Markets were higher early on follow-through momentum from rallies Thursday and Friday but gave up later in the day after a Greek downgrade. Why would a Greek downgrade at this time spook markets? Didn't anyone with authority over trading other people's money know this was likely?
Now I was out most of the day and didn't return until things were rapidly heading south. Materials and energy were leading stock markets lower which really has little to do with Greece directly anyway. Further, the euro held on to most of its gains which was odd given the news.
Volume was once again light making it easy for manipulators to push things around. Breadth was mildly positive perhaps even pushing conditions close to short-term overbought.
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. Close to being overbought.
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. The Summation Index is starting to turn back up.
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. Fear is abating but it's only Monday.
Continue to Major U.S. Markets
This wasn't what bulls were expecting that's for sure. Light volume is a two-edged sword which can push things in your favor or not. It's especially lethal in trading range environments. You'll note in the 5 minute chart most of the volume exhibited came after the Greek downgrade. Further, the daily chart shows markets hitting resistance we've outlined here for some time now. The weekly chart still reflects the potential for a bearish H&S top.
MDY & IWM:
Mid and Smallcaps both exhibited better overall performance than their big brother but still faded at resistance.
Tech remains the steadiest performer since it's less volatile than other major sectors.
Continue to U.S. Market Sectors, Selected Stocks & Bonds
XLF, KBE, JPM, BAC, GS:
Financials were weaker with ideas of financial reform floating through the halls of congress. One also should wonder about the exposure some banks have to eurozone debt.
Well, you'd know just when we'd get stopped out of our short position it would go lower once again. Bad luck? No, it's what light volume will do to you.
I'm not sure what to make of this sector since, well, I'll be honest, I don't get it! High unemployment, housing still in a funk and poor retail sales data makes you wonder why consumers are on a spending binge.
So maybe folks are renting now in lieu of buying. That would keep the rents flowing but what about the commercial sector where $1.3 trillion in loans must be repaid or rolled-over. Not to worry for now evidently.
IEF & TLT:
Bonds just cruised along today with few worries despite the continuing flow of auctions on tap.
Continue to Currency & Commodity Markets
$USD/DXY & FXE:
The euro rallies as Greek is downgraded? That's rather strange don't you think which makes me wonder if there was more intervention.
Gold just cruised through the day without much fanfare. It remains a fixture in most portfolios as insurance against many bad outcomes and events globally.
Commodity tracking indexes were boring overall today.
Crude is up with the dollar being down is really all you can make of it.
Energy stocks bore the brunt of hearings in Washington with BP taking most of the flack understandably.
More importantly, base metals continue to rise despite Greek worries.
A weaker dollar and stronger "softs" (coffee, cocoa and sugar) lead markets higher.
Continue to Overseas & Emerging Markets
Despite Greek downgrade EFA did okay but you can see it's right on resistance.
Flat on the day after all was said and done.
Brazil is at resistance overall and we fell away today despite stronger commodities overall.
In a one year trading range and this is pretty frustrating for most investors.
Continue to Concluding Remarks
We got good bullish follow-through from last Thursday and Friday early but as the Greek situation resurfaced once again things just fell apart. Even Stewie was annoyed.
Remember, there are serious IPOs to get done this week especially with the CBOE coming to market. GS is the lead manager and some rumors were circulating they were in the S&P futures pit buying to prop markets on Thursday and perhaps again late Friday. It isn't uncommon for this kind of stuff to happen when you want to place a lucrative underwriting deal. The syndicate will get together and support the market as best they can. With volume light, and big fees on the line, it wouldn't be a surprise. In fact, GS is the lead underwriter for 4 of 5 IPOs this week as per Briefing.com.
The euro rallied today but with the Greek situation you have to wonder why it did sans some intervention.
We were a little late getting our act together for posting today so the commentary and charts are brief. Thankfully markets cooperated in this regard.
The important data tomorrow is the Empire Manufacturing Survey before the market opens.
Remember, it's Quad-Witching this week so by Thursday and Friday things could get pretty weird.
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: EUO, UUP, GLD, EFZ and EUM.
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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