I am not aware of another period when it appears one day is the mirror image of the previous day. Friday equites rallied, the seventh consecutive day where the Dow closed over 100 points higher or lower. The catalyst for the rally…falling dollar predicated by a possible change in the time table of when the Fed will change rates.
I will argue that most of the trading is now dictated by the proverbial machines, trading the most highly capitalized and liquid issues.
I have commented many times about the lack of breadth, breadth that has been narrowing since January/February 2014. The asset class that has performed is the mega capitalized stocks comprising the popular indices. For the exception of treasuries, all other asset classes/markets have lagged considerably.
Will there be a broadening of market performers or will the averages soon come under consistent pressure?
It is my firsthand experience that when all are chasing performance at the expense of forward looking thought, where thoughtless indexing is regarded as the pathway to riches, change will occur.
The most under represented group is commodities. Will funds soon rush into this beleaguered and decimated group?
The supplies for many commodities are from unstable regions of the world, regions that are either totalitarianism in nature or on the edge of anarchy. It would take little to disrupt supplies, especially in a world that lacks global leadership and its 70 year referee has quit pursuing a domestic agenda.
Moreover, at some juncture there will be an inflationary tipping point because of today’s massive global stimulus, an environment where an unprecedented 19 of the 57 central banks representing about 57% of global production have negative short term interest rates.
It is often penned the most obvious conclusions are those that are ignored. Will this possible conclusion also be ignored via the blindly chasing performance via closest brainless indexing?
What will happen this week? There are several inflation, manufacturing, housing and sentiment surveys released.
Last night the foreign markets were mixed. London was down 0.40%, Paris down 0.85% and Frankfurt down 1.23%. Japan was up 0.99% and Hang Sang up 0.49%.
The Dow should open nominally lower ahead of speeches from several Federal Reserve officials. The 10-year is up 2/32 to yield 1.93%.
