Light-Volume Dip Buying: Dave's Daily
Clearly, markets can't continue to produce 4-8% per month returns without some profit-taking or correction. Even in the dotcom days returns like this weren't achieved consistently. A downturn is healthy to weed-out excess. That said, dip buyers are a stubborn bunch and they're programmed to do this until they break their F-10 key.
In a news vacuum, Greece again takes center stage as a debt deal and austerity measures have the goal posts continually moved. Greece should probably just default and get it over with. They would then exit the EMU and the drachma would make a return. The political will for both austerity and debt repayment isn't there. The last major sovereign default was when Argentina defaulted on $95 billion in 2001. Subsequently they were shutout of the capital markets. In 2005 they arranged to pay 30% of amount owed to 75% of the creditors. There is still $7.5 billion outstanding mostly owed to the Paris Club (an informal group of creditors) and negotiations are ongoing. It wasn't the end of the world but the difference now is the EU and EMU relationship with Greece. There wasn't then or now any South American common monetary system or currency.
Lingering issues from Friday's employment report include the following startling fact: With the U.S. population 30 million greater than 10 years ago, there is little change in the number of people working. Think about that. This leads to the following humorously modified skit c
ourtesy of Grant Williams, Vulpes Investment Management:
COSTELLO: I want to talk about the unemployment rate in America.
ABBOTT: Good "subject" in these terrible "times." It's about 9%.
COSTELLO: That many people are out of work?
ABBOTT: No, that's 16%.
COSTELLO: You just said 9%.
ABBOTT: 9% Unemployed.
COSTELLO: Right 9% out of work.
ABBOTT: No, that's 16%.
COSTELLO: Okay, so it's 16% unemployed.
ABBOTT: No, that's 9%...
COSTELLO: WAIT A MINUTE. Is it 9% or 16%?
ABBOTT: 9% are unemployed. 16% are out of work.
COSTELLO: If you are out of work you are unemployed.
ABBOTT: No, you can't count the "Out of Work" as the unemployed. You have to look for work to be unemployed.
COSTELLO: But ... they are out of work!
ABBOTT: No, you miss my point.
COSTELLO: What point?
ABBOTT: Someone who doesn't look for work, can't be counted with those who look for work. It wouldn't be fair.
COSTELLO: To who?
ABBOTT: The unemployed.
COSTELLO: But they are ALL out of work.
ABBOTT: No, the unemployed are actively looking for work... Those who are
out of work stopped looking. They gave up. And, if you give up, you are no longer in the ranks of the unemployed.
COSTELLO: So if you're off the unemployment roles, that would count as less unemployment?
ABBOTT: Unemployment would go down. Absolutely!
COSTELLO: The unemployment just goes down because you don't look for work?
ABBOTT: Absolutely it goes down. That's how you get to 9%. Otherwise it
would be 16%. You don't want to read about 16% unemployment do ya?
COSTELLO: That would be frightening.
ABBOTT: Absolutely.
COSTELLO: Wait, I got a question for you. That means they're two ways to bring down the unemployment number?
ABBOTT: Two ways is correct.
COSTELLO: Unemployment can go down if someone gets a job?
ABBOTT: Correct.
COSTELLO: And unemployment can also go down if you stop looking for a job?
ABBOTT: Bingo.
COSTELLO: So there are two ways to bring unemployment down, and the easier of the two is to just stop looking for work.
ABBOTT: Now you're thinking like an economist.
Elsewhere, Bill Gross lamented something we've noted for a long time: "What incentive does PIMCO or banks have to buy five-year (or longer) Treasuries at 75bp when the maximum upside capital gain is two percent of par and the downside substantially more?" What else are insurance companies, large pension plans, endowments and baby boomers to buy? After all, aside from baby boomers or individual investors, most have "set" fixed income designations. They "must" buy bonds whether Treasuries or junk.
Stocks opened lower Monday on Greek worries and an absence of supportive economic data overall. The dollar was somewhat stronger which equity bulls hate while bonds rallied. Gold continued to sell-off with a rising dollar, crude oil was also weaker and most other commodity sectors were more or less unchanged.
Earnings announced before and during trading were received quite poorly from some well-watched names including: Humana (HUM) with shares down approximately 5%; Sohu (SOHU) disappointed and shares dropped 15%; and, Sysco (SYY) with shares down 4%. After close, in view will be YUM Brands (YUM) which reported earnings of $.76 vs $.74 expected and Coinstrar (CSTR) which operates Redbox earned $1 vs $.64 expected. CSTR also noted it's buying NCR's entertainment business. As for Sohu the disappointing outlook sent many Chinese internet stocks (BIDU, RENN, and SINA) lower reversing previous enthusiasm over the proposed Facebook launch. This also was a splash of cold water to last week's previous social media ETF winner (SOCL) lower by 2%.
Volume continues to be light and with so much investor flight from markets we're approaching perhaps a "new normal" in trading. Light volume rallies can make markets more accident prone and heavy selling volume is the normal result. Breadth per the WSJ was mildly negative reversing some, not all, overbought conditions.
You can follow our pithy comments on
and join the banter with me on
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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.
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.
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.
See more details
Continue to U.S. Sector, Stocks & Bond ETFs
SOCL - The Global X Social Media Index ETF seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the Solactive Social Media Index. The Solactive Social Media Index is designed to reflect the performance of companies involved in the social media industry, including companies that provide social networking, file sharing, and other web-based media applications.
FDN
- The
First Trust Dow Jones Internet
IndexSM
Fund is an exchange-traded index fund. The investment objective of the fund is to replicate as closely as possible, before fees and expenses, the price and yield of the Dow Jones Internet
IndexSM
. For a stock to be included in the selection universe for the index, a company must generate at least 50% of its annual sales/revenues from the Internet.
XLY - The Consumer Discretionary Select Sector SPDR® Fund, before expenses, seeks to closely match the returns and characteristics of the Consumer Discretionary Select Sector Index. Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs.
IVE - The iShares S&P 500 Value Index Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of U.S. large-cap value stocks, as represented by the S&P 500/Citigroup Value Index.
XLV - The Health Care Select Sector SPDR® Fund, before expenses, seeks to closely match the returns and characteristics of the Health Care Select Sector Index. Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs.
XBI - The SPDR® S&P® Biotech ETF, before expenses, seeks to closely match the returns and characteristics of the S&P Biotechnology Select IndustryTM Index. Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs.
KRE - The SPDR® S&P® Regional Banking ETF, before expenses, seeks to closely match the returns and characteristics of the S&P® Regional Banks Select Industry Index(ticker: SPSIRBK). Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs.
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.
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.
SDIV - The Global X SuperDividend ETF seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Solactive Global SuperDividendTM Index.
PGF - The PowerShares Financial Preferred Portfolio (Fund) is based on the Wachovia Hybrid & Preferred Securities Financial Index (WHPSsm Financial Index) (Index).
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Continue to Currency & Commodity Market ETFs
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. The USDX® futures contract is designed to replicate the performance of being long the US Dollar against the following currencies: Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish
Krona
and Swiss Franc.
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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
.
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.
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.
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.
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.
PPLT - ETFS Physical Platinum (PPLT) is designed to offer investors a simple, cost-efficient and secure way to access the precious metals market. PPLT is intended to provide investors with a return equivalent to movements in the platinum spot price less fees.
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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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DJP - The
iPath
® Dow Jones-UBS Commodity Index Total
ReturnService
Mark ETN is linked to 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. The commodities represented in the Dow Jones-UBS Commodity Index Total
ReturnService
Mark are rebalanced annually; however, the weightings fluctuate between
rebalancings
due to changes in market prices.
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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").
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.
UNG - The United States Natural Gas Fund LP (UNG) is an exchange traded security that is designed to track in percentage terms the movements of natural gas prices.
IXC - The iShares S&P Global Energy Sector Index Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of companies that Standard & Poor's deems part of the energy sector of the economy and important to global markets, as represented by the S&P Global Energy Sector Index. The index is a subset of the Standard & Poor's Global 1200 Index.
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.
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MOO - The Agribusiness ETF seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the
DAXglobal
® Agribusiness Index. The Index provides exposure to publicly traded companies worldwide that derive at least 50% of their revenues from the business of agriculture. As such, the Fund is subject to the risks of investing in this sector.
Continue to Overseas Sectors & ETFs
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.
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.
AAXJ - The iShares MSCI All Country Asia ex Japan Index Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the MSCI All Country Asia ex Japan Index.
EWY - The
iShares
MSCI South Korea 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 South Korean market, as measured by the MSCI Korea Index.
THD - The iShares MSCI Thailand Investable Market Index Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the MSCI Thailand Investable Market Index.
ILF - The iShares S&P Latin America 40 Index Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of companies in the Mexican and South American equity markets as represented by the Standard & Poor's Latin America 40 Index.
EWW - The iShares MSCI Mexico Investable Market 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 Mexican market, as measured by the MSCI Mexico Investable Market Index.
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.
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.
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.
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
Monday featured a mixed bag of earnings and volume was ridiculously light. There was little economic news and Greek tension rose to the surface early. They just can't seem to gain the political consensus and will to follow the austerity dictates from their EMU bosses.
Earnings after the bell made for good headlines with Coinstar and YUM Brands. Little noticed were losses for PMC Sierra (PMCS) down 6.5% in late trading and Micron Technology (MU).
Let's see what happens.
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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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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
, 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.
