Tape Painting Time

I thought this deliberate end-of-month/quarter shenanigans were against the rules right? Oh, they don’t enforce this type of activity—never have, never will.

Anyway, with volume ultra-light, or absent bullish news for that matter, propping markets can be done with ease since it takes just a little paint to push things in the desired direction.

Breadth was positive but volume was beneath significant.

The intermediate to long range outlook was rolling over as shown below on the McClellan Summation Index but now appears to be stabilizing.

Current market conditions are well articulated on this CNBC video by Larry Levin and echo things we and others have been saying for a long time.

Another technical indicator we use is DeMark weekly sequential 9 counts. Their intent is to indicate trend exhaustion or a waypoint in the prevailing trend. DeMark indicators used in this manner either shows a potential trend change or just a time to rest by moving sideways. Below is from our internal SPY weekly chart which features the latest weekly 9 count from mid-May. Since you can see we’ve basically moved sideways even if the movement has been erratic. The previous trend higher could always resume now that a “reaction” has taken place or even reverse. It’s impossible to predict at this point and Mr. Market has to show the way.

With little in the way of volume, bulls were able to prop things higher just as Larry Levin stated in his blunt statement from the CNBC video. Bulls have a lot going for them in terms of liquidity, and that’s what this current rally is based on. Printed money routed to trading desks to play with for fun and profit. It’s good to be a Primary Dealer for the Fed.

Yes, there is always end-of-quarter tape painting going on and the SEC, which prohibits such activities, has never done anything about it. They’re too busy trying to prevent you from trading leveraged ETFs.

This will be a key week despite the low volume and shortened trading. On Thursday we get a lot of important data especially with the employment report. It’s amazing it’s being released on Thursday before the market closes for the holiday. I can’t imagine traders heading to the Hamptons early with this kind of news. Cynically, many believe the report will be bad allowing traders a long weekend to spin it another way.

Disclaimer: Among other issues the ETF Digest maintains positions in: MDY, IWM, QQQQ, QLD, BWX, WIP, LQD, DBC, USL, XLE, DBB, EWJ, EWA, EFA, EEM, AFK and FXI.


The charts and comments are only the author’s view of market activity and aren’t recommendations to buy or sell any security. Market sectors and related ETFs are selected based on his opinion as to their importance in providing the viewer a comprehensive summary of market conditions for the featured period. Chart annotations aren’t predictive of any future market action rather they only demonstrate the author’s opinion as to a range of possibilities going forward. More detailed information, including actionable alerts, are available to subscribers at www.etfdigest.com.