Anyone know what REALLY causes these big moves? I mean, why so many people all of a sudden are buying on the dow? What can be the major appeal that the dow + other us markets offer to these big hedge funds, banks, large retail traders? I have yet to figure out the answer. I can only speculate that we are overspending wayyy more than we should and this market is not organically growing, it is growing on emotions and loans.
Commitment of Traders report says huge commercials are way long, while speculators and little retail folks are more short than normal. Huge commercials rule -- for a while yet.
I could care less about what's actually pushing the dow into record territory, since what we read or hear about is really stipulation anyway. I can stipulate too: many speculators and funds were afraid of the talks of correction and were heavily short and accumulated puts during the recent market consolidation. They then proceeded to get squeezed on that 285+ point day, although some probably refused to believe it. Those that were tenacious shorted more into the rally and are really hurting now, and as they begin to capitulate and cover buyers are coming into the large caps as money rotates into the tech and energy sectors.
Take a look at sector rotation here. http://stockcharts.com/charts/performance/SPSectors.html Several Dow components are regarded as safe havens during economic downturns. If the Dow remains stronger than the S&P (one day or a few tell us nothing) then that could be a sign that major players are anticipating a weakening market, in which case we should get a confirmation by way of the utility sector strengthening. At the moment we don't see that, as the ultility sector is the lowest line of the chart. There is great bullishness led by the energy sector. Keep an eye on Utilities they may give us an advance warning of a decrease in bullishness.
if you are going to watch util's, keep an eye on bonds. bond strength (lower rates) is good for utils. the 30 yr is over 107 and the yield on the 10 yr notes is right around 5% after popping up well over it rates go up, utils will charge down
Market will keep on going higher because of USD inflation and cheap global liquidity. USD weakens resulting in spurious "earnings growth" from foreign markets, esp. for large DOW stocks because of conducive currency rates. Said companies use the "increased earnings" to buy back shares reducing shares available. Crude pegged to USD means someone, somewhere has a lot of USD that he needs to put to work. What better place than financing the purchase of liquid US assets. The US has robust rule of law and respects property rights. Hedge Funds with marginal strategies that barely beat the SnP, borrow JPY at near zero interest rates and leverage these marginal strategies to squeeze decent returns for investors. The resultant leverage distorts real demand. Astute Private Equity with access to cheap JPY and questionable financing strategies forecast the impending collapse in the USD and pay currently inflated prices for public corporations with robust cashflow but low earnings growth. In a decade, $1.00 USD today will be $0.01 USD in real terms. Borrow JPY at near 0% interest rates and use the future cashflow of the Corporation to pay off said loan. Real cost of purchase to astute Private Equity firm. $0.00 USD. Removal of another listed large corporation equals even fewer shares available for purchase by "investors" sending prices of other shares higher ( see above on increased hedge fund leverage ). Above are just a few of the reasons why US equities will keep on climbing higher. As long as Oil is pegged to USD thereby creating demand for USD and there is cheap JPY available, no need to worry. Buy and forget is the current strategy.
=============== Agree AmT. And saw a turkey from my trading office today ; remember old turkey, old book, old trader,''its a bull market you know'' Too bad some dont know that. Shorts always help fuel rally. Frankly,SPY ,QQQQ down today; its a bull market you know-& good place to liquidate longs today also
Excellent point! Lately the market seems to have been very sensitive to the ten-year rate whenever it goes over about 5 %. I monitor the rate on the ten-year very closely.
Come on. The reason why the DOW is going up is because of the shorts??? Really? Is everytime an index of any kind goes up, it must be the shorts??? Is that the new normal? Just look at the components of the DOW. There are only 30 of them. I will give you a hint, it starts with an E. EARNINGS. Lets go through, I'll be short... Alcoa- buyouts, aluminum producer, high demand for aluminum AIG- It will never get above 73 AXP- Your favorite credit card guys BA- High aircraft demand C- Unfortunately, going nowhere fast CAT- Makes big machines that are in high demand DD- Chemical maker, chemical makers doing well, high demand DIS- God, I dont know, who likes Disney GE- Makes many different high demand products, global conglomerate, everyone pumping as much as they can GM- I dunno if I have anything positive to say HD- Going nowhere HON- Going much higher, high demand HPQ- Everyone loves HP, no one likes DELL IBM- Financial engineering pushing her higher! INTC- Getting it right, good earnings JNJ- Buffet play, working on that AIDS vacine, going higher JPM- yuck KO- Everyone loves Coke MCD- Great coffee in the morning and cheaper then SBUX MMM- Global play on chemicals, materials and other things MO- going nowhere Here figure out the rest, Im too lazy to explain. I cut/pasted the list. MRK MERCK CO INC 50.83 4:01PM ET 0.02 (0.04%) 8,421,650 MSFT MICROSOFT CP 30.03 4:00PM ET 0.21 (0.70%) 48,023,159 PFE PFIZER INC 26.08 4:00PM ET 0.17 (0.66%) 22,897,839 PG PROCTER GAMBLE CO 63.15 4:00PM ET 0.49 (0.78%) 12,873,262 T AT&T INC. 40.21 4:00PM ET 0.19 (0.47%) 14,301,298 UTX UNITED TECH 76.67 4:00PM ET 1.67 (2.23%) 7,356,737 VZ VERIZON COMMUN 42.76 4:02PM ET 1.00 (2.39%) 25,248,437 WMT WAL MART STORES 48.94 4:01PM ET 0.21 (0.43%) 11,749,564 XOM EXXON MOBIL CP 89.70 4:02PM ET 0.63 (0.70%) 22,408,599 All these companies have something going for them. Thus the DJIA is finally an investment grade vehicle again.