The result of Greek elections seemed a non-event and now so too are the Fed's action. The former is back to limbo with a renegotiation stalemate with more of the same to come. The Fed's extension of "Operation Twist" was widely predicted as the likely outcome of their meeting. The former makes you wonder why anyone believes the eurozone is "fixed" while the latter begs the question: "If you've been twisting for the past 6 months without any positive benefit, why continue?"
In his news conference Bernanke told reporters the Fed had lowered GDP forecasts (1.9-2.4% from 2.4-2.9%) and expected unemployment to remain above 8% through year-end. This is hardly bullish news despite hints of more action to come if necessary. Like what? Well, they could just expand their Treasury holdings by buying even more dated bonds-QE3 or some form of it. The latter is more jawboning and threats. Goldman Sachs had perhaps astutely suggested this was the Fed's last chance to do something serious before the election made it seem politicized.
Nevertheless, markets want to go higher because, cynically, it's bonus time for portfolio managers and report card time for clients. After all Europe is not fixed and neither is the U.S. The French have gone the other way recommending retirement age be decreased to 60 from 62. Um, not very helpful in the quest for austerite, oui? All we really have now globally is money printing and talk to buy time.
There has been some good reports and news from Microsoft (MS) and Oracle (ORCL) of late but there have also been poor results like Procter & Gamble (PG) and others too long to mention. When earnings start flowing next month you might expect "beats" as estimates have been sharply reduced.
I've been on the "down low" the past few days awaiting the Greek election outcome and the Fed's action. It didn't seem like there was much to discuss until the dust cleared. Of course the funny thing is conditions are as murky and unsettled as ever.
With the Fed's announcement the dollar (UUP) was weaker along with gold (GLD) and commodities (DBC), (USO) & (JJC) while bonds (IEF) were also weaker. Stocks were mixed to lower and it seems nothing was popular on this Big Wednesday overall.
Volume was higher Wednesday especially after the Fed's announcement. The old saying is "the first move's the wrong move" after Fed announcements and this seemed the case Wednesday. Breadth per the WSJ was mixed to negative overall.
U.S. Sector, Stocks & Bond ETFs
Currency & Commodity Market ETFs
Overseas Sectors & ETFs
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.
Two major events that meant nothing except a short-term trading opportunity for hedge funds and trading desks occurred in Greece and again with the Fed. What is more difficult to understand is the Fed has been doing Operation Twist for 6 months now. It has yielded zip for achieving the Fed's twin mandate: strong employment and protecting the purchasing power of the dollar. Why do it again?
The markets are short-term overbought based on the NYMO which is generally reliable for its view. The VIX has crumbled back to complacency and bears are nowhere to be found. The ramp into the end of the month and quarter are important to those dependent on bonuses.
Thursday features Jobless Claims and given the Fed's statement and outlook a poor report shouldn't move markets. Existing Home Sales may have more of an impact for the "housing bottom" crowd. The Philly Fed and Leading Indicators will be closely watched.
Disclaimer: The ETF Digest maintains active ETF trading portfolio and a wide selection of ETFs away from portfolios in an independent listing. Current "trading" positions in active portfolios if any are embedded within charts: Lazy & Hedged Lazy Portfolios maintain the follow positions: SH, EFZ, VT, MGV, BND, BSV, VGT, VWO, VNO, IAU, DJCI, DJP, VMBS, VIG, ILF, EWA, IEV, EWC, EWJ, EWG, & EWU.
The charts and comments are only the author's view of market activity and aren't recommendations to buy or sell any security. Market sectors and related ETFs 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 annotations 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.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
