The Fed announced basically no changes in policies Wednesday. Parse the statement 20 different ways from Sunday, and all you find is weak fixed business investment, global risks and more stable home prices. So previous ideas that the Fed would double asset purchases were not in the cards for this meeting. Tuesday, the rumor swirled that Ben would not be accepting a third term as Fed chief if offered (Romney has said no to an offer, anyway). This gave markets the blues, since Ben has been providing the sugar bulls were addicted to. No doubt Ben wants to write a book, sit on boards and make lucrative speeches. Besides, he may miss those Bee Gee days, ya think?
New Home Sales in the U.S. rose 5.7% -- the highest rate in two years -- screamed the headlines in the financial media. But as always, inside, the numbers things weren't quite so rosy, as again prior data was revised lower (368K vs. 373K), thus allowing for the "beat." The Flash PMI rose to 51.3 vs. expected 51.5, but prior data was revised lower from 51.5 to 51.1, allowing a beat. (Oh, those pesky revisions!)
Chinese manufacturing rose from 47.9 to 49.1, which cheered investors hoping for a "soft landing" in the region. But at the same time, eurozone manufacturing fell, as did German confidence data.
Europe's SAP reported better earnings, allowing for a rebound in indexes. Boeing (BA) reported weaker earnings, but beat estimates, while Eli Lilly (LLY) missed, and Dow Chemical (DOW) announced large lay-offs. Facebook (FB) shares soared 22% at the open on a slightly better report regarding mobile ads. However, the outsized boost came as a result of a massive short squeeze abetted by some analyst buy ratings. Cynically, let's remember restricted shares are due for release in two months, so getting the stock higher helps those in need.
There have been rumors from the eurozone that a deal with Greece had been reached. (This was all later denied by Draghi, and further amended by the troika that no monies would be dispersed until conditions are met.) In it is an austerity commitment of $13.5 billion over two years, an increase in the retirement age to 67 from 65, and a placement of 25K government workers on "reserve" (read: layoffs and welfare). If this were true, we'd see tear gas and firebombs in the streets of Athens by now. The show in the eurozone may go on for years. The ECB's Draghi spoke to the German parliament Wednesday, and everyone came away talking about how comforting the presentation was. Spiegel featured Germany's Finance Minister Schauble with a grimmer outlook.
It's the central banks and QE vs. economic data and earnings. Below are charts of economic data from China, Europe, and the U.S., which tell the story (courtesy of ZH and Credit Suisse).
The dollar (UUP) was flat, and gold (GLD) somewhat weaker once again. Stocks continued to decline on the Fed statement. Commodities (DBC) were led lower by energy (USO) on higher inventory data. Bonds (TLT) dropped in price, most likely due to a smaller than expected QE buy package from the Fed.
Volume overall remains light, even for a Fed-day. Breadth per the WSJ was negative, and now we're getting short-term oversold.
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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.
A disappointing day for bulls, since they didn't get the rumored super-sized QE they wanted.
Jobless Claims on tap for Thursday, and let's this time guess the prior "revisions," since that's the game officialdom is playing with us. Durable Goods Orders are on tap, and they're expected to rise substantially. This is followed by Pending Home Sales.
It seems our website is down, and we're awaiting a fix from overseas…sigh.
Disclaimer: The ETF Digest maintains an 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: 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.