The Markets Speak: New Highs

Summary

• U.S. equity markets are at new highs.
• The Fed is providing a great deal of liquidity.
• The liquidity is finding its way into equities.
• Emerging markets and MLPs are still cheap.
• The market is shrugging them off, going for momentum plays.

("Bubbles" Source: Creative Commons)

During Fed-driven bubbles, markets often respond to central bank gambits to inject and to withdraw liquidity, rather than to fundamentals.

Algorithmic methods can often sniff out important statistical footprints created by heavy-handed moves by central banks in their open market operations. I use my Zomma Directional Algorithm to take advantage of these trends.

The algo does not use form-fitting. It uses the same settings on every market.

Here is how to understand the results:

1. When the yellow line crosses above the green cloud, it signals a buy.

2. When the yellow line crosses back into the top of the green cloud, it signals a sell and a move to cash.

Note: The algo is not designed to create short signals.

The S&P 500 (SPY) is still sprinting higher, largely ignoring geopolitical risks, its own P/E ratio, and its curfew. The market is partying, and it's ignoring tugs on its sleeve to start heading home. We are monitoring this closely.

And yes, I finally zoomed in. The green cloud does dynamically change shape. You're welcome. #MovingAveragesWillBankruptYou #UseAlgosInstead

I am empathetic to the notion that a few mega-cap companies are dragging the indices higher, but as a factual absolutist, I need to point out that the equal-weighted S&P 500 (RSP) is rising as well.

Even stocks outside the S&P 500 (VXF) are rising.

But the great mystery of this market are the MLPs (AMLP). They have 9% yields, and investors are shrugging. This is worrisome. And intriguing.

The real symbol of Canada is not the maple leaf. It's Enbridge (ENB). Its dividends are far sweeter than any syrup. And the Canadian pension funds back it to the hilt. They will gobble up any MLP that gets too cheap. And their check always clears.

I knew a great

Analyst’s Disclosure:I/we have no positions in any stocks mentioned, but may initiate a long position in RUSL, UGLD, EDC over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.