NEW YORK (ETF Digest) -- There are plenty of Black Swans to trip up markets and bulls. Some are known (eurozone, Iran, China economic contraction, a purge in China, North Korea, Syria's non cease fire fighting, oil, currency wars and so forth) and are hovering over investors. Bulls would like to see them as nonthreatening, but then they come back to haunt them like tar balls bobbing to the surface in the Gulf.

Bulls might argue that a correction was due after outsized first quarter gains. They appear to be right for now unless current selling builds on current declines. One thing is clear; equities are short-term oversold so a bounce could occur at any time. Nevertheless stocks were sold hard most of the day with few leading the way lower as selling was widespread.

They may not get much help from earnings since outlooks have been cut sufficiently which paradoxically could lead to beats. All this will start with Alcoa (AA) earnings which are usually a complex mess to understand anyway. AA earnings beat estimates which shouldn't surprise given all their warnings and lowered estimates by analysts. This is typical for many companies: give terrible guidance, see analysts' lower expectations and then beat on the news.

Gold (GLD) rallied sharply as worries about the eurozone (IEV) and other global risks intensified. Oil (USO) prices were weak, the dollar (UUP) was mixed and bonds rallied sharply.

The eurozone debt issues are widespread with Spain (EWP), Italy (EWI) and Greece (GREK) once again taking center stage. The Financial Times came across a

leaked memo

outlining much of the regions troubles as noted. The IMF remains a component here and U.S. taxpayers could be asked to pony-up more money. The average American hardly knows anything about U.S. commitments to the IMF or even what the acronym stands for. Is it a new Apple app?

Volume picked-up sharply as investors headed for the exits exacerbating the flight from equity markets. Breadth per the WSJ was close to a 10/90 day.

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SPY - The SPDR® S&P 500® ETF is a fund that, before expenses, generally corresponds to the price and yield performance of the S&P 500 Index. Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs.

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IWM - The

iShares

Russell 2000 Index Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the small capitalization sector of the U.S. equity market as represented by the Russell 2000 Index. The index represents the approximately 2,000 smallest companies in the Russell 3000 Index.

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QQQ -

PowerShares

Capital Management LLC is passionate about our goal of delivering the highest quality investment management available through one of the more benefit-rich investment vehicles ever created, the exchange-traded

fund. PowerShares

QQQ¿, formerly known as "QQQ" or the "NASDAQ- 100 Index Tracking Stock®", is an exchange-traded fund based on the Nasdaq-100 Index®. The Fund will, under most circumstances, consists of all of stocks in the Index. The Index includes 100 of the largest domestic and international nonfinancial companies listed on the

Nasdaq

Stock Market based on market capitalization. The portfolio is rebalanced quarterly and reconstituted annually.

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

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XLK - The Technology Select Sector SPDR® Fund, before expenses, seeks to closely match the returns and characteristics of the Technology Select Sector Index (ticker: IXT). Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs.

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XLB - The Materials Select Sector SPDR® Fund, before expenses, seeks to closely match the returns and characteristics of the Materials Select Sector Index. Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs.

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XRT - The SPDR® S&P® Retail ETF seeks to replicate as closely as possible, before expenses, the total return performance of the S&P Retail Select Industry® Index. Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs.

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XLF - The Financial Select Sector SPDR® Fund, before expenses, seeks to closely match the returns and characteristics of the Financial Select Sector Index. Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs.

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XLP - The Consumer Staples Select Sector SPDR® Fund, before expenses, seeks to closely match the returns and characteristics of the Consumer Staples Select Sector Index. Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs.

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ITB - The iShares Dow Jones U.S. Home Construction Index Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Dow Jones U.S. Select Home Construction Index.

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IYR - The iShares Dow Jones U.S. Real Estate Index Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, to the performance of the real estate sector of the U.S. equity market, as represented by the Dow Jones U.S. Real Estate Index.

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IEF - The

iShares

Barclays 7-10 Year Treasury Bond Fund seeks to approximate the total rate of return of the intermediate-term sector of the United States Treasury market as defined by the Barclays Capital U.S. 7-10 Year Treasury Bond Index.

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TLT - The

iShares

Barclays 20+ Year Treasury Bond Fund seeks to approximate the total rate of return of the long-term sector of the United States Treasury market as defined by the Barclays Capital U.S. 20+ Year Treasury Bond Index.

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HYG - The iShares

iBoxx

$ Investment Grade Corporate Bond Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the corporate bond market as defined by the

iBoxx

$ Liquid Investment Grade Index.

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Continue to Currency & Commodity Market ETFs

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UUP - The

PowerShares

DB US Dollar Bullish Fund (Symbol: UUP) is based on the Deutsche Bank Long US Dollar Index (USDX®) Futures Index¿ (DB Long USD Futures Index). The Index, which is managed by DB Commodity Services LLC, is a rules-based index composed solely of long USDX® futures contracts.

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FXE -

CurrencyShares

Euro Trust is designed to track the price of the euro net of Trust expenses, which are expected to be paid from interest earned on the deposited

euros

.

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FXY - CurrencyShares Japanese Yen Trust is designed to track the price of the Japanese Yen net of Trust expenses, which are expected to be paid from interest earned on the deposited Japanese Yen.

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FXA - CurrencyShares Australian Dollar Trust is designed to track the price of the Australian Dollar net of Trust expenses, which are expected to be paid from interest earned on the deposited Australian Dollars.

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GLD - The objective of the SPDR® Gold Trust¿ is for the Shares to reflect the performance of the price of gold bullion, less the Trust's expenses.

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GDX - The Gold Miners ETF seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the NYSE

Arca

Gold Miners Index. The Index provides exposure to publicly traded companies worldwide involved primarily in the mining for gold, representing a diversified blend of small-, mid- and large- capitalization stocks. As such, the Fund is subject to the risks of investing in this sector.

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SLV - The objective of the

iShares

Silver Trust is for the value of the shares of the

iShares

Silver Trust to reflect, at any given time, the price of silver owned by the

iShares

Silver Trust at that time, less the

iShares

Silver Trust's expenses and liabilities.

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DBB - The

PowerShares

DB Base Metals Fund (Fund) is based on the Deutsche Bank Liquid Commodity Index - Optimum Yield Industrial Metals Excess Return¿ (Index) and managed by DB Commodity Services LLC. The Index is a rules-based index composed of futures contracts on some of the most liquid and widely used base metals - aluminum, zinc and copper (grade A). The index is intended to reflect the performance of the industrial metals sector. You cannot invest directly in an index. Ordinary brokerage commissions apply.

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JJC - The Dow Jones-UBS Copper

Subindex

Total

ReturnService

Mark is a sub-index of the Dow Jones-UBS Commodity Index Total

ReturnService

Mark and reflects the returns that are potentially available through an unleveraged investment in the futures contracts on physical commodities comprising the index plus the rate of interest that could be earned on cash collateral invested in specified Treasury Bills.

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USO - The United States Oil Fund, LP ("USO") is a domestic exchange traded security designed to track the movements of light, sweet crude oil ("West Texas Intermediate").

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UGA - The United States Gasoline Fund LP (UGA) is an exchange traded security that is designed to track in percentage terms the movements of gasoline prices.

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XLE - The Energy Select Sector SPDR® Fund, before expenses, seeks to closely match the returns and characteristics of the Energy Select Sector Index. Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs.

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DBA - The

PowerShares

DB Agriculture Fund is based on the Deutsche Bank Liquid Commodity Index Diversified Agriculture Excess Return¿ and managed by DB Commodity Services LLC. The Index is a rules-based index composed of futures contracts on some of the most liquid and widely traded agricultural commodities. The Index is intended to reflect the performance of the agricultural sector. You cannot invest directly in the Index. Ordinary brokerage commissions apply.

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Continue to Overseas Sectors & ETFs

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EFA - The

iShares

MSCI EAFE Index Fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in the European, Australasian and Far Eastern markets, as measured by the MSCI EAFE Index.

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IEV - The iShares S&P Europe 350 Index Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of 350 stocks providing geographic and economic diversity over 10 market sectors, as represented by the Standard & Poor's Europe 350 Index.

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EEM - The

iShares

MSCI Emerging Markets Index Fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in emerging markets, as represented by the MSCI Emerging Markets Index.

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EWJ - The

iShares

MSCI Japan Index Fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in the Japanese market, as measured by the MSCI Japan Index.

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EWG - The

iShares

MSCI Germany Index Fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in the German market, as measured by the MSCI Germany Index.

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EWC - The

iShares

MSCI Canada Index Fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in the Canadian market, as measured by the MSCI Canada Index.

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EWZ - The

iShares

MSCI Brazil Index Fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in the Brazilian market, as measured by the MSCI Brazil Index.

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RSX - The Russia ETF seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the

DAXglobal

® Russia+ Index. The Index provides exposure to publicly traded companies that are domiciled in Russia, and traded in Russia and/or on leading global exchanges. As such, the Fund is subject to the risks of investing in this country.

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EPI -

WisdomTree

India Earnings Fund seeks investment results that correspond to the price and yield performance, before fees and expenses, of the

WisdomTree

India Earnings Index.

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FXI - The

iShares

FTSE China 25 Index Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the FTSE China 25 Index.

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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

We're much too oversold for shorting based on the NYMO yet the VIX, while rising, has a long way to go to reach fear levels.

The Alcoa report was nothing if not humorous. They've been talking this quarter's report down for so long analysts were sucked-in. Now they beat much reduced forecasts causing a short squeeze in afterhours trading.

The Fed's Beige Book is due at 2 PM and that may be the catalyst to rally. Fed governors are still in full campaign mode including Wednesday's Lockhart, George, Rosengren, Bullard and Yellen. They want their policies to be rewarded by higher stock prices since egos are at stake.

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: 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.

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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