Stocks finally took a break from ten successive daily new highs. The S&P 500, just shy of its all time record high (1565), couldn’t clear that hurdle Friday. Gaining sectors included newly monetized EWJ (iShares MSCI Japan ETF) and, despite the horror show, where J.P. (Read more…) Morgan (JPM) execs testified about their botched “whale trade” losses, financials (XLF) managed to rise. This week the Fed completed its second round of bank stress tests with 14 of 18 passing. Both JPM and GS were given only “conditional” passing grades; I guess the two will need to earn some extra credits. Declining sectors included emerging markets primarily (EEM), China (GXC) and Brazil (EWZ) for example. The rally has become QE-centric as the U.S., eurozone, and Japan can print money while others don’t or can’t.
Economic data Friday included: a weakening Empire State Mfg Index (9.24 vs 10 exp & prior 10.4); a sharply lower Consumer Sentiment report (71.8 vs 77.5 exp & prior 77.6); higher Industrial Production (0.7% vs .5% exp & prior -.01%); a much higher CPI (0.7% vs 0.5% exp & prior 0.0%); and, a “tame” Core CPI, a laughable measurement, (0.2% vs 0.2% exp & prior 0.2%).
Meanwhile, Hedge Fund operator SAC Capital Advisors must pay a fine $600 million for insider trading involving several stocks. No “perp walks” have yet been spotted. It’s the largest fine of its kind and will keep the U.S. government operating for a few hours.
Wanting to be part of the action, former Fed Chairman Greenspan stated Friday there was no “irrational exuberance” in stock prices since things are different now than when he made that comment in 1996. Right, there wasn’t any QE or ZIRP then. As far as QE is concerned, the Fed launched their largest POMO of the week, the largest on Friday, conveniently coinciding with quadwitching. Coincidence?
The dollar (UUP) was weaker as investors were nervous ahead of the FOMC Meeting Wednesday and due to a poor Consumer Sentiment report. Also, the EU was meeting and discussing all the woes facing the region, while in the background, the ECB was printing euros. Gold (GLD) inched higher with the weaker dollar. Commodities overall (DBC) were higher led mostly by heavy energy weightings, while base metals (JJC) were weaker. Bonds (TLT) were stronger despite a mixed to poor auction results. This was also due to the poor Consumer Sentiment report and a short squeeze.
In today’s video we profiled the iShares MSCI Australia ETF (EWA). It’s amazing the country posted 71K new Thursday when only 10K was expected. Things are going well Down Under.
Volume Friday, typically high on an expiration event, was light to modest. Breadth per the WSJ was negative.
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.
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.
The VIX is a widely used measure of market risk and is often referred to as the “investor fear gauge”. Our own interpretation is highlighted in the chart above. The VIX measures the level of put option activity over a 30-day period. Greater buying of put options (protection) causes the index to rise.
A little selling Friday aided by some quadwitching shenanigans which is a mechanical event which should be ignored. The economic data on the week was mixed. The weak Consumer Sentiment was likely driven down by gas prices which is a common reaction.
Next week is a short week with Good Friday. Wednesday features the Fed Meeting and pundits will be parsing every word they utter.
Happy St Patrick’s Day and play nice.
Let’s see what happens.
[VIA Zero Hedge]