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Markets rallied sharply on little hard news Monday beyond rumors. The rally boiled down to one thing: markets were oversold. (I pointed this out in the $NYMO (McClellan Oscillator) on Wednesday and again Friday.)

Sure, headlines had it another euro zone fix was rumored to be close but there wasn't any hard news to support this. In fact, most of the news there was negative with Germany's Finance Minister Schaeuble stated that the country would not accept any

euro bonds in any form whatsoever

. Later it was reported

France and Germany were prepared to take drastic action

while the

IMF was rumored to be drafting an $800 billion bailout plan

for Spain and Italy. And, if the IMF is "in" then so is the U.S. with another large bailout given its large IMF commitment, and so it goes. 

A classic chart well-demonstrates that Europe is quickly heading to recession as noted below:

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Britain is worried eurozone issues will

drag Britain into recession

and bailouts as well.

It was expected that short interest in U.S. markets would be high; thereby reinforcing a massive short squeeze but it turns out via the NYSE that short interest was falling.

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Most of the so-called good news was Black Friday was a big success for retailers making bulls giddy consumers will be buying like crazed shoppers this year. That remains to be seen.

So, we turn back to the $NYMO as presented before today's closing calculation as we saw it Friday--much oversold.

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Stocks leapt higher on this enthusiasm which may only see follow-through if economic data the rest of the week is positive, the euro is saved again and bulls push the seasonal rally theme. Another notion was if the Bush era tax rates rise then the Fed will be forced to QE3 and that would be bullish in the short-term should it occur. And speaking of the Fed and lost in the bullish enthusiasm, was this disgusting release of how

secret Fed loans helped banks net $13 billion in profits.

The dollar fell, commodities rallied, bonds sold-off as stocks rose sharply reversing much of the previous week's losses. There wasn't any particular market leadership beyond sectors with the highest betas and most oversold.

You can't make any of this stuff up but there it is...but wait...there's more!

BREAKING: Fitch puts negative outlook on U.S. credit rating. Rumor: S&P to put France on negative outlook in 10 days. Um, so there's time then? FACT:

Obama tells Europeans to take decisive action on debt

...seriously?

Volume was modest given the magnitude of the rally while breadth per the WSJ (90/10 on volume) was quite positive breaking short-term oversold conditions.

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Continue to U.S. Sector, Stocks & Bond ETFs

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Continue to Currency & Commodity Market ETFs

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Continue to Overseas Sectors & ETFs

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'

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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

You're still seeing plenty of mixed signals from the $VIX, $NYSI and $NYMO. This indicates how unstable and volatile markets are.

Consumers are shopping but Black Friday may have seen them shoot their wad. Cyber Monday is seeing a 20% increase in sales but one wonders what the profit margins will be.

It was an impressive rally Monday although it lacked meaningful news and volume. The euro zone is still the main driver of events and I suspect there will be more events shortly emanating from the region daily.

Tuesday will feature more from the euro zone and economic data from the U.S. like Consumer Confidence and the Case-Shiller Home Price Index.

Let's see what happens.

Disclaimer: The ETF Digest maintains active ETF trading portfolio and a wide selection of ETFs away from portfolios in an independent listing. Current positions if any are embedded within charts. Our Lazy & Hedged Lazy Portfolios maintain the follow positions: VT, MGV, BND, BSV, VGT, VWO, VNO, IAU, DJCI, DJP, VMBS, VIG, ILF, EWA, IEV, EWC, EWJ, EWG, EWU, EWD, GXG, THD, AFK, BRAQ, CHIQ, TUR, & VNM.

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

.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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.