Economic data Friday included Personal Income & Spending which was highlighted by a negative (-0.1%) reading in spending; a great Chicago PMI report (65.5 vs prior 63) but featured an increase in prices paid and an employment decline; and a slight rise in Consumer Sentiment to (81.90 vs prior 81.80).
Stocks struggled all day Friday as some early to the party took profits and left for the weekend. Friday’s can be like that often. Most market action historically takes place Tuesday-Thursday barring unusual event days. But hey, markets are a little different these days wouldn’t you agree? Some pundits are getting hip to the idea that complacency (see VIX below) is getting a little long in the tooth. FT's Gillian Tett notes that, as we have vociferously explained, almost every measure of volatility has tumbled to unusual low levels, "this is bizarre," she notes, "financial history suggests that at this point in an economic cycle, volatility normally jumps."
"Investors in the options markets are not pricing in any big macro risks. This is very unusual." In reality, as Hyman Minsky notes, “market tranquility tends to sow the seeds of its own demise and the longer the period of calm, the worse the eventual whiplash”. But, again this Fed-fueled ZIRP and QE market is nothing like we’ve seen before. Oh wait, that’s ending right?
Its obvious markets enjoyed an excellent month of May but you don’t need me to point that out. And, pulling out a worn hackneyed phrase “sell in May and go away” sometimes works and then doesn’t. But now we enter June with markets stretched and the Fed reducing (oh, the horrors of it!) QE even further.
Leading market sectors higher included: Retail (XRT), REITs (ICF), Utilities (XLU), Consumer Staples (XLP), Semiconductor (SMH), Nuclear Energy (NLR), Italy (XLI), China (FXI), Spain (EWP), Nickel (JJN) and Aluminum (JJA)
Leading market sectors lower included: Small Caps (IWM), Homebuilders (ITB), Biotech (IBB), Metals & Mining (XME), Steel (SLX), Silver Miners (SIL), Emerging Markets (EEM), South Korea (EWY), Taiwan (EWT), Brazil (EWZ), Mexico (EWW), Latin America (ILF), Turkey (TUR), India (EPI), Russia (RSX), Indonesia (IDX), Gold (GLD), Crude Oil (USO), Coal Producers (KOL), Solar (TAN), Silver (SLV), Agriculture (DBA) and Natural Gas (UNG).
The top 20 market movers by percentage change in volume whether rising or falling is available daily.
Volume remains light and breadth per the WSJ was mostly negative.
Markets finished May with good gains with most of these achieved the last week of the month on ultra-light volume.
Some observers, like the FT’s Gillian Tett are scratching their heads about how complacent investors are.
The truth seems to be, volume indicates there aren’t many investors who are complacent, just hedge funds and HFTs picking each other’s pockets.
June will begin with plenty of economic data including Friday’s Employment Report and the ECB’s policy meeting midweek.
There isn’t much earnings data until after the July holiday and volume should become lighter, if that’s possible.
Have a great weekend and let’s see what happens.
Dave Fry is founder and publisher of ETF Digest 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".
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