I suppose many younger readers don’t know who Jim Finlayson is pictured above. He was the original “D'oh!” guy from Laurel & Hardy films. It’s appropriate to display him Tuesday given how weird today’s rally was.
As ZH pointed out this morning at 10 AM and again at 11 AM, two conflicting headlines attempted to explain Tuesday’s rally. The first was based on hope while the second just an hour later was just a lie.
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Tuesday, March 1 10:00 am EST
Tuesday, March 1 11:41 am EST
Let’s look at the data this day. PMI Mfg Index fell to 51.3 vs prior 52.4; ISM Mfg Index was still weak and below 50 at 49.5 vs 48.5; Construction Spending was higher at 1.5% vs 0.6%. That’s better but it was led by primarily highway and road construction given better weather. And, we should remember the weak data from Monday and the litany or prior weak reports. In fact PMI readings globally are very weak.
Nevertheless, stocks soared higher given another massive short squeeze as TPTB ignored most data once again.
I still believe markets are similar to the movie plot from The Big Short where shorting mortgage-backed derivatives by the major players was initially wrong as markets continued to rally against them. Eventually they were proven correct in a major way and the rest is history. This too is what’s happening in markets in my opinion. If I’m wrong, you won’t recognize the study of finance in the future.
Another reason for the rally as bulls grasped at straws was a small increase in oil prices. Russia announced that they and others would freeze production at current levels. That’s amusing since current production is the reason prices are so low. That said, everything was higher each pulling the other along.
Market sectors moving higher included: Just about everything.
Market sectors moving lower included: Bonds (TLT), Gold (GLD) and Volatility (VIX)
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 about average by recent data and breadth per the WSJ was positive.
I listened to Alan Greenspan speaking with Bloomberg today (yes, really I did!) and when asked if he was optimistic going forward he said, “I’ve not been optimistic for a long time.” He also cited negative China data which he said the slowdown there will only grow. That said, it was announced today 6M Chinese would quickly be receiving pink slips. That’s a lot by US standards but just a small city there.
API reported crude inventories after the close of trading rising by 9.9M bbls vs prior at 3.3M bbls the largest since 2015. So the rally in crude at least should be squished tomorrow.
Tuesday was highlighted by the world’s worst economic data in 4 years and the best rally day in 6 months. Only on Wall Street can you make this stuff up.
Wednesday features ADP Employment results along with the Beige Book.
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.
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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