offs of 29K employees at Hewlett-Packard may help short-term earnings but doesn’t do much to reduce the unemployment problem. As if on cue Thursday’s Jobless Claims rose dramatically (360K vs 337K exp & prior 344K). Bulls can ignore it since (yeah, you got it) bad news is still good for more QE from the Fed.

The message from Bernanke launched global buy programs for anything not nailed down. The only losers on the day were the dollar (UUP) and oddly enough bank stocks (KRE) which were feasting on higher interest rates previously.

Gold (GLD) and commodities (DBC) were also beneficiaries of a much weaker dollar. Bonds (TLT) and others saw yields drop.

Historically thoughtful investment methodologies fall by the wayside in a more money than brains environment. The smart money rides the wave of money so check your brains at the door.

Volume on the rally was below average and breadth per the WSJ was quite positive.

 7-11-2013 5-24-22 PM diary rev

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NYMO

NYMO 
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

NYSI 

 
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

VIX 

 
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.
  • SPY 5 MINUTE

SPY 5 MINUTE

 

  • SPY DAILY

    SPY DAILY

  • .SPX WEEKLY

    .SPX WEEKLY

  • INDU WEEKLY

    INDU WEEKLY

  • RUT WEEKLY

    RUT WEEKLY

  • QQQ WEEKLY

    QQQ WEEKLY

  • KRE WEEKLY

    KRE WEEKLY

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  • FDN WEEKLY

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  • IGV WEEKLY

    IGV WEEKLY

  • IYT WEEKLY

    IYT WEEKLY

  • IYR WEEKLY

    IYR WEEKLY

  • ITB WEEKLY

    ITB WEEKLY

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    IBB WEEKLY

  • AMLP WEEKLY

    AMLP WEEKLY

  • MBB WEEKLY

    MBB WEEKLY

  • TLT WEEKLY

    TLT WEEKLY

  • UUP WEEKLY

    UUP WEEKLY

  • FXE WEEKLY

    FXE WEEKLY

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    FXY WEEKLY

  • GLD WEEKLY

    GLD WEEKLY

  • GDX WEEKLY

    GDX WEEKLY

  • SLV WEEKLY

    SLV WEEKLY

  • JJC WEEKLY

    JJC WEEKLY

  • DBC WEEKLY

    DBC WEEKLY

  • DBA WEEKLY

    DBA WEEKLY

  • USO WEEKLY

    USO WEEKLY

  • UGA WEEKLY

    UGA WEEKLY

  • XOP WEEKLY

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  • EFA WEEKLY

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  • IEV WEEKLY

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  • EEM WEEKLY

    EEM WEEKLY

  • EWA WEEKLY

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  • EWJ WEEKLY

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  • AAXJ WEEKLY

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  • ILF WEEKLY

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  • EPI WEEKLY

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  • GXC WEEKLY

    GXC WEEKLY

 

 

...

 

Yes, these are more charts than anyone needs. One thing is obvious; perhaps
you only need to buy one or two with the highest beta in this environment.

Consumer Sentiment, PPI and many Fed speakers on the campaign trail Friday.

Let’s see what happens.

 


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Fri, 07/12/2013 - 04:11 | Link to Comment e-recep
e-recep's picture

wtf dude?? are you OK?

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