This morning’s headline:
“Fed’s Yellen says QE taper does not mean reduced stimulus; says 2% inflation target is taken seriously; economy needs extraordinary support for some time; Fed short of reaching its targets!”
Or as we think: “Fed’s Yellen sees risk being sold in market…pulls a Bernanke and opens yapper to get juices flowing again.”
We would like to say we are joking…but we are not. For quite a while, we have seen nothing more than a Fed reacting to any drop in markets by yapping them back up or by printing a ton of money. Remember, QE3 was born out of a sharp drop in the market. Just recently, European markets were plunging again. What did the ECB do? They announced they are looking at QE. They know the game. All of this is off of weakening economic numbers around the globe.
We watched the “60 Minutes” piece on how supposedly the markets are being rigged by high frequency traders. Frankly, they need not look further than the Fedheads around the globe that with no accountability, continue to be able to conjure up unimaginable amounts of money in order to keep markets from the big yonk.
As far as the market, coming into today, we have seen 6 straight days of gaps to the upside and 6 straight days where markets were distributed off the gap. We have seen risk areas implode while defensive areas have come to the fore. This is evidenced by the NASDAQ/NDX and SMALL CAPS underperforming the DOW and S&P. As of this second, we will just call it vicious sector rotation. Our interest will not be in today as it is the usual end-of-quarter window dressing. (Which by the way, is illegal and does not happen.) Our bigger interest will be April. But as of now, indices remain rangebound with heavy sector rotation as we enter the 2nd quarter.
Sector-wise, our call of bullish action in Gold finally hit a wall and is now back in no man’s land. Semicondutors remain the strongest area with good action and good set-ups in many oils. The all-important big financials remain mixed but holding support. Regional banks are leading this area. Lastly, in the past 2-3 weeks, the worst countries have been the strongest as Russia, Asia, Brazil and emerging markets finally have caught a bid after a nauseating year.