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BRICs Lead Markets Lower: Dave's Daily

While the DJIA eked out a small gain, other sectors struggled all day. The inflation bugaboo you're not supposed to see is making its presence felt in emerging markets. Their authorities aren't using "pretend" inflation measurements and are taking action by raising interest rates. This has happened in India, China and threatened in Brazil.

At the same time, the COMEX, rumored to be short deliverable silver, have instituted draconian margin increases to knock prices lower. This reduces the likelihood of delivery demand -- who said this is a free market? CFTC Commissar Gensler, a former Goldman Sachs director, now conveniently is in the hen house and one wonders if that's a good thing. Nevertheless, silver prices plunged from their lofty levels dragging gold and many other commodity markets down with it. Now we'll see if this engineered bear raid is over or not. Silver had gone parabolic and the volatility could only increase. I've been involved with silver since the Hunt Bros. days in the 70s and it's not a game for neophytes.

Economic data was good with Factory Orders stronger than expected and Auto/Truck sales strong. However, with the latter it's always a case of channel stuffing by the carmakers to the dealers. Now we'll see if the inventory can be sold.

Earnings data was not so great with Sears (SHLD) and Clorox (CLX) providing disappointing results. The DJIA while barely closing higher internally was a messy picture. Tech struggled all day with Google (GOOG) and Broadcom (BRCM) leading the way lower while Apple (AAPL) and Intel (INTC) held things together somewhat.

Most multinational companies reporting good results profit by the weak dollar and it's just that simple frankly.

Volume increased marginally with selling which is typical. Breadth per the WSJ was quite negative.


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Below is an ETF Digest internal monthly chart of DIA (SPDR DJ Industrial Avg ETF) with DeMark Sequential Counts highlighted. May is presenting a "9" count even as the month is quite young. It would take a close beneath $118.60 for a "9" not to be registered. Importantly, this presentation is also seen on most major market ETFs (MDY, IWM, QQQ, EFA and many others). This may indicate "trend exhaustion" which may also lead to sideways action or even a correction. The last "9" that failed occurred in January 2010 with the correction within the 9 itself. One reason these indicators may fail has much to do with Fed monetary policies which can steamroll many technical indicators. That said, QE2 and POMO will end supposedly in June coincident with this presentation. This also corresponds with the "sell in May and go away" maxim.


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