Bulls Need a Slap in the Face: Dave's Daily

When things change more suddenly than many investors and portfolio managers can adjust to, they just do nothing sometimes.
By Dave Fry ,

Investors are frozen in the headlights. Tax bills, deficits, ongoing euro zone issues (not to mention violence), a rising dollar, falling commodity prices, and especially, rapidly falling

bond prices

are collectively weighing on their psyche. There was a well-received

30-year Treasury auction

today and prices rallied sharply--perhaps the Fed bought the whole issue. Actually, the Fed

POMO

activity today was supportive to shorter maturities.

Not much of this combination of events was expected and it's forcing investors to ponder recalculating their sector allocations.

Better Jobless Claims data was cheered early but then the gap open higher was sold as on recent days this week.

Volume continues to, well... suck. Breadth was positive overall.

Continue to U.S. Sectors, Stocks & Bonds

Continue to Currency & Commodity Markets

Continue to Overseas Markets & ETFs

The

NYMO

is a market breadth indicator that is based on the difference between the number of advancing and declining issues on the NYSE. When readings are +60/-60 markets are extended short-term.

The

McClellan Summation Index

is a long-term version of the McClellan Oscillator. It is a market breadth indicator, and interpretation is similar to that of the McClellan Oscillator, except that it is more suited to major trends. I believe readings of +1000/-1000 reveal markets as much extended.

The

VIX

is a widely used measure of market risk and is often referred to as the "investor fear gauge". Our own interpretation is highlighted in the chart above. The VIX measures the level of put option activity over a 30-day period. Greater buying of put options (protection) causes the index to rise.

Continue to Concluding Remarks

What's it going to take to get investors off their duffs? We won't be getting earnings news and the vote in the House on taxes was off-putting.

When things change more suddenly than many investors and portfolio managers can adjust to, they just do nothing sometimes. They must think about what adjustments they need to make and then implement them. This is crucial now as everyone looks ahead to 2011 and how to allocate their portfolios. Given the fall of bond market prices coupled with Bernanke's remarks about keeping rates low it seems a contradiction is at hand. Bond vigilantes take markets in the opposite direction that Bernanke's POMO activities are supposed to yield. It creates uncertainty which in turn keeps investors wary.

Friday brings us the U of Michigan Consumer Sentiment, which by the way, is heavily influenced by how investors feel about the stock market among other things.

Let's see what happens. You can follow our pithy comments on

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Disclaimer: Among other issues the ETF Digest maintains positions in: SPY, MDY, IWM, TNA, QQQQ, QLD,  XLI, XLF, FAS, TBF, GLD, DGP, SLV, DBC, DBA, JJC, BAL, EFA, EEM, EWA, EWJ, EWG, EWT, EWY, EWC, EWZ, RSX, EPI & 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

.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

Dave Fry is founder and publisher of

ETF Digest

, Dave's Daily blog and the best-selling book author of

Create Your Own ETF Hedge Fund, A DIY Strategy for Private Wealth Management

, published by Wiley Finance in 2008. A detailed bio is here:

Dave Fry.

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