Hello? Is there Anybody Out There?

Hello? Is there Anybody Out There?

Volumes are way light this am. They started off ok, so the street was saying anyway, although it didn’t feel like it. Since then however, everyone I speak to tells me they are dead. There’s been much made of the light volumes behind this rally; how that’s indicative of a bear market rally. I came across and interesting chart on the Pragmatic Capitalist which provides a bit more food for thought, noting a common bear market rally trait is that of declining volume as the rally exhausts.

I alluded yesterday to my surprise that the market had such an aggressive move on the back of a confidence number. The beat came from the Expectations Index (72.3 vs 51 previous) which given the stock market rally has continued through May, probably had quite a lot to do with it. Present situation Index had far more moderate gains (28.9 vs 25.5 previous). Anyway, I’m pretty sure if asset prices hadn’t continued their rise this month, the beat would have been far less, if anything. Bottom line, it’s a fickle indicator.

The Greenback’s attempt at a rally yesterday was short lived and concerns continue that this trend isn’t something that’s going to go away anytime soon. In light of this, I thought this work from the much listened to David Rosenberg was useful. He’s just run some basic historical correlations between industry performance and the $. The results are:

• Basic materials 87% inverse correlation
• Consumer staples 79% inverse correlation
• Industrials 62% inverse correlation
• Consumer discretionary 34% inverse correlation
• Utilities 28% inverse correlation
• Financials 22% inverse correlation
• Health care 18% inverse correlation
• Tech 5% positive correlation
•Telecom 13% positive correlation

The stuff priced in $ does well when it is low, so do those with big foreign exposure. So not mind blowing really, but a reminder of where to look if you think the $ is headed the way of the Dodo.