Euro Stress Tests A Snap!: Dave's Daily

If traders want to accept the eurozone stress tests as valid then that's what they'll do.
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It's pretty sad when so-called "stress tests" pass with flying colors. After all the toxic waste eurozone banks were sitting on weren't a part of this test. All that was being evaluated were tradable government bonds. Even then some banks failed--perhaps they just didn't turn in results on time.

It really doesn't matter since bulls have a firm grip on the tape. The eurozone results just gave bulls the opportunity to focus on earnings results and buy more stocks. It's a market where too much thinking and logic will put you behind the eight ball fast.

We're having a seasonal rally based on good earnings results while completely ignoring poor economic data and the eurozone joke.

Earnings that beat estimates Friday came from important market leaders like MCD, F, AXP and IR for example while AMZN results were disappointing.

Volume remains below average despite some last minute manipulation to get the DJIA close above 100 points and the 200 day moving average. This is the headline market main street watches. Breadth was quite positive.

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Continue to Major U.S. Markets

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SPY:

The bulls own the tape now since little can throw them off stride. Not poor forward-looking economic data or Bernanke's tepid remarks.

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MDY & IWM:

Both Mid and Small-Caps showed their higher beta by outperforming on the upside.

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QQQQ:

Tech is still the more consistent market leader despite AMZN.

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

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SMH, AAPL & AMZN

: Tech stocks and semi's in the news Friday.

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AXP & XLF:

Financials went with bulls and were helped mightily by AXP's results.

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IR & XLI:

Industrials broke through resistance helped by results from companies like IR.

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XLB:

Materials had a powerful week although still in the range. Next week DD is up with results.

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XLY & F:

It's odd that F is in Consumer Discretionary since you don't buy a car every week.

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IYR:

REITs move higher with stocks and it is hard to understand frankly since you have to disbelieve economic data is forward-looking.

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IYT:

Transportation sector is going with the flow literally. Next week we'll see Norfolk Southern's earnings.

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IEF & TLT:

Stock rally takes some luster out of bonds.

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LQD:

Individual investors are pouring money into corporate bonds. The street says they're always wrong. We'll see.

Continue to Currency & Commodity Markets

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$USD/DXY, FXE, ULE & FXY:

Ah, those bank stress tests in the eurozone were a relief for traders but not a victory for honesty.

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GLD:

Gold down, Euro up? Back to that are we? It also could be argued that "risk trades" are back in vogue.

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DBC:

Energy markets finish the week on an up-note along with base metals.

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$WTIC/CRUDE OIL & XLE:

The Energy Sector ETF has been a volatile market while crude oil remains in a trading range.

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DBB:

Base metals finish off a great week and now heading to the next level of resistance.

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XME:

Miners roar higher with stocks and the metals.

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DBA:

Still in a trading range despite recent moves to the upside for agricultural products.

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MOO:

Ag stocks move higher with overall market.

Continue to Overseas & Emerging Markets

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EFA:

European stocks rise with good readings from Germany and phony stress tests.

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EEM:

Same story with EM's--at resistance.

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EWJ:

Trading range.

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EWY:

Samsung has the Apple chip business so things should go well despite silly war games.

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EWA:

Aussie stocks doing well but right at resistance.

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EWC:

Canada moving higher with natural resource prices.

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EWZ:

Brazil stocks breaking out with base metals and perceived coal demand from China.

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RSX:

Russian stocks moving higher with natural resources.

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EPI:

Same comment as yesterday.

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FXI:

On the one hand the government is tightening and insists it's not going to ease, but investors don't believe them.

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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

The tape is the tape. If traders want to accept the eurozone stress tests as valid then that's what they'll do.

This was a great week for bulls without question. The rally wasn't even much of a battle between good earnings and bad economic data. Bulls chose to ignore the latter and accentuate the positive. Besides, the punchbowl is still there and stock managers have little choice but to buy considering the low yields elsewhere.

We're still mostly on the sidelines but if our system says go, we'll go no matter emotional views in the other direction.

We'll have plenty more in the way of earnings and economic data. Seasonally, this has generally been a good time for stock investors and July is proving the point.

Have a great weekend!

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Disclaimer: Among other issues the ETF Digest maintains positions in: GLD, UDN and ULE.

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

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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.