Tags: oil | ETF | Obama | market

I Like What Mr. Market Is Saying

By    |   Wednesday, 17 Jul 2013 07:45 AM

My readers know that I have been watching the broad-market, May/June selloff for signs that it could possibly be something more: the start of a significant correction or even a bear market.

I always doubted this was the case. The economy is too strong, and getting stronger, for the market to roll over into a bear phase. Keep in mind the words "strong" and "stronger" have been dumbed down by the Obama presidency to levels that would have been intolerable a decade ago. But we have to work with the tools we've got.

As I write this, tech stocks, as measured by the PowerShares QQQ (QQQ) exchange-traded fund (ETF), which is based on the Nasdaq 100, have reached new highs on solid volume.

The other two index ETFs, SPDR S&P 500 (SPY) and SPDR Dow Jones Industrial Average (DIA), are a razor's edge below their May peaks. The iShares Dow Jones Transportation Average (IYT) has a bit more work to do to hit new highs.

Volume has been good on recent rallies. I believe all of the indexes mentioned will continue on to new highs soon. Why? The breadth (advance/decline line) has been outstanding: it is solidly above its May peak and should carry stocks with it.

A similar story comes from looking at new highs, which have swelled in recent sessions, and new lows, which have been far fewer than they were in June.

Keep in mind all this is happening in the face of higher oil prices, which I am sure will soon be the new hobby horse for frustrated bears and Cassandras. As usual, they are mixing up cause and effect. The higher oil prices are because the economy is strong.

Why else do we see continued weakness in bonds and inflation-indexed bonds? After their sharp selloffs they are entitled to some bargain hunting. And much the same can be said for gold.

But lower prices are coming for all three. Once second-quarter earnings are in and the traditional late third-quarter bounce from the summer economic doldrums comes into play, stocks should march onward and upward, while fixed income and precious metals will go lower.

The market's new wild card is the suspension of Obamacare until 2015. In addition, the medical stocks, especially device makers such as Intuitive Surgical (ISRG), are encountering sell pressure due to company-specific issues. I'll discuss in the near future whether this FDA-led war on medical innovation will stifle one of America's most promising growth industries.

If you think this administration has only fracking and the Keystone Pipeline in their sights, think again.

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Gary-Jakacky
The economy is too strong, and getting stronger, for the market to roll over into a bear phase. Keep in mind the words "strong" and "stronger" have been dumbed down by the Obama presidency to levels that would have been intolerable a decade ago. But we have to work with the tools we've got.
oil,ETF,Obama,market
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2013-45-17
Wednesday, 17 Jul 2013 07:45 AM
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