Ctrl DOW Delete: Dave's Daily

With the Dow down 900 points or so, I guess this was a buying opportunity for those in the know and with the guts to do it. Frankly, who's to say?
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It was a simple mistake according to

CNBC

that will surely lead to months of congressional hearings and SEC mandated "Computers for Dummies" classes. Stocks were heading south and, as the story goes, someone entered an order for billions in lieu of millions. Then the High Frequency Trading algos kicked-in exacerbating the situation. You'd think these computers would have some kind of governor on them to prevent such occurrences.

So, with the

DOW

down 900 points or so, I guess this was a buying opportunity for those in the know and with the guts to do it. Frankly, who's to say? The bottom line for me is Main Street won't like this and it will only deepen their distrust of all things Wall Street and keep markets a trading desk and hedge fund affair it's been.

Yesterday we posted a few charts with DeMark Indicators that reliably tell us a trend change, or at least trend exhaustion, was ahead. While not precise to the percent, these dominated many important markets given them added dependability.

Of course, all of this selling is the result of fear from Europe and stocks being much overbought as we've been discussing for weeks. The latter is no longer the case but protesters in Greece are being killed with violence potentially spreading to other countries where cuts must be made. The debt burden globally, including the U.S., is at ridiculous and unsustainable levels.

Suffice it to say, volume was extraordinarily heavy and breadth exceeded 90% to the negative.

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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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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.

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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

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OMG!

CNBC

states it was a

Citigroup (C)

trading room "accident" It's not like somebody barfed on the keyboard but maybe Citigroup has some government interns working the HAL 9000s. Since the company is in great part taxpayer owned it's not out of the question bureaucrats are running the trading desks.

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SPY

perhaps inadvertently tagged previous support around $105 and then rapidly advanced. These markets have been overbought for months and something had to give. Is there more to go? You'll hear plenty of soothing and encouraging words from TPTB overnight.  But for our money, the DeMark 9's told the tale. Now getting back in is another story and which way--short or long?

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Look for

MDY

buyers to emerge here since the damage hasn't been serious unless of course you got stopped out today.

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IWM

is just resting on support so small-caps seem okay despite 6% slide.  That's seems "okay" to you no?

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QQQQ

and tech held up reasonably well despite the carnage although it too has been subject to DeMark 9 count signals.

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

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AAPL

sank to $200 and you might thing there were open orders to buy at that price. Some of this buying would have been options related no doubt.

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PG

(Proctor & Gamble) is the celebrated stock where a trade error was reportedly made. The chart above is scrunched-up enough to see how dramatic the trade affected the stock.

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XLF

(Financials) no doubt just went along for the ride today. Banks have been under pressure given financial reform efforts and what it might mean. Uncertainty is bad.

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KBE

(Banks) are living the good life with the steep yield curve, trading profits (maybe not today) and TARP. End of story.

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XLY

(Consumer Discretionary) went with the crowd but actually should have done worse given the poor store sales data released today. But who cares about the news?

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XLB

(Materials) were weaker previously as companies fret about forward demand particularly from China.

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IYR

(REITs) made an amazing recovery today and even managed to close above previous support levels despite the large intraweek swing. There's still M&A action within the sector keeping open market bids operative.

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IYT

(Transports) had a day like most others where it tested support but rallied to stay in the zone for now.

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IEF

(10-year Treasury Bonds),

TLT

(30-year Treasury Bonds) &

TBT

(Leveraged Inverse 20-30 year Treasury) all saw heavy action with the first meeting with safe haven buying but the latter a "get me out" short squeeze.

Continue to Currency & Commodity Markets

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DXY/USD/UUP

(US Dollar Index),

FXY

(Yen) &

FXE

(Euro) are all in play.  Uncle Buck is rallying with a flight to safety or "the best house in a bad neighborhood" idea. Meanwhile, traders are playing the cross rate with the euro/yen. Fast markets to be sure.

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GLD

(Gold) &

DGP

(Leveraged Gold) a safe haven includes Uncle Buck, bonds and gold...and "cash" of course.

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DBC

(DB Commodity Tracking) reflects no desire by investors to be involved in this sector where demand, especially over 50% weighted by energy, is uncertain.

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Oil (

USL/USO

) markets, and energy as a whole, hit the commodity skids as demand remains questionable as indicated previously.

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XLE

(Energy ETF) defies gravity once again by hanging onto support. XLE, like so many others, collapsed sharply but reclaimed important support levels.

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DBB

(Base Metals) are being hurt by a perceived lack of demand.  Dr. Copper is represented as a third of DBB and is usually a reliable indicator of future economic activity.

Continue to Overseas & Emerging Markets

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EFA

(EAFE ETF),

IEV

(Europe 350 ETF) &

EPV

(ProShares Leveraged Short ETF) tell the tale well about where the main negatives reside.  Using the leveraged version over a short period is what the good folks at ProShares have offered investors.

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EEM

(Emerging Market ETF) is a popular ETF where much money has flowed over the past year. It's worth remembering that there's more volatility in both directions when you're involved here.

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EWA

(Australia ETF) is a base metals casualty primarily; but, it's interesting how many markets have held at support.

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EWZ

(Brazil ETF) &

BZQ

(ProShares Leveraged Short Brazil ETF) were in full play today and again support held for the former.

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EPI

(India ETF) clearly has a very bad data point that probably is correct given the amazing amount of bad trades today.  But, again, here's another market where support held at least for now.

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FXI

(FTSE Xinhua 25 ETF) &

FXP

(ProShares leveraged inverse ETF)

Represent what's going on in China. The Shanghai CSI 300 (we're short) was hit hard last night so it follows that some spillover would occur with FXI/FXP.

Continue to Concluding Remarks

Citigroup is denying it is involved in the mistaken trade. I still think some bureaucrat interning at Citigroup probably did something since government workers don't know the difference between millions and billions.  Just kiddin'? 

There will certainly be an investigation and our brilliant congress representatives will showboat an investigation; however, they know nothing about how anything works in trading operations.

You can see the negative beat goes on in After Hours trading per MarketWatch below:

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Friday brings us important unemployment data and that might change things dramatically.

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

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By Dave Fry, founder and publisher of

ETF Digest

and author of the best-selling book

Create Your Own ETF Hedge Fund.

Disclaimer: Among other issues the ETF Digest maintains positions in: MDY, IWM, QQQQ, XLE, GLD, DGP, UUP, YCS, EPV, BGQ and FXP.

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.