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Was Nasdaq 5000 A Top?
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March 04, 2015

There was a very good, but incomplete, article regarding the $2 trillion in stock buybacks since 2009 featured by Bloomberg and posted on Yahoo.

The article misses a major point and consequence of this activity.

These massive undertakings are done primarily to advance the stock price of the company so engaged. As you can see in the article these buybacks are growing at the same time as corporate debt. Corporations are taking what the Fed and ZIRP has provided—ultra low interest rates. The activity is growing now as companies assess the prospects for higher interest rates in the future. This recently caused a jump in interest rates for Treasury bonds as the size of corporate borrowing has crowded out those offerings.

There’s also a dirty little secret that isn’t discussed much about buybacks—income inequality.

The Fed is complicit in this since even as buybacks will likely enrich all shareholders, they will enrich those in senior management possessing lucrative stock options, the very people cited by numerous stories about income inequality. This is something to ponder since this activity is no different for the stock market than the famous Bernanke Put and level of previous QE.

ETF Digest subscriber, David Hurwitz, has taken the time to research what he believes is “a tell” that markets may be topping out now. His analysis is well summarized by the chart below and some comments we shared.

3-4-2015 8-23-46 PM Bear Market

 

 

 

 

 

 

 

 

 

 

 

 

“In essence, the indicator is interesting but not obviously foolproof. I back tested it to 1959 and Mark tweaked those results. The gist of our mutual findings is that the indicator delivers the following:

 

3-4-2015 8-24-53 PM margin

Most of the false positives lasted only for a few months before the indicator reversed to bullish. All of the major bear markets since 1959 were identified within a range of 3 months before or after onset.

I fully agree with your criticism of what I’ll refer to as the adverse research impact of central bank interference in markets plus the stock buyback phenomenon. I’m inclined to think that stock market margin data is probably not subject much to either. And, that these forms of market price manipulation will ultimately suffer the consequences they deserve. That is, their questionable efficacy, especially as to Central Banks intrusions will prove to have a highly adverse impact on markets and the economy.”

Markets declined Wednesday as the ADP Employment Report (212K vs 220K expected & prior 250K) disappointed as bulls believe the weakness might carry over to Friday’s employment report. Other employment related reports were better including PMI Services Index (57.1 vs 56.8 expected & prior 54.2) and ISM Non-Mfg Index (56.9 vs 56.5 expected & prior 56.7). Oil inventories came in high at 10M bbls which was a surprise. Prices initially fell sharply initially then surprisingly reversed course and rallied. Some explained crude oil is entering its most bullish season as Saudi’s raised the price of Light Crude.

Leading market sectors higher included: Oil & Gas Exploration (XOP), Healthcare (XLV), Biotech (IBB), Crude Oil (USO) and Natural Gas (UNG).

Leading market sectors lower included: S&P 500 (SPY), Dow (DIA), Financials (XLF), REITs (IYR), Utilities (XLU), Consumer Staples (XLP), Consumer Discretionary (XLY), Emerging Markets (EEM), Europe (IEV), Japan (EWJ), Euro (FXE), EAFE (EFA), Mexico (EWW), Brazil (EWZ), Russia (RSX), India (EPI) and Gold Miners (GDX).                                                               

The top 20 market movers by percentage change in volume whether rising or falling is available daily.

Volume was about the same as Tuesday’s while breadth per the WSJ was mildly negative.

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3-4-2015 8-25-23 PM Diary

 

 

 

 

Charts of the Day
  • SPY 5 MINUTE

    SPY  5  MINUTE

  • SPX WEEKLY

    SPX WEEKLY

  • INDU WEEKLY

    INDU WEEKLY

    Pick3

  • RUT WEEKLY

    RUT WEEKLY

  • NDX WEEKLY

    NDX WEEKLY

  • IGV WEEKLY

    IGV WEEKLY

  • IGN WEEKLY

    IGN WEEKLY

  • FDN WEEKLY

    FDN WEEKLY

  • SMH WEEKLY

    SMH WEEKLY

  • XLB WEEKLY

    XLB WEEKLY

  • XLE WEEKLY

    XLE WEEKLY

  • XLF WEEKLY

    XLF WEEKLY

  • XLI WEEKLY

    XLI WEEKLY

  • XLP WEEKLY

    XLP WEEKLY

  • XLV WEEKLY

    XLV WEEKLY

  • XLU WEEKLY

    XLU WEEKLY

  • IYR WEEKLY

    IYR WEEKLY

  • TLT WEEKLY

    TLT WEEKLY

  • UUP WEEKLY

    UUP WEEKLY

  • FXE WEEKLY

    FXE WEEKLY

  • FXY WEEKLY

    FXY WEEKLY

  • GLD WEEKLY

    GLD WEEKLY

  • GDX WEEKLY

    GDX WEEKLY

  • SLV WEEKLY

    SLV WEEKLY

  • DBB WEEKLY

    DBB WEEKLY

  • USO WEEKLY

    USO WEEKLY

  • DBC WEEKLY

    DBC WEEKLY

  • EFA WEEKLY

    EFA WEEKLY

  • IEV WEEKLY

    IEV WEEKLY

  • EEM WEEKLY

    EEM WEEKLY

  • EWA WEEKLY

    EWA WEEKLY

  • EWY WEEKLY

    EWY WEEKLY

  • EWD WEEKLY

    EWD WEEKLY

  • PLND WEEKLY

    PLND WEEKLY

  • EWZ WEEKLY

    EWZ WEEKLY

  • RSX WEEKLY

    RSX WEEKLY

  • EPI WEEKLY

    EPI WEEKLY

  • FXI WEEKLY

    FXI WEEKLY

  • NYMO DAILY

    NYMO  DAILY

    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 DAILY

    NYSI DAILY

    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 WEEKLY

    VIX WEEKLY

    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.

Another sell day but the pace of selling declined. Thursday features Jobless Claims, Productivity & Costs and Factory Orders.

Let’s see what happens.

 

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Dave Fry is founder and publisher of ETF Digest, MarketWatch columnist 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"



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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

 

ETF Digest

Market Summary
NYSE Composite Index S&P 500 Index Nasdaq Composite Index Russell 2000 Small Cap Index NYSE Composite Index S&P 500 Index Nasdaq Composite Index Russell 2000 Small Cap Index 10 Year Treasury Note Yield Gold Bugs Index Morgan Stanley High Tech 35 Index Market Chart
Commodity Quote Change Change % NY
Gold1,201.500.200.02 % 09:25
WTI Crude Futr51.620.090.17 % 08:50
Index Quotes Change Change % Local
CRB222.45-0.75-0.33 %09:07
US Dollar96.390.410.42 % 09:03
Index Quotes Change Change % Local
VIX14.230.372.67 % 03/04
MSCI Value Daily MTD YTD
Brazil1638.552-4.32 %-6.33 %-10.58 %
Russia486.971-2.99 %-1.32 %20.26 %
India548.362-0.90 %0.54 % 10.47 %
China68.147-1.04 %-2.26 %3.19 %