I missed the FOMC announcement today because I didn't realize Bernanke was practicing for his next career, stand up comedy, with another press conference today. Not that I cared, I didn't think the announcement would have much affect on the market. I was wrong there, this market really likes zero interest for the rest of eternity, and took off like a banshee on the announcement. The mystery January rally is no longer a mystery, as some pretty savvy people were able to guess exactly what the FOMC was going to say, and have been buying in anticipation all month. One thing I was concerned about was the high level of CMF and the fact it was starting to drop. That drop has now stopped dead in it's tracks, and with still no whiff of distribution, it's awfully tough to find anything bearish to say. About all I can say is we are now overbought, which means virtually nothing: the market can frequently be overbought for weeks.
Athough he is not supposed to be, it is pretty clear Bernanke is targeting the markets, and they are responding. The Nasdaq hit yet another short term high in price relative, so it is reasonably safe to say the down trend is as dead as Obama's re-election chances. I suspect the recent strength of the Nasdaq was due to those same savvy people correctly guessing AAPL's numbers this quarter.
My, my, the Russell 2000 continues to move up, and more importantly, the price relative line is moving up as well. The is no BS bullish.
| Ticker | Relative Strength Index (14) |
| XLK | 75.81 |
| XLB | 75.63 |
| XLY | 74.83 |
| XLI | 74.77 |
| XLV | 73.72 |
| XLF | 72.8 |
| XLE | 66.5 |
| XLP | 64.97 |
| XLU | 55.47 |
Here are the sectors ranked by RSI. It is no surprise that XLK has taken the lead, most of that coming today, and no surprise that XLU is still last. Notice that 6 pf the 9 sectors have an RSI higher than 70, which is considered the threshold to being overbought.
XLK has been strong in the last 20 days (which is the time frame RSI measures), but very weak since the peak in September. This recent strength may be a short term flash in the pan, or we may be seeing some rotation into this sector. Right now my bias is towards the former.
Despite being in last place, XLU made a huge move today, actually having the highest one day gain on a day when "risk" was supposed to be on. If there is rotation going on, it just might be right back into here.
We are now stuck with low (or no) interest rates until late 2014. It is pretty clear that the Fed is not buying into the recovery we are supposedly in, and I suspect they see another recession coming. If you wonder how they low interest rates helps the middle class, it doesn't. It helps the over-leveradged asset rich, who will lose their asses if the dollar strengthens. They are calling the shots, and Bernanke will accomodate them until we have or Iceland moment, when the torches and pitchforks start coming out. Until then, we can party on in the market.
I will have the new highs update.
