Stick Save for Bulls: Dave's Daily

Bulls with positions to protect in financial sectors got things going when the SEC revealed the vote count in favor of the civil suit for fraud versus Goldman Sachs.
By Dave Fry ,

Dave's Daily

By Dave Fry, founder and publisher of

ETF Digest

and author of the best-selling book

Create Your Own ETF Hedge Fund.

April 19, 2010

STICK SAVE FOR BULLS

The word came out late in the day the SEC vote to file the civil suit against Goldman Sachs was only 3-2 in favor. This meant to those operating the HAL 9000s, the case against GS was weak enough for the SEC to lose. Let's face it; GS lawyers will spin a jury into mass confusion. Expect a settlement with words admitting no guilt etc. So, the afternoon Buy Program Trading Express left the station with that news and the short-squeeze was on.

Volume fell from Friday's heavy perfect storm of selling most likely exacerbated by options expiration. It's hard to know if Friday's selling was just a one off day due to a confluence of bad news. If that's the case, a drop of little over 100 Dow points was hardly a big deal. Breadth was negative overall per WSJ data below:

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.

Per Investopedia:  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.

Per Investopedia: 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 Major U.S. Markets

Continue to U.S. Market Sectors, Selected Stocks & Bonds

Continue to Currency & Commodity Markets

Continue to Overseas & Emerging Markets

Continue to Concluding Remarks

Bulls with positions to protect in financial sectors definitely got things going when the SEC revealed the vote count in favor of the civil suit for fraud versus Goldman Sachs.  With 2 of 5 voting "no" bulls believe GS will beat the rap with a wrist-slap fine. Perhaps Friday was a "one-off" day given all that had taken place. But today saw much lighter volume and breadth focused on financials versus other sectors. So the markets are not out of the woods yet.

We sold some positions based on weekly DeMark sequential 9 counts as shown below for SPY.  Usually this will indicate a pause for the previous trend. Unfortunately you generally have to wait the week out and Friday's large sell-off wasn't helpful in making the most of this bullish trend. Not every indicator is right all the time. You'll note the previous 9 in the chart below from December which did well in predicting at least a shallow correction. It's important to note that charts from all major market sectors showed this presentation. That is usually powerful. The last time DeMark weekly sequential 9 counts were steamrolled was during the dot.com boom when few indicators, much less any common sense, prevailed or were effective.

Tuesday will present little in the way of economic data but plenty of earnings reports from important companies like A.O Smith, Coca-Cola, Eaton, Goldman Sachs, Illinois Tool, Cree, Apple and so forth.  It should be interesting.

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: MDY, MVV, VTI, BGU, QQQQ, IWM, TNA, DYY, DBB, BDD, EFA, DZK, and EEM.

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

.

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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