MARKET COMMENT
Dave Fry at ETF Digest, March 4, 2009
There isn’t much to say about an oversold bear market rally. They just happen and a short squeeze is the result. The only cause to this was attributed to China’s increasing its stimulus package. Further, the Chinese, as we’ve been pointing out, have been busy tying-up base metals and making energy deals for when things turn around. And, when things do turn around, China may emerge as the leading economic power in the world much sooner than anyone expected. Is that possible?
No matter opinions, the short squeeze was on. In the last few minutes of trading heavy profit-taking took indexes sharply off their highs. This means conviction isn’t that strong. Volume was average and breadth was positive. Even on a good up day check-out the continuing stream of new 52 week lows.
Meanwhile, our man in Geneva chimes in with his readings on volume and breadth.
Why else would we rally from current levels? DeMark Sequential counts put SPY at beyond a “9” on monthly charts usually generating some type of reaction even if it’s just some sideways action. (This pattern repeats on many other major market indexes and ETFs.)
It doesn’t take much to stampede an oversold market. We got that today with news from China that they’ll toss more yuan into their stimulus package. Is it just a one day wonder? Perhaps since the trusty McClellan Oscillator is very good at extreme readings spying short-term moves.
The late day sell-off must have disturbed bulls since it showed a lack of conviction to hang around. Volume and breadth were also unremarkable. Nevertheless, it will take a lot of work to relieve oversold conditions. Just some sideways action would be healthy for both bulls and bears. But, we don’t have an inside track on Mr. Market’s thinking—nor does anyone else.
There aren’t any professors to beat up today and Bloomberg didn’t post any new ways to define PE ratios to mean stocks are cheap. Few objective people would argue the markets like much of what the Obama administration is doing. You might ask Jimmy Cayne how he feels about Tim Geithner and you’ll get an X rated earful not that we should care.
Tomorrow we’ll get more employment data, chain store sales, factory orders, a Kohn speech surely designed to pump us up, followed by a Natural Gas report which seems to be an appropriate tag for Kohn’s speech. Of course Friday is the employment data where even a horrible number may be perceived bullishly as before…if only briefly.
Let’s see what happens.
Disclaimer: Among other issues the ETF Digest maintains positions in: IEF, TLT and GLD.
