Index Gains Distribution

All major indices posted healthy gains last week.

The blue chips led the way, while the Nasdaq Tech issues and Russell 2000 small caps lagged. Financials, which had been conssitently poor, showed signs of life. Exporting beneficiaries of the weak dollar — think industrials like Honeywell (HON) and Caterpillar (CAT) — had strong earnings.

Its interesting to note, however, that these gains were not evenly distributed. The Dow was the only index in the green everyday last week.  Econoday uses a very attractive form of info-porn:


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  1. fat mary commented on Apr 23

    we think the sun came up today but really cant be sure because its cloudy.

    the rally that started last august has the bears reassessing their outlooks for sure. they are slowly capitulating after realizing that what goes on in the economy has little to do with the markets. Its all about Ben and his desire to not let this economy falter because of housing or decreases capital spending, and everything to do with pumping the liquidity via total fed credit, billions every day. enjoy it while it lasts.

  2. John commented on Apr 23

    Barry, do you have access to a breakdown of institutional/retail activity? That monster volume spike on Friday looked like more than just short-covering above the Feb highs to me; it looked like more than just expiry, also. It looked like Joe & Mary Retail finally decided it was safe to start buying again. That is what I’ve long thought this rally was all about: leaving the little guy holding the bag, from both ends. I surmise that a lot of put-selling and call-buying from March 12th – 14th was not hedged. Thus the relentless, illogical, low-volume walk higher, which featured a HIGHLY suspicious artifact: every time the market was about to top out, it would go upside vertical instead; the evidence remains in the series of breakaway gaps.

    Well, now that the April expiry has passed, the only reason to keep propping up the market is to make bagholders out of all the retail folks who were smart enouigh to sit this one out.

    The funny thing is, while people like Alan Farley and Jeff Cooper get called paranoid because of their insistance that the whole market is manipulated constantly by the biggest players, theirs are the only explanations I’ve seen that manage to consistently account for the action as it occurs.

    And one last point: I’ve heard that index options are ‘smart’ money and equity options are ‘dumb’ money; so what does it say that the put/call ratios being over 1.00 are largely due to index put activity, while equity calls far outnumber puts, and have for weeks?

  3. michael schumacher commented on Apr 23

    and how many headlines that read Japanese Market up big had to be canned when it tanked 150pts on it’s close…..

    Selective use of other reasons to further bloat our market……


  4. Barry Ritholtz commented on Apr 23

    Fat Mary:

    First you say the bears are capitulating “after realizing that what goes on in the economy has little to do with the markets”

    Then you say “Its all about Ben and his desire to not let this economy falter”

    Well, so does the economy not matter (nothing to do with stocks) or is it all that matters (driving the Fed and Interest rates)?

  5. super-anon commented on Apr 23

    If I were an evil hedge fund that was part of some mythical conspiracy to goad Joe Q. Moran into buying over-priced stocks I would concentrate on the indicies that are displayed most prominently on cable news channels to facilitate the transfer of wealth from rich to poor.

    Just sayin’. Nothing like that is really happening.

  6. Winston Munn commented on Apr 23

    A couple points. The chart above shows what I saw in my personal A/D index last week, a 3-day divergence of the Dow. If this keeps the same pattern, looks to me like a top is forming as money switches into a few issues (large caps) while the underlying issues can’t find broad support.

    Fat Mary: Are you aware that Ben and the Fed cannot “pump money into the market”? All the Fed can do is protect a target interest rate – albeit a low one that stimulates demand – but all they can then do is respond to demand. It is the demand that causes the liquidity. There is more control of interest rates by foreign dollars than by the Fed.

  7. michael schumacher commented on Apr 23

    there you go with “there are rules” again.

    How can you be so naive Winston?


  8. RW commented on Apr 23

    Can someone who has access to MacroMavens comment on Pomboy’s recently quoted statement that 75% of money/credit creation was no longer under Fed control? Just trying to be sure that’s what she actually said.

  9. Nova Law commented on Apr 23

    John, the last numbers that I saw, institutional money constituted 15 of the 17 trillion of total market cap. The retail investor is a small component of the overall market.

  10. John commented on Apr 23

    Thanks, Nova.

  11. Winston Munn commented on Apr 23

    “How can you be so naive Winston?”

    I am not, I assure you. Maybe I am doing a poor job of spelling out what I mean. What I am saying is the Fed by themselves cannot pump up the market, as they are handicapped by what they can do; that does not mean they cannot be co-conspirators with a group that is a mechanism of demand.
    That mechanism would be the means.

    If someone were to say “Ben and the boys” pumping in the cash, I woudn’t quibble with that. After all, it doesn’t take much more than a few billion splashed around to stop or start an equities trend.
    And when you think of the tax receipts for both short-term and long-term capital gains, there is reason to want the market to go forever upwards – that would establish a motive.

    So all I’m saying is let’s be accurate about this – if there is manipulation, it goes a lot deeper than simply Ben and the Fed. The Fed just happens to have the opportunity on their side.

    Motive. Means. Opportunity. Seems like it’s all there.

    On a similar note, you notice how the bond market is not manipulated – it is simply too big. We tend to think that the Fed’s target rate influences bonds, but I contend that is backwards. It is the bond market that the Fed follows.

    If you can find a 2000-2001 chart of the 3-month T-bills and compare it to Greenspan’s emergency cuts, you will find that the T-bills led the way. Al was just trying to keep up.

    Interesting thing is that somewhere toward the end of those cuts, long term bonds were not joining Al’s party, refusing to follow the short term T-bills path, keeping mortgage rates high. Sometime after this time frame, mortgage rates plummeted, but I can’t find the catalyst that propelled the long-term bonds to join in.

    Any ideas?

  12. muckdog commented on Apr 23

    I think the interesting tale of the tape here is that we’re all looking for a correction. At least seem to be. Me included as I’ve cut back on aggressiveness. So let me personalize this and accept all blame…

    As I wait for the “inevitable” correction, I see subprime woes and foreclosures. I notice “what seems like” for sale signs on every third house in the neighborhood. I believe consumers are tapped out as their interest rates rise and gas prices increase. I notice that the lines at Best Buy, Costco, and Home Depot don’t seem to be as long as they used to be in years past. I have the bricks to make one heck of a wall of worry. I don’t think I’m the only one in this camp.

    So I believe it is folks like me who are fueling this move. This is the cash that is coming in and moving things higher. At some point maybe some of these things will matter. But maybe that won’t be until the next recession. Lets face it, as long as folks are working then should we be worried about the fate of the economy? Unemployment is 4.4%. Folks are surviving and living their lives. This is not the Dust Bowl days. This isn’t even 2001.

    I won’t capitulate and join the bulls, because I’m well aware of the greater fool theory and have been one before. Instead I play safe and do use a small position to play mo-mo but with a short leash.

    Phew. Party on, Wayne.

  13. RW commented on Apr 23

    Same here muckdog; got a couple nice little plays going but am now mostly high-hedged and low-beta’d — tough darts, I’d rather pay some opportunity cost than lose money; done both more than once and the former not only smarts a lot less but recovery is easier by at least an order of magnitude.

  14. fat mary commented on Apr 23

    your wrong winston. the fed pumps money into the economy every day. Its called total fed credit. its the magic pixie dust that allows the banks to loan out the money. our fiat money system allows banks to turn that money almost over twenty fold from what was lent from the fed through our fractional reserve banking system. where does all this created money go? it finds its way into our economy, our markets ect. How much has JPM lent out to hedge funds? You dont think dudely has the reigns on this market? think again.

    Barry, good point and well taken.

  15. fat mary commented on Apr 23

    and while we are on this market… wasn’t a goldmanite the treasurer during the clinton economic boom? and isn’t a goldmanite now the bush treasurer and the market has rocketed since he was sworn in. Of course these are all coincidences. The bottem line, the fed and the tresurey will and are indirectly flooding this economy with dollars. its all about the availability of credit created by treasury and the fed. Economies lifeblood is credit. Credit tieghtens, the economy will contract. Listen, go with it and worry about that other stuff later, now is the time to recognize whats happening and act accordingly. I ve made the mistake and i have watched others of intellecualizing why the market should go down. I cant afford to do it again. enjoy the ride.

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