The major market averages ended lower on mixed volume, with Oracle (ORCL) playing a part in the NASDAQ's increased volume which resulted in a distribution day for that index. ORCL accounts for 2.9% of the NASDAQ's weighting, and sold off yesterday on massive volume, so its effect on volume levels was material. The market, however, has acted sluggishly since the March 5th Market Direction Model (MDM) buy signal, making very little progress despite the fact that all of the indexes are still but a breath away from their multi-year highs.
The House approved a bill that funds the federal government through September. This spares the market from the drama and threat of a government shutdown next week. On a roll call of 318 yes votes and 109 no votes, the House approved a Senate-passed bill containing about $984 billion in funds. Without the bill, the government would have partially shut down after March 27.
Cyprus continues to formulate a rescue plan knowing that the European Central Bank will withdraw a liquidity lifeline if it hasn’t reached a deal by Monday. Jitters were felt throughout the markets yesterday with precious metals moving higher on the fear trade, their fifth up session in the past six.
With a number of distribution days around the peak, the market is showing a few cracks here, and investors should remain alert to their stops in individual stock positions. While the MDM remains on a buy signal, it continues to monitor the situation and will shift if and when sufficient evidence of a trend shift begins to build. While the pundits may continue to coo over a market rally based on an alleged economic "recovery," we still wonder why, after four years of zero-interest rate policy and the most massive monetary and fiscal stimulus in the history of mankind, we are only seeing GDP growth of just over 1%. Granted, the world's leading economies are either in recession or in a slowdown period, though in the past, a lowering of interest rates to 2-3% by the Fed would have been sufficient to spark sharp economic growth. This speaks to the fragility of economies around the world. Certainly, Fed Chief Ben Bernanke on Wednesday did not intimate any view that the economy was experiencing any robust growth, and in fact sounded somewhat cautious about the economy's prospects going forward. If the current market rally is based on anything other than the continued massive influx of QE, it is certainly not as evident as one might consider it should given four years of massive government intervention. Thus investors should refrain from becoming too complacent and remain alert to any potential correction, should that begin to build, the Cyrpriot crisis notwithstanding.