Reversal of Fortune: Dave's Daily
REVERSAL OF FORTUNE
Just like I said yesterday regarding silver and precious metals generally, "I'd advise caution." We had a modest dollar rally Tuesday on the belief that tax cuts would cause bond yields to rise making Bucky more attractive. In turn, this proved enough to trigger stops and selling in most commodity markets which love lower interest rates and a weaker dollar.
Sometimes it seems like whatever image we post here is reversed sharply the next day. Anyway, that's the perils of posting.
Most markets opened sharply higher Tuesday only to be met by a "sell the news" mentality on the tax extension and Citigroup sale by the government. Even another round of
was no help.
As an aside, if yield is your desire you might checkout
our podcast/video on EMLC
(Van Eck Emerging Markets Local Currency Bond ETF) with Ed Lopez, Van Eck's Marketing Director.
Volume doubled the pathetically low level Monday and breadth remained slightly positive to mixed.
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
Monday with ultra-light volume and soaring commodity prices felt sort of phony. The news Tuesday was really positive for markets overall until bonds fell sharply and Bucky rallied. Some early "sell the news" trades snuffed out the rally and when, with markets still higher, the afternoon buy program express triggered stops and selling gained momentum.
Commodity markets don't like higher interest rates and that's what we're seeing despite the Fed's actions. It's sort of a Bernanke meets Bond Vigilantes script. The former may be buying bonds but in the trading pits they're selling. This is an interesting test for the Fed.
Wednesday we do get some economic data including crude inventories which will be important given bulls expect a drawdown of stockpiles.
Lastly it's the anniversary of the attack on Pearl Harbor and being a former 35 year resident of Hawaii it has more meaning to me than perhaps others.
Below is the National Cemetery of the Pacific at Punchbowl Crater. It's a beautiful and peaceful place above downtown Honolulu.
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, XLF, FAS, XLI, TBF, GLD, DGP, SLV, AGQ, DBC, DBA, JJC, SGG, EFA, EEM, EWA, EWJ, EWY, EWC, EWZ, ILF, LBJ, 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
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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
, 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.