Technology and biotech
fronted the U.S. stock market's rally to a historic high
Wednesday as the Federal Reserve minutes, released five hours
early, showed Fed officials agreed that the current quantitative
easing program should continue for a few more months.
But several investment strategists said they're skeptical that
the Fed-juiced market could climb much further given the weak
IShares S&P North American Technology Multimedia
Networking Index (
) jumped 2.85% to 29.16, fueled byJDS Uniphase (
) andJuniper Networks (
), each of which surged almost 5%. Juniper announced that it
received a contract from Belgacom, the largest telecom provider
in Belgium, to provide routers for cloud computing systems.
First Trust NYSE Arca Biotech Index (
) climbed 2.73% to an all-time high of 55.00, led byAmgen (
) andCelgene (CELG), each up about 4%.
SPDR S&P 500
(SPY) added 1.22% to 158.67 -- a fresh all-time high.
PowerShares QQQ (QQQ), tracking the 100 largest nonfinancial
stocks on the Nasdaq, popped 1.94% to 70.01. It appears to have
broken out of a bullish cup-with-handle base chart pattern. It
ended just a smidge above a 69.12 buy point.
SPDR Dow Jones Industrial Average (DIA) rose 0.87% to 147.78
-- a fresh high.
"Part of the enthusiasm in
stock markets today
is very likely related to the fact that the Fed has been
discussing a timeline to the end of a near-zero Fed funds rate,"
Carlos Guillen, an analyst at Wall Street Strategies, a New
York-based stock market and equity research firm, wrote in a
"While there has not been a definitive date set, investors are
seeing this as an indication that they need to start moving money
from safer long-term bonds into stocks very soon," he added.
The Fed instills
confidence in the stock market at a time when a lot of the
underlying economic data aren't stellar, said Brad Reynolds,
chief investment officer at LJPR Inc. of Troy, Mich., with $525
million in assets under management. "The Fed has its foot pressed
on the accelerator and isn't looking to remove its foot soon," he
The ISM manufacturing index showed activity slowing, while
only 88,000 jobs were created in March. That's far short of the
150,000 new jobs needed to keep with natural growth in the
workforce, Harry Dent, founder of HS Dent, an economic research
firm in Tampa, Fla., wrote in a client missive Wednesday.
"More important, over 600,000 people left the workforce. Now,
the question is how persistent the slowing will be as payroll tax
hikes have clearly hit, but marginal tax rate hikes begin to hit
along with government spending cuts," Dent wrote.
Dent recommends shorting the market by buying inverse
ETFs,ProShares Short S&P500 (SH)
Small Cap Bear 3X
Shares (TZA), unless the S&P 500 soars above 1600, or 160 for
Foreign Markets Still Lag U.S.
IShares MSCI EAFE Index (EFA), tracking developed foreign
markets, gapped up 1.48% to 60.08 -- its highest level in a year
and nine months. It's lagged the U.S. market since the bull
market started in March 2009 and is still a far cry from
regaining its pre-financial-crisis high. It trades above both its
50- and 200-day moving averages, indicative of a strong
French industrial production in February rose 0.7% from the
month before but fell 2.5% from a year earlier. Although that
beat consensus forecasts, it confirms weakening activity, Waverly
Advisors wrote in a client note.
IShares MSCI Emerging Markets Index (EEM) hopped 0.96% to
42.49. Lagging developed markets, it's corrected 6% from its
52-week high. It is trading above its longer-term 200-day average
but below its shorter-term 50-day moving average, indicating a
"When the U.S. looks fine but money is flowing out of the rest
of the world, the message is that someone pulled the plug on the
liquidity bathtub," Tom McClellan, founder of the McClellan
Market Report wrote in his newsletter Wednesday.
"The rest of the world's markets are already saying that there
are liquidity problems, in spite of the money printing that the
Federal Reserve is doing," he added. "Perhaps $85 billion per
month is just not enough."
Chinese exports shrank 10% year over year, with shipments to
the U.S. and Europe falling year over year.
Market Vectors Gold Miners ETF (GDX), down 3.83% to 34.65, led
the losers' list. It's been downtrending since September and has
corrected 37% from its 52-week high, far surpassing the 20%
correction that defines a bear market.
Gold Loses More Luster
SPDR Gold Shares (GLD) slipped 1.68% to 150.77.
"It is puzzling that gold and silver are not rallying more
than they are given Japan's announcement of stimulus that is more
than 2.5 times the QE in the U.S. when adjusted for the size of
its economy," Dent wrote. "This almost certainly will evoke
stimulus responses from South Korea and China, its closest export
competitors in manufacturing. In fact, this could set off a
currency trade war similar to the tariff wars in the 1930s that
worsened that depression."
Gold is forming a major bottom that occurs every 13-1/2
months, says McClellan.
"It is not actually due until May, but it is also not
precisely punctual. It can come a month early or late, and still
be considered on time," McClellan wrote.
The commitment of traders report shows commercial traders,
considered the smart money, to be bullish and have proven to be
right eventually every time, McClellan added.
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