What is there on the horizon to prevent the bear market's return? Evidently it's not the new iPhone since most of its whiz-bang features were already known.
The Fed has stopped buying mortgage-backed securities and is looking to start unloading them. Interest rates are about as low as they can get. The government's first time home buyer's credit has expired. There won't be any talk in an election year with polls negative for most politicians of another stimulus package or much about taxes.
The action has shifted to Europe, events in the Middle East and uncertainty regarding economic conditions in China. With markets always forward-looking nothing is looking good.
What's doing well? Bonds and gold, not to mention good old "cash".
Is this a bear market? Not until we fall 20% from the most recent high. Was the previous rally, just a bear market rally? I don't know but the rally was fabulous; but it was similar in percentage gain to the rally following FDR's first 100 days. That's an ominous comparison.
took out February's closing low which is significant. Volume remains light as buyers are on strike while breadth was decidedly negative.
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. Getting oversold but not yet.
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. Markets are still in a neutral range but heading slowly toward oversold levels not seen perhaps since March 2009.
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. Fear is widespread caused by the obvious news and uncertainty.
Continue to Major U.S. Markets
There weren't many strong sectors within the index today except some nibbling here and there. Investors are just in a funk.
MDY & IWM:
Both Mid & and Small caps continue to underperform on down days. Both are near support while IWM clearly has an ominous looking bearish H&S top forming.
It isn't necessarily just a garden variety correction anymore as the downturn is now in the teens.
Continue to U.S. Market Sectors, Selected Stocks & Bonds
AAPL, AMZN, GOOG & RIMM
: The Four Horsemen are stumbling along. I suppose RIMM has fallen out of the group probably but we'll put it here once more for old times sake.
XLF, C, BAC & GS:
Financials are an important component in SPY but they've been a drag lately just moving about in a protracted trading range. They've got the people's money, dressed-up toxic waste on their books and a subpoena here and there just to keep things interesting.
So, industrial condition--critical. Is GE an industrial company or just a conglomerate? You'll find it crossing over to several sectors and dominant in the halls of congress.
XLP & XLV:
When times get tough we all could use some drugs and stuff like soap and deodorant. They used to say--booze, drugs and guns; what more is there?
When materials breakdown this hard it means commodities are weak and demand for raw materials very weak. This was "the tell" from last week.
When Chucky gives up the ghost, you know the parties over and the little rascal is tapped-out.
REITs are in just as much trouble as anything else. The dividend is supportive but that's about it. As for builders, they got to keep selling AND building.
As for transports? I just repeat myself as does the look of the chart.
IEF, TLT & TIP:
This is where the winners are so far this week, but the week is young.
Continue to Currency & Commodity Markets
$USD/DXY, UUP & FXE:
The euro continues its slide. It's not the first time we've seen these levels since nearly 10 years ago it was in the mid-80s. Then traveling to Europe was great as it was for Europeans to sell Bordeaux in the states.
Gold is the alternative to paper money and investors, especially those in Europe, know it. It's also a vote against central bank monetary and government fiscal policies.
We've gone nowhere for over a year now with most commodity indexes. Individual commodities are a different story naturally.
I cling to my belief in this trading range but it's starting to look like a bad bet. Turn loose the Nigerian rebels!!!
XLE, BP & UNG:
There was some early nibbling on energy stocks early but that faded quickly. The bottom picking in BP isn't being rewarding thus far. UNG needs a weekly close > the 22 period MA.
When base metals fail you know industrial production is in trouble. The primary customer is China and manufacturing there may be turning south.
Base metals drag the sector lower.
Overplanting, heavy stock carryover, great weather and a strong dollar hurt agriculture.
Continue to Overseas & Emerging Markets
Europe is being shunned period.
EM's are struggling with commodity prices and are now at support.
Japan is heading down just like every other market.
Exporting raw materials north to China may be slowing down.
There are plenty of bears in Canada but they seem to have them well behaved.
: BRIC's seemed to do better overall than their higher beta would normally indicate. Nevertheless, they're down on the day with everything else.
Continue to Concluding Remarks
Another late day swoon still took place despite BP claiming more oil now being recovered and the new iPhone presentation. Sure markets are starting to get oversold but there's something else troubling markets. It may be the end of Fed and government stimulus, the difficult to quantify troubles in Europe, uncertainty over China's economy and geopolitical troubles ever present in the Middle East. The combination of all these weigh on investors' psyche.
Whatever it is will be known soon enough and hopefully it isn't something terrible because it's that possibility Mr. Market must be sensing.
There aren't any significant economic or earnings reports due Tuesday so in a vacuum perhaps we can get a Turnaround Tuesday.
Let's see what happens. You can follow our pithy comments on
and become a fan of ETF Digest on
Disclaimer: Among other issues the ETF Digest maintains positions in: SH, SDS, SMN, TIP, GLD, UUP, EUO, EFZ and EUM.
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
Dave Fry is founder and publisher of
, Dave's Daily blog and the best-selling book author of
, published by Wiley Finance in 2008. A detailed bio is here: