Kim's Hissy Fit Hits Markets: Dave's Daily
The little man in North Korea needs attention and perhaps money so he launches a few missiles for effect.
Elsewhere, doubts remain regarding European bailouts as if anyone were surprised. Evidently, even German Chancellor Merkel stated: "We're in an extraordinarily serious situation as far as the situation of the euro is concerned."
The third strike were raids and subpoenas on hedge funds and possibly some mutual funds regarding insider trading investigations. I'm shocked! It's like the line from Casablanca: "I'm shocked, shocked there's gambling going on in here!"
So markets took a beating today -- some more than others. We're invested but hedged so it's hard to make sense of conditions going forward as daily direction is confusing and volatility has increased.
A broad array of DeMark 9's generally indicate a correction or trend exhaustion which is what we're experiencing now. However, it wouldn't indicate Tuesday's events would occur. Below is the chart for SPX which displays these counts prominently. From a bullish view you can see a "cup" forming which may be followed by the "handle" which might be forming now.
(We didn't publish yesterday given a late day internet outage).
As has been typical volume increased on selling as no doubt stops were hit. Breadth was as negative as you'd expect.
Continue to U.S. Sectors, Stocks & Bonds
Continue to Currency & Commodity Markets
Continue to Overseas Markets & ETFs
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.
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
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
There's no predicting what will happen next when you're dealing with a deranged and desperate person like Kim Jong Il. At the same time many selloffs occur after we get DeMark 9s which seems a coincidence but to my mind isn't.
There are some strange things going on within this selloff. Mid-Caps (MDY) and Small-Caps (IWM) have only experienced minor losses while retail ETFs aren't even experiencing a speed bump on their ascent. IWM and MDY don't have the same futures and HFT trading volumes so perhaps they're just ignored for now.
Wednesday, barring further events, volume should slow before the holiday even with plenty of economic data (Personal Income/Spending, Durable Goods Orders, Jobless Claims and Michigan Consumer Sentiment). Anything could happen.
The developing trading scandals are reminiscent of those from 2002-2003 when similar scandals occurred and were the catalyst to launch ETFs to great popularity.
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: SPY, MDY, IWM, TZA, QQQQ, XLI, TBF, UDN, GLD, DBC, DBA, EFA, EEM, EWA, EWJ, EWY, EWC, EWZ, RSX, EPI & 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
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Dave Fry is founder and publisher of
, 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.
