Monday stocks rallied once again on light volume.
China sacked its Securities Chief and directed the media to only speak positively about the country’s stock markets. U.S. and European media already do this since they’re corrupted by industry advertising money…just sayin’.
Another cause for a rally was higher oil prices abetted by Friday’s news of dramatically reduced rig counts. So in this case markets remain self-regulating.
In other news, PMI Mfg Index FLASH fell once again to 51 vs prior 52.7, just another indicator of potential future recession on the horizon. Or is this just old news? Even if true, it reminds bulls the Fed will still have their backs keeping interest rates low allowing for more stock buybacks financed by cheap but mushrooming debt. How about NIRP (negative interest rates)? Would that be a blessing or a curse? If the latter, it might destroy Fed credibility. I still believe there’s something afoot for a dramatic coordinated policy change by central banks to stimulate markets. This could take place at this weekend’s meeting with a G20 Shanghai Accord rivalling that of Plaza Accord decades before. Watch for that.
Then we have on tap a British exit from the EU (BREXIT) and another large PMI drop in Europe, the worst in a year, is ignored for now.
Gold prices fell as the dollar rallied against the euro and pound and it was “risk on” for equities. Even EM bonds rallied while most Treasury Bonds were down modestly.
Market sectors moving higher included: Most equity ETFs.
Market sectors moving lower included: Gold (GLD), Silver (SLV), Euro (FXE), Pound (FXB) and Volatility (VXX).
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).
Volume was quite light on the rally which hasn’t been unusual on recent moves higher. Breadth per the WSJ was positive.
The rally from the previous week continues but on light volume. The previous declines were met by massive distribution (volume).
With any budding trend supportive news must follow the trend for it to continue.
What could the supportive news be? The only thing I can think of is coordinated central bank intervention to prop markets. It could come soon from what be a Shanghai Accord. Would the Fed quickly backtracking on very recent policy changes, would that negatively affect their credibility? Sure. But then they could argue they’re just following their international peers. Nevertheless, another round of QE and/or negative interest rates wouldn’t comport with their “economic growth is solid” BS.
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.
Top 50 Investing Blogs.
Top 25 Best ETF Newslettersin 2015.
ETF Digest was awarded one of the most informative ETF websites in the10th Annual Global ETF Awards.
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