Overnight markets were a bit quiet. I must say, I was a little surprised to see equity investors in Europe shrug their shoulders in the wake of last Friday’s nonevent of an EU summit/shrimpfest. With Greece and Ireland already in what Dennis Gartman termed “receivership,” and Portugal and Spain headed in that same direction, one might have expected European markets to be on the weaker side, yet they were not.
Thus, other than the fact that QE2 is about to end (as well as a litany of other problems), there was no reason for U.S. stocks to sink, so the early going saw the indices modestly higher, with the Dow leading the way, gaining 0.5%.
Thinning the Herd
On the subject of the Dow’s leadership, Justin Mamis made some interesting comments in his weekly letter today. Justin has been becoming increasingly negative as he sees more and more individual stocks start to deteriorate from a technical perspective.
Specifically, he noted, “By week’s end, although still at lower highs, the Dow Industrials had recovered conspicuously better than the S&P 500, with the Nasdaq and the New York composites the laggards. And over the decades we have come to recognize that as the leadership narrows, and it is led by the so-called “blue chips” of the DJIA, the later the rise is becoming.”
Now, just because this is happening doesn’t mean that the market is immediately going to collapse. And, as I have noted in the past, sometimes charts can repair themselves. But I think it is a warning that, despite the pervasive bullishness, the stock market is acting a bit differently than it has been.
He’s Just “Hawking” His Wares
As for QE, St. Louis Fed Head James Bullard gave a speech over the weekend suggesting that perhaps the Fed needn’t even finish QE2 because things, in his view, were getting so much better. I would just like to ask, who does he think he is kidding? This game of talk tough and act easy is so old and so transparent, I don’t see how anyone at the Fed could possibly believe they have any credibility, and anyone who takes them at their word when it comes to being disciplined is even dumber.
Back to the action, the rally pretty much fizzled out by midday. The rest of the session saw the indices more or less unchanged until the last hour, when they slipped into the red, led by the Nasdaq, which lost about 0.5% (the Dow/S&P fell by half as much).
Away from stocks, the dollar was mixed, bonds were flattish, and oil lost about 1%. Precious metals were under pressure overnight, with silver declining a couple of percent to gold’s 1.5%, before trimming those losses today to a bit over 0.5% apiece.