Daily Investment Interpretations

March 24, 2011

2011-3-24 (Thursday Night): Don't look now but the markets have been sneaking back up. The NASDAQ Composite added 38.12 points (1.41%) to 2,736.42. The Dow rose 84.54 points (0.7%) to 12,170.56, while the S&P 500 advanced 12.12 points (0.93%) to close at: 1,309.66. Oil ended the day at $105.21 a barrel, while Gold adjusted to $1,428. The VIX fell to 18.02
    Perhaps the most significant thing about today is that the markets broke above their resistance levels and are cleared for a resumption of the bull market: Cover Your Ears If You're a Bear . In particular, the markets are advancing in the face of bad news: Technical Talk: Back on the Bandwagon?  
    TopStock Portfolios' David Manning has some insights to share in Bad News For Stock Pickers: 'Risk Trade' May Be Here To Stay. The gist of this article is that stock-picking may be more-or-less a thing of the past. The problems he relates are that (1)  the investment community has begun to invest in the investment themes ("macro trades") that are in fashion at any given time (such as emerging markets, oil, shorting the markets, etc.), (2) investors are switching between "risk on/risk off" trading, and (3) the increasing use of ETF indexes in lieu of baskets of individual stocks. Mr. Manning explains that the "risk on/risk off" approach as follows:  
    "
The idea here is instead of spending time doing company research (which is VERY expensive and VERY time consuming, by the way), traders today simply “put risk on” (via leveraged ETF’s, futures and derivatives) when the news is good and the market is moving up, and then “go the other way” by taking risk off (and/or by putting shorts on) whenever things start to get ugly. The bottom line here is that using a risk on/off approach is quicker than stocks, easier than stocks, and much cheaper than creating, maintaining and trading baskets of stocks. So, if you are a fast-money type, there is no need to do any research on things as silly as earnings or company fundamentals when you can “bomb in” or out of the overall market or specific indices with the click of a button (or better yet, you can always program the computer to do it for you!)."
    Marketwatch's Tomi Kilgore writes, "Mob mentality is driving the markets". (I favor David Manning's interpretation.)
    Market futures are up about 0.3% tonight.