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Confidence In Central Banks Plummet
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February 11, 2016

When markets move from bullish to bearish suddenly troubling conditions previously brushed-off by investors suddenly appear like snow melting over them—drip, drip, drip.

This is what’s occurring now as central banks’ Keynesian experiments desperately expand; the Mideast refugee crisis grows; violence surrounding illegal aliens in Europe and the U.S. becomes apparent as citizens see their culture’s threatened; economic conditions globally contract; political correctness now goes too far; student debt piles up; houses, where the jobs are, become unaffordable to buy or rent; the political process features outside populists supported by an irate public over corruption and do-thingness; bullshit from officialdom is seen for the bullshit it is and, a litany of complaints too long to list here exists.

Most of us know central banks are lying regarding economic conditions being good or “solid”. If they are as they say, why go down another experimental rabbit hole by moving to the absurd device of negative interest rates. It would be hard to abandon current Keynesian policies given how long TPTB (the powers that be) have relied on them for their existence.

Equity markets globally are collapsing, gold soars, the dollar weakens and investors overall flock to safety in U.S. Treasury Bonds and (gasp!) cash. Taken together this action no doubt pisses-off the TPTB. And, if they’re pissed, imagine how many monetarists have felt all these past 7 years!

I make no apology for my sentiments. It’s enough for subscribers to be in cash and/or short. The overall message always conveyed to subscribers has been, “the news follows the trend”. As we closed our lazy portfolio on December 31st the reason was the path ahead wasn’t bullish. Since then, the news has support that bearish view.

Beyond throwing the bums out, what else has to happen. Interest rates stayed too low (ZIRP) for too long once the “emergency” had passed. So hooked on the sugar from the Fed kept bullish markets moving along. Abetted by cheap interest rates corporations elected not to invest in growth but to buyback shares financed by cheap interest rates. This has to change but it will be painful initially.

Stocks closed off the lows of the day as bulls fought hard to save the day from another collapse. Yes, it’s a battle since good ongoing fee income for da boyz might be at risk. Bulls may just be wasting buying power once again. Markets only rebounded higher in the afternoon after a story stated OPEN “might” be willing to cooperate on a cut in production.

Market sectors moving higher included: Volatility (VIX), Treasury Bonds (TLT), Gold (GLD), Gold Stocks (GDX), Silver (SLV), DBP (Precious Metals Basket), Platinum (PPLT), Commodity Tracking ETF (DBC) and not much else.

Market sectors moving lower included: Everything else.

Below is the heat map from Finviz reflecting those ETF market sectors moving higher (green) and falling (red). Dependent on the day (green) may mean leveraged inverse or leveraged short (red).

2-11-2016 3-10-00 PM

Volume was quite heavy and breadth per the WSJ was negative once again.

2-11-2016 3-10-24 PM

12-17-2015 9-04-44 PM Chart of the Day

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Charts of the Day
  • SPY 5 MINUTE

    SPY  5  MINUTE

  • SPX DAILY

    SPX DAILY

  • SPX WEEKLY

    SPX WEEKLY

  • INDU DAILY

    INDU DAILY

  • INDU WEEKLY

    INDU WEEKLY

  • RUT WEEKLY

    RUT WEEKLY

  • NDX WEEKLY

    NDX WEEKLY

  • XLB WEEKLY

    XLB WEEKLY

  • XLE WEEKLY

    XLE WEEKLY

  • XLF WEEKLY

    XLF WEEKLY

  • XLI WEEKLY

    XLI WEEKLY

  • XLY WEEKLY

    XLY WEEKLY

  • HYG WEEKLY

    HYG WEEKLY

  • TLT WEEKLY

    TLT WEEKLY

  • UUP WEEKLY

    UUP WEEKLY

  • FXE WEEKLY

    FXE WEEKLY

  • FXY WEEKLY

    FXY WEEKLY

  • GLD WEEKLY

    GLD WEEKLY

  • GDX MONTHLY

    GDX MONTHLY

  • SLV MONTHLY

    SLV MONTHLY

  • DBB MONTHLY

    DBB MONTHLY

  • USO MONTHLY

    USO MONTHLY

  • DBC MONTHLY

    DBC MONTHLY

  • EFA WEEKLY

    EFA WEEKLY

  • IEV WEEKLY

    IEV WEEKLY

  • EEM WEEKLY

    EEM 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.


     

  • IEV WEEKLY

    IEV WEEKLY

    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 has changed due to a variety of new factors including HFTs, new VIX linked ETPs and a multitude of new products to leverage trading and change or obscure prior VIX relevance. 

The tape is doing all the talking and the tune is one of a massive rollover to bear market levels. It won’t be without counter-trend rallies but the overall long term view is quite negative.

Yellen can’t win for losing as her message the past two days was both blind to realities and disturbing regarding negative interest rates.

Retail Sales are on tap Friday, but other than that there isn’t much else. If OPEC decides to do something specific to cut production then we could have a sizable rally. But if they say they’ll cut then most will cheat anyway.

Let’s see what happens.

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Dave Fry is founder and publisher of ETF Digest and has been covering U.S. and global ETFs since 2001.

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ETF Digest was awarded one of the most informative ETF websites in the10th Annual Global ETF Awards.



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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

 

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