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Down in the Dumps Street: Dave's Daily

Is Wall Street now Dump Street? It could happen.
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Is Wall Street now Dump Street? It could happen. Just remember, with volume still light overall (even though heavier on selling) the bulls still linger in the weeds ready to squeeze summer bears. There remains little in the way of good news to comment. Perhaps we're getting a little short-term oversold (check the NYMO at the end of this commentary) making any spark of good news unleash the animal spirits once again. Retail Sales? Consumer Sentiment? Friday the 13

th

!  A Chucky the Consumer you can't kill sequel? How appropriate!

Jobless Claims continued to disappoint missing consensus estimates by nearly 20K for the second straight week and Continuing Claims still are crawling along the ocean floor along with BP's mess.

TST Recommends

Cisco's revenue miss was a disappointment and added fuel to an early selloff. In this environment, everything must be perfect.

Volume was running about the same as over the past few sell-off days but still higher than on previous positive days. Breadth continues to be negative.

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SPY:

The 50 day MA was lost and the weekly charts look like the previous rally was false.

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MDY & IWM

: Those ETFs beneath the majors are taking a bigger hit. This is not uncommon when economic data sucks.

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QQQQ:

Tech gets socked by semis and Oracle. And we'll take another look below.

Continue to U.S. Sectors, Stocks & Bonds

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IGV, ORCL & MSFT

: Software was led lower by a sharp drop in CSCO with a disappointing report while MSFT has become a utility with little dividend. It's the latter issue that seems the most troubling.

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SMH & INTC

: Semis, the heart of tech, are also on Dump Street.

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BAC & XLF

: Financials seem especially weaker from a variety of views.

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XLB

: Are the seeds of life for economic and industrial growth. Things look a little shaky right now.

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XRT & XLY

: Why the optimism here? Back to school buying in the works? I don't see it but we'll know more tomorrow if our little friend Chucky is on the prowl.

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IEF, TLT, TIP, LQD, BWX & MUB

: Bond markets seem a little shakier this week while the muni market continues on a tear even with many broke.

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PFF

: Higher yields in preferred ETFs but just remember these are mostly financials.

Continue to Currency & Commodity Markets

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USD, DXY, FXE & FXY

: The dollar rally is as abrupt as stock sell-off. Once again we seem locked into the pattern of a falling dollar as good for stocks while the opposite when rising.

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GLD

: Gold is the answer for many as an alternative to bonds and stocks. The rise in gold demonstrates a severe level of distrust in the financial system and economy.

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DBC

: Energy markets dominate the weightings in most commodity tracking funds so as it goes so too DBC and others.

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$WTIC & XLE

: Energy markets going down with global economic growth--end of story.

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DBB & JJC

: Base metals are suffering from doubts over global economic demand.

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XME & FCX

: Base metals producers and miners also suffer which is no surprise.

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DBA & JJG

: The volatility in grain markets is extraordinary which is common in weather markets. Further crop reports from the U.S. were a little light and so prices reversed dramatically.

Continue to Overseas Markets & ETFs

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EFA

: European markets, and even bonds, have sharply reversed course from the sanguine attitudes of the previous two weeks.

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EEM

: Just going down with the general market and hurt more with declining commodity prices.

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EWJ

: Same comment as yesterday.

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EWY

: The same comment from yesterday and the chart is unchanged.

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EWA

: Australia is dependent on higher commodity prices and exports to China and beyond. Hesitancy here is understandable.

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EWC

: Is just in the same boat as Australia.

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EWZ

: The tight range from yesterday persists on commodity weakness.

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RSX

: I apologize for the same charts and comments but they are what they are.

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EPI

: The trading range continues.

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FXI

: A tiresome one year plus 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

Bulls at least kept things orderly not allowing the bottom to fall out of markets. The signs have been clear about the economy but murky regarding stock and bond markets with the ongoing punchbowl benefit. But, now it seems poor economic data is beginning to take a toll which seems logical from a forward-looking perspective. This is why, for example, a company like Cisco would give a cautionary at best outlook. Yes, companies have cut payrolls, sold bonds and bought back stock. This has been a combination of financial engineering and human misery. So, if Mr. Market is forward-looking as we're told he shouldn't like much going forward.

We still carry heavy cash positions and waded in on Monday with positions we were loathe to take given light volumes. But, in we went and our visit overall was brief. Now we're possibly heading toward the dark side in a big way as short-selling opportunities are becoming present. Either way, it won't be a smooth ride and never is.

Retail Sales and Consumer Sentiment are on tap for Friday the 13

th

. Perhaps our little friend Chucky the Consumer will get his sequel tomorrow. It's been amazing to view retail and consumer sectors be as resilient as they've been given housing and unemployment issues.

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: FAZ, TZA, GLD, DGP, DBC, UDN, FXE, DBC, EEM, EWZ, EPI and FXI.

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.