Quiet Day Prone To Rumors


It was a pretty boring Tuesday as stocks churned about on light volume and some occasional rumors.  The financial media is starved for ideas and headlines. Apple (AAPL), given its outsized weighting and following is always ripe for some rumors. There wasn’t even a, “What’s Buffett Buying Now” story. Old timer Richard Russell, publisher of the Dow Theory Newsletter, emerged from his long-standing bearish position and told subscribers to buy the DIA (SPDR Dow Jones Industrial Average ETF). That’s impressive but rather late it seems.

"Yes, I know that this market is uncorrected during its long rise from the 2009 low, and I know that there are risks in buying an uncorrected advance that is becoming uncomfortably long in the tooth, but my suggestion is that my subscribers should take a chance (after all, Columbus took a chance) and take a position in the DIAs." Richard Russell

And from the previous week was this observation.

“Question-- Russell, then what about the record highs recorded by both the Dow and the Transports? 

Answer -- My only answer to this is that both D-J Averages produced something never seen before, namely new highs during a post-crash upward correction.  My explanation of this unprecedented situation is that the advance to new highs was a direct result of never-before-seen manipulation by the Federal Reserve.” 

Similar rumors from yesterday regarding Apple swirled again a couple of times but to no avail as the stock fell 2%.

3-12-2013 6-01-59 PM apple 

The only major news from overseas was from the UK where Industrial Production fell 1.5% leading many to worry the country would succumb to a triple dip recession. Naturally the pound (FXB) has been taking a beating with pundits recommending long euro short pound pair trade. The equity market EWU (iShares UK ETF) still has a bearish look to it even as the BOE is considering more QE.  We provided a brief chart video analysis of both FXB and EWU.

It was a boring enough day that the goings on in Rome caught my attention—a new candidate for pope and he’d be a refreshing change:

So it was that kind of day. A little selling here and there but then “presto”—enter the “gotta close green” algo which started just a little too late to get every index green. Just as some were burying gold (GLD) as an investment it rallied Tuesday. No it wasn’t enough to change the downtrend but the article’s timing was amusing.  The dollar (UUP) was higher amid poor economic data from the eurozone not to mention confusing data from China previously. Bonds (TLT) were stronger in price while commodities (DBC) were slightly higher helped by crude oil price gains (USO).  Tech (XLK) sectors were broadly lower particularly with Apple’s decline.Biotechs (IBB) continue to perform well while financials (XLF) gave back some previous gains.

Volume remains perfectly light for manipulation from on high to work its magic.

Breadth per the WSJ was mostly negative.

 3-12-2013 6-02-23 PM diary

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 breadh 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.

Some real economic data will include Retail Sales, Import & Export Prices and Business Inventories Wednesday.

 Let’s see what happens.