Bulls are a determined and desperate bunch. There were two consecutive days of large sell-offs this week but on each day dip buyers entered to make things more respectable. Let’s face it, bulls have positions to defend, so getting a green close was huge psychological win for Main Street.
Durable Goods Orders beat expectations coming in at 3.3% vs 1.4% expected, and prior, -5.9%; Ex-transportation, which gives a better picture of conditions since they’re generally volatile like Boeing 787 orders for example, would be at 1.3% vs 0.4% expected, and prior -1.7%. This gave bulls some hope. But that news was sold hard early in the day Friday.
There really wasn’t any other news Friday and many traders were leaving early for the long weekend thus volume started to slacken making it easy for some algos (they never take a holiday) to bid things up squeezing some shorts.
The volatility in Japan markets continued as their leaders haven’t learned how to describe new policies as Earnings from Hewlett-Packard (HPQ) were initially well received but on second look the stock was hit hard Friday. More defensive sectors again led markets like consumer staples (XLP), but that’s about it. Most other sectors were either mildly lower or much lower. Overseas markets were mostly weaker than U.S. sectors especially China (FXI), emerging markets (EEM) and Europe (IEV). It would be wrong to conclude that Friday’s action was bullish when looking over the global landscape.
The dollar (UUP) was flat. Both gold (GLD) and silver (SLV) weakened once again. Commodities (DBC) were weak once again as was oil (USO) and bonds (TLT) were fractionally higher.
Volume trailed off and bulls were free to ramp stocks into the close. Breadth per the WSJ was mostly negative.
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 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.
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
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.
Next week will feature Consumer Confidence; Case-Shiller HPI, GDP; Jobless Claims; Pending Home Sales; Chicago PMI; and, the dueling U of Michigan Consumer Sentiment data. The Fed will continue POMO actions throughout the week with the largest liquidity add Friday.
Let’s see what happens.