Dave's Daily: Down the Down Staircase - TheStreet

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.

January 22, 2010

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DOWN THE DOWN STAIRCASE

The market continues to sell-off sharply.  Earnings news has been strong with results beating estimates.  But that refrain is becoming tiresome -- better to sell the news it seems.

Behind much of this is a fear among investors Bernanke won't be reconfirmed, the Obama bank plan and comments from folks like Barney Frank saying Fannie and Freddie should be abolished.  Politicians need a fall guy (Bernanke/Geithner) and the president now turns to Volcker who had been the forgotten man on the team.

From a technical view we're now short-term oversold; however, the clue this type of decline would happen came from monthly and weekly DeMark 9 readings littering just about every sector of markets in December and January.  These caused us to exit markets and move almost exclusively to cash.  (The chart below is of SPY without current data for yesterday and today)

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Volume is surging and we're almost in a panic stage and breadth came close to a 10/90 to wrap up the week.

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Continue to Major U.S. Markets

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Continue to Major US Sectors & Bonds

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Continue to Currency & Commodity Sectors

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Continue to Overseas Markets

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Continue to Concluding Remarks

You may not agree, but the headline of the day is from Reuters read: "Europe welcomes Obama bank plan, won't imitate it."  And they say imitation is the sincerest form of flattery.

Even though in percentage terms the sell-off is modest, the heavy volume is what impresses.  Fear is rising as the VIX, just getting to start cruising in the "complacency zone" is quickly back up heading toward fear. 

Next week we'll have more earnings and economic data including: Home Sales, Consumer Confidence, Durable Goods, the Chicago PMI and U of Michigan Sentiment.  What's missing?  The FOMC meeting on Wednesday.  What will that bring?  An interest rate increase?  That might stir the animal spirits one way or another.  Rest assured however, Fed governors are watching markets closely.

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

twitter

.

Disclaimer:  Among other issues the ETF Digest maintains positions in: GLD 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

.

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.