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Market Suffers a Late Dive: Dave's Daily

Investor attention remains focused on negatives still smoldering within the eurozone.
Author:
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The early news was worse than expected with weak housing data. We were out most of the day visiting with State Street in Boston. By the time we got there markets had rallied some off a down opening. Later as we were driving back there was a steady and steepening decline.

What was going on? The euro/dollar cross rate still seems in the mix with global equity indexes for as the euro was falling so too were stocks. It seems a silly relationship at first, but investor attention remains focused on negatives still smoldering within the eurozone.

The stronger dollar today may be the result of strong Treasury auction results which attracted $138 billion in bids.

Energy prices and stocks fell even as a Federal judge ruled against the deep drilling moratorium.

Volume again was higher on selling today although still somewhat light. Breadth was negative.

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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 Major U.S. Markets

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SPY:

It's a "make up your mind already!" market. We just can't find "durable" trends lately but only confusion. All markets are showing bearish H & S tops. But, I'm not much of an adherent to these since you can see them so often and see little result. 

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MDY & IWM:

The more economically sensitive sectors the greater the rise and fall. Today it's the latter.

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QQQQ:

Yes, tech remains stronger than other sectors as heavyweights like Apple rule.

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

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AAPL, MOT, AMZN, GOOG & ADBE

: The race is on between Apple (iPhone) and Motorola (Droid) take the lead. The nod goes to Apple early given great reviews but Motorola has a better service provider (Verizon) while Apple is stuck with AT&T. Amazon is now engaged in a price war for its Kindle with Barnes & Noble not to mention the iPad. Google has unveiled a new music download service tied to its search engine that should compete with Apple but it's still months away from reality. Adobe reported earnings that beat estimates by a penny. Will that impress Apple?

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XLF, KBE, KRE & GS:

Financials were weak overall as worries over banks waxes and wanes. For Lloyd Blankein, GS CEO, when push comes to shove go on Oprah. Yeah, that's the ticket!

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XLI:

Not much to see here except strength in Ford, CAT and Boeing.

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XLB:

This is a worrisome sector given its importance to industrial demand and economic growth globally.

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XLY:

An enigma wrapped in a riddle is how I feel about our buddy Chucky the Consumer. The funny thing is that it's been one of the strongest sectors previously based on very little good news.

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IYR:

Chasing yield is sometimes finding trouble.

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IYT:

Still digesting poor FDX report.

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$BDI:

The Baltic Dry Index has been on a steady decline reflecting poor current shipping conditions.

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TST Recommends

SHY, IEF, TLT & TIP:

The Treasury had a very successful 2 year note auction. It didn't hurt that stocks were lower.

Continue to Currency & Commodity Markets

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$USD/DXY & FXE:

The dollar was well bid today helped no doubt by demand from the Treasury auction.

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CNY

: The yuan has had more talk than action and you can see how it really has done little.

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GLD:

Since 2004 the assets of GLD have grown from $114 million to over $52 billion! That's an eye-opener and reflects the public's distrust of fiat money, debt and government inflation data.

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DBC:

Crude oil dropped and therefore so did DBC. It would be good to have a commodity index not so weighted by energy.

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$WTIC/CRUDE OIL:

Profit-taking on higher inventories and a strong dollar.

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XLE & UNG:

Someday perhaps I won't hate this sector but it's plain to see it as a mess. As for UNG it seems likely that investors are disappointed over the administrations lack of support for the sector following the spill in the Gulf.

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DBB & XME:

Base metals are doing reasonably well considering their sharp decline. But, it's important they do well for economic growth. Steel producers and miners also are part of the supply/demand chain here.

Continue to Overseas & Emerging Markets

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EFA:

Was the rally just a dead cat's bounce? Possibly.

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EEM:

Important news today was that MSCI would keep Korea and Taiwan in the index. This is both good and bad depending on your view. We'll have more to say about this tomorrow.

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EEB

: I would normally post more charts but we're back late and EEB will suffice for several markets obviously. Besides, tomorrow is Fed day and no surprises are expected but...ya never know!

Continue to Concluding Remarks

Watching World Cup flops is beyond belief and it reminds us how silly our markets are behaving. With markets behaving as they have, it's a reflection of machine (HAL 9000s) trading activity. No wonder the average investor is turned-off.

New Home Sales data is on tap tomorrow and that will help set the tone before the Fed announcement.

Then we have the Fed announcement and not many are expecting much in the way of change. The usual talking heads will be around to parse the language and tell us what it means or not.

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: SHY, TIP, CNY, GLD and  DGP.

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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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.