Is Bad News Suddenly Bad?
0
April 28, 2016

GDP data today showed the economy continues on a downward path. In fact, if you strung the last few GDP reports you’d be correct to think the economy is rolling over. Consumer Metrics Institute sums things up correctly as noted below:

Summary and Commentary

Although the headline remained positive, this is not a report that shows a robust economy. Among the troubling aspects of the report:

-- The growth rate for consumer spending took another significant hit, dropping substantially for the third consecutive quarter. In fact, the growth rate for consumer spending on goods was barely positive, at a miserable +0.03%. And non-discretionary spending on health care and housing provided most of the remaining growth in consumer services spending.

-- Private investment contracted for the first time since the first quarter of 2011.

-- Exports went deeper into the red.

Looking at the past three quarters as a group, we can see a slow-motion slide into either stagnation or contraction. It is truly sad when stagnation looks to be the better alternative.

The dollar fell sharply this day allowing commodity markets overall but hurting overseas markets at the same time. Bonds were a beneficiary as was gold, gold stocks, silver and a rising VIX.

After the close of trading the focus was on Amazon’s earnings which beat estimates by a mile rallying the stock over 12% or nearly $75. Let’s see if this can hold the Nasdaq together.

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).

4-28-2016 2-19-36 PM

Volume increases with selling which is not unusual while breadth per the WSJ was negative. 

4-28-2016 2-20-29 PM Diary

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

 

 

 

4-28-2016 2-41-54 PM GDX

 

 

 

 

Charts of the Day
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    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.


     

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    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

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    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. 

 

This commentary is short and perhaps I’ll post another Friday if bulls storm back rejecting bad news as bad in favor of more of the same— “bad news is good”.

There had to be some selling eventually. It’s hard to convince myself this is finally a change in view.

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.

Named as one of the Top 22 ETF Experts You Need To Follow on Twitter for continuing to deliver high quality analysis and commentary through the ETFDigest Twitter feed.

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