"I've been in favor of pretty much any accommodative policy I've heard about," said Charles Evans, President of the Chicago Fed on Bloomberg TV. What a remarkable statement? (Actually, he says this kind of stuff all the time.) Using his logic you could take anyone off the street and get something accommodative Evans would sign off on. But essentially this is what bulls are hanging their hat on Tuesday. Further it isn't unusual for markets to rally once the troubled European markets are closed.
Frankly we're still oversold from an intermediate view if the McClellan Summation Index (see chart at end of commentary) is still valid. Also there were several dozen weekly DeMark "buy to close" sequential 9s from Friday which only seem reliable Tuesday as opposed to Monday.
While officials in the eurozone are still herding cats, perhaps fatigue has set-in with investors pining for a QE solution close to home. Investigate, and try as I might, there isn't much reason to rally beyond the powers of the Fed's printing press and some oversold conditions. As mentioned previously, let's not forget quad-witching Friday and portfolio manager bonuses due at quarter end. Sure it's cynical but it's a fact.
The roller coaster ride of uncertainty continues causing investors to sell and shorts to be squeezed. It's a manipulated algo driven affair. So it's no wonder many investors have fled markets seeking safety in bonds or mattress money generally.
Leading markets higher Tuesday were all the sectors leading them lower Monday. Gold (GLD) rallied as the dollar (UUP) fell. Commodities (DBC), (JJC) and (USO) were higher with the weaker dollar and sentiment reversal. Bonds (IEF) were weaker.
Volume increased on the short squeeze and 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.
Retail Sales should have some impact on conditions on Wednesday unless the eurozone becomes unglued again. Then there's always more Fed governor campaign speeches.
Let's see what happens.