Markets started the day off weakly then rallied late because … wait for it ... Spain is rumored to be willing to ask for help, and Obama said European leaders face an "urgent need to act." No, you can't make this kind of stuff up. His statement is about as effective as a Kofi Annan Syrian peace plan.
Search as I may, there seems to be little hard news to explain Friday's rally. On this note, we'll just bow to the bulls "newsless" oversold short squeeze and end the commentary with just a few charts.
Volume was on the light side as the melt-up from Wednesday continued. Headlines let everyone know this was the best week of the year. Breadth per the WSJ was positive.
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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.
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.
It's very hard to make sense of the week's event beyond the obvious. If you view the VIX you'll see conditions as still elevated. The McClellan Summation Index also shows conditions as much oversold from an "intermediate-term" basis. DeMark weekly sequential counts (not shown) signal many major markets as sharply oversold and due for a bounce. This is a very convenient situation for bulls anxious for end-of-June bonuses.
It's just the way things are folks, and there's little sense in making more of it than this.