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TheStreet Open House

Poor China, Euro News: Dave's Daily

NEW YORK ( ETF Digest) -- On some occasions you see equities in a slow death spiral supported invariably by ZIRP and QE. It's not a new experience for markets since we've had both factors dominating markets over the past three years. When the punchbowl is removed we move sharply lower as this seems to be the only support available. Stocks sell-off on sharply higher volume from both the public and insiders. Poor economic data (Jobless Claims) then drives Fed governors to the speaking circuit with hints of QE and further stimulus as Dudley and Yellen did Thursday, and markets rally. Wash, rinse and repeat.

Thursday also featured the "rumor" that Friday's China's GDP data would exceed 9% rather than show contraction. This helped Thursday's rally but then bulls met reality when the number was only 8.1%. (Buy the rumor, sell the fact.)

There are some companies (too few it seems) like Apple (AAPL) and International Business Machines (IBM) doing great things and performing well. And with major indices being price-weighted by both companies, real returns can mislead.

Friday stock prices fell sharply driven lower by China GDP report and more crummy news from the eurozone. Spanish 10-year bonds pushed yields over 6% making the spread to German Bunds (1.6%) quite wide. In Italy new government debt is being issued only for less than one year duration. This is a very bad sign as investors aren't willing to risk longer-term duration.

Most everything reversed course Friday as stocks were weaker, bonds (TLT) and the dollar (UUP) higher, commodities (DBC, USO, GLD) weaker--wash, rinse, repeat.

JP Morgan (JPM) and Wells-Fargo (WFC) reported earnings that were not well received. Overall these reports impacted financials (XLF) negatively with Citigroup (C), Bank of America (BAC), Goldman Sachs (GS) and Morgan Stanley (MS) on deck to report next week.

Frankly 2012 may become a carbon copy of 2011 and 2010 from a seasonal view. This seems strange but coincides with DeMark Indicators and QE conditions.

Volume was only marginally higher than yesterday's large light volume rally. Breadth per the WSJ was quite negative.

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