Dave's Daily

By Dave Fry, founder and publisher of

ETF Digest

January 12, 2010

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COMPLACENCY KILLS

It's always ironic when you write a piece suggesting that something dramatic was needed to knock bulls down you get something odd like Alcoa that does the trick.  Why odd?  Alcoa always has complex earnings results that defy dissection.  The bottom line is the street didn't like the results, and with markets much overbought it doesn't take much sometimes to cause reversals.  Add-in China's decision to restrict lending to curb speculation and inflation (Gasp!  I thought there wasn't any) and this made matters worse.

Tuesday wasn't a disaster unless you were in the commodity pits and long as things turned around significantly. 

In this latest bull-run volume always picks-up on down days and Tuesday was no exception.  Breadth was as negative as you'd expect with WSJ details below:

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Continue to Major U.S. Markets

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Continue to Major US Market Sectors

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Continue to US Market Sectors & Bonds

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Continue on to Currency & Commodity Markets

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Continue to Overseas Markets

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Continue to Concluding Remarks

Tuesday wasn't a disaster clearly and bad news sometimes has a logical reaction not often seen lately.  Clearly market PEs are historically high but bulls have made the bet that earnings will come through and this thinking is baked-into prices.  When earnings fail to impress and other news is negative the combination causes a reversal. 

Alcoa was the first to roll-out earnings and hundreds more will follow in short order.  Many are looking forward to Thursday's Intel report and JP Morgan's on Friday. 

Let's see what happens and you can follow our pithy comments on

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Disclaimer:  Among other issues the ETF Digest maintains positions in: VTI, XLY, XLI, UYM, UXI, FAS, GLD, DBC, XME, PBW, SEA, EWJ and EFA.

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.