Ben's Oversold Stick Save: Dave's Daily

Volume was better than recent averages and most are gearing up for more Fed easing.
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Economic news was terrible once again as New Home Sales and Durable Goods whiffed big time at low expectations. Stocks appropriately sold off sharply on the news. But stocks were much oversold short-term as we pointed-out yesterday, and with some POMO (Permanent Open Market Operations) cash from Tuesday settling today, Da Boyz had the ammo they needed to launch a squeeze. Further, the usual suspects (more WS firms) stated the Fed needed to launch another round of quantitative easing more robust than the current limited effort.

There are plenty of reasons to be short clearly. Stocks aren't cheap from our view and future conditions look dreadful. But this won't stop Da Boyz from having a little late summertime fun.

The excuse we here from bulls is that there's some value out there with lots of cash on the sidelines just itching to come in. Again, as this good analysis from

ZeroHedge

offers, the cash on the sidelines theme is nonsense and well offset by debt.

Volume was on the heavy side in two-way action until the HAL 9000s seized the tape and ran with it. Breadth was positive in the end.

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SPY

: Only in the stock market can you make this stuff up especially when computers and easy money are in control.

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MDY & IWM

: These sectors still appear weak despite the short squeeze Wednesday.

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QQQQ & AAPL

: Apple is about to launch another new product rollout thought to be for its iPod September 1

st

. The new gadgetry may link to TV and other entertainment.

Continue to U.S. Sectors, Stocks & Bonds

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XHB, DHI & TOL

: New Home Sales in the toilet but some were so bad that buyers felt they couldn't get even worse so...buy, buy, buy. It's both absurd and laughable. Many must believe the Uncle Sugar belief that before the election in November another "something" will be unveiled to stimulate home sales.

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C, KBE & XLF

: The big story making the rounds today was that Credit Agricole banking analyst Mike Mayo has been frozen out from speaking with Citigroup executives. It seems Mike is being undone by the silly notion that the bank is involved in a grand accounting cover-up and hiding non-performing assets. Gee, I thought they all were doing this. The story is

HERE

at Fox Business with Charlie Gasparino.

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XRT & HD

: It's a surprise that Home Depot is doing so well Wednesday. Earnings news is behind us and they weren't great especially with future guidance. Further with home sales in the dumps overall, what's the incentive to go to Home Depot for consumers? My wife and I went to one store on Saturday which was one of the larger centers and you could hear a pin drop and the parking lot was virtually empty.

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IYT & $BDI

: Transportation ETF looks in bad shape while the Baltic Dry surges ahead--quite a contradiction.

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XLB

: Important materials sector not out of the woods with the robots ignoring them most of the day.

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DVY & IVE

: Value and Dividend ETFs swim in the same sea within which is mostly financials.

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IEF, TLT, TIP, LQD & PFF

: The Treasury sold 5 year new issue today at a yield of 1%. Did you buy some? Does this interest you? Will the Fed then be buying what the Treasury is selling? Keynes on steroids. I'd rather have a CD over a shorter term or higher paying utility stocks/ETFs.

Continue to Currency & Commodity Markets

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$USD/DXY, FXE & FXY

: Currency markets are torn between unrest in the eurozone again and intervention with Bank of Japan trying to keep the yen from rallying too far.

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GLD, SLV & GDX

: All the talk of more quantitative easing is inflationary and not dollar friendly ultimately.

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$WTIC, XLE & FCG

: Quite a dramatic reversal in energy Wednesday caused by markets tagging support on bearish inventory data, hurricanes or quantitative easing which wouldn't be dollar supportive.

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DBB & JJC

: Markets show lack of enthusiasm overall meaning demand is "unusually uncertain".

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DBA & JJG

: Weather markets are impacting grains in particular with rains in Russia helping the winter wheat market. Further, many are reporting bumper crops of corn domestically.

Continue to Overseas Markets & ETFs

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EFA

: Quite an interesting "stick save" Wednesday as shorts were squeezed when markets hit support.

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EEM

: With commodities still being priced flat to lower, EMs find little support.

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EWJ

: Same comment as previously. The weaker yen hurt U.S. holders Wednesday.

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EWA

: Still weak as noted within the chart.

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EWZ

: Just another commodity market.

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RSX

: More commodity based weakness.

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EPI

: India markets not participating with the little countertrend rally in the U.S.

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FXI

: China markets down sharply Wednesday and we're approaching support once again in this frustrating trading range.

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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.

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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.

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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

Wednesday was perhaps more than just an oversold short squeeze. Volume was better than recent averages and most are gearing up for more, not less, Fed easing. This will start with another round of POMO Thursday as scheduled. Perhaps the amount of Treasury's purchased will be greater than before. It does strike the average investor as odd the Fed buying what the Treasury is selling. It is manipulation and Ponzi Scheme in its own way.

Thursday will also bring Jobless Claims. Most estimates are lower than previous so if correct should make for a bullish early headline. It seems  economists are just throwing the same number out there and missing it each time. An engineered beat will help I suppose.

Friday is the GDP number and Bernanke's little talk from Aspen.

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: GLD, DGP, TIP, LQD and EPI.

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

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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.