U.S. stocks and global stocks for that matter are still having a rough time. Worse was the obvious intervention in currency markets to rally the euro and a subsequent bear raid on gold, silver and other precious metals. The powers that be, don't like the message high prices send investors and these actions today crushed prices.
Important news not well delivered was $9 billion was removed from equity mutual funds following the so-called "flash crash". This reflects how poor retail investor confidence in all things Wall Street remains.
Markets were near the lows of the day Wednesday when the FOMC minutes were released that showed a more optimistic Fed as to U.S. economic growth so stocks rallied some off their lows. They were unable to decide when to sell their horde of mortgage-backed securities however.
Stocks are still oversold by most measures but that doesn't mean they can't remain so for longer than most expect. Remember, options expiration is Friday and will play a big role in a market like this.
Volume was heavy once again on selling while breadth remains negative.
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. Much oversold and you can expect a rally off these levels.
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. Markets continue to correct from their much overbought levels.
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 dominates investors at the moment. This should be interesting during options expiration.
Continue to Major U.S. Markets
I'm not sure given how oversold markets are short-term that we won't rally out of this range if only briefly. The catalyst may be options expiration where the least obvious things can happen.
It's strange that Mid-Caps are suddenly underperforming their big brother. This may not be a good sign.
Small-Caps also are underperforming which emphasizes distribution and weakness. But with IWM we're just on support right now.
Tech got a relative lift today from HPQ which in turned helped semiconductor sectors.
Continue to U.S. Market Sectors, Selected Stocks & Bonds
It's a sign of how pathetic conditions are when financials are leading markets in strength today. It must be because of the mess that so-called financial reform has come to in the Senate.
Industrials were the big market losers today as their leaders CAT and BA for example struggled.
Materials performance reflects poor economic conditions overall and AA does that in spades.
The consumer discretionary sector is confounding most logic. It's true MCD, DIS, KO and TW for example are doing well with movies and dollar meals; but, even XRT which is mostly chain stores, stuns with the same performance. It's stunning because of unemployment and housing data.
If we rally out of the range the sell-off will be dismissed as just a too far too fast move. M&A activity will have to pick up as will mall traffic once again.
You need to cut transport sector a wide berth given its inherent volatility. If shipping slows then that's a sign economic conditions are slowing.
IEF, TLT, TIP:
Bonds overall are the big winner this week due to safe-haven rules.
Continue to Currency & Commodity Markets
$USD,DXY, UUP, FXE, FXA:
Whether direct or through proxy brokers/banks, central banks went all out intervening in currency markets to stop the bleeding in the euro. This is done frequently often with abrupt effectiveness but usually short-lived.
Today featured a massive bear raid on precious metals and I would encourage you to read
for the brutal details.
The commodity tracking index is now at the bottom of its trading range and in a precarious position. Metals and energy are holding it back.
Remember, this view can differ some from what you might see elsewhere as they vary the rollover to new month contracts from quote vendors. Nevertheless, this crude oil is fighting at support.
Energy remains weak and so are stocks overall so that just drags things down period.
Made up of equal parts copper, aluminum and zinc the condition of base metals indicates strong or weak demand period. Things aren't looking good at the moment.
Continue to Overseas & Emerging Markets
This popular ETF is struggling with Europe and to a lesser extent Asia. Support is clear. European and Asian markets were hit hard before NY opened and it just shows you how quickly those declines become stale data.
Emerging Markets have more volatility and therefore on down periods they underperform especially when commodity markets are weak as now.
At best a trading range...until it's not.
Oh those pesky North Koreans--what to do? Nothing it seems.
Falling sharply with commodity prices, especially base metals, and now the Aussie dollar for overseas investors.
It is pretty amazing, or not, how many markets are resting on support levels.
This market is breaking down much like Australia. You have to be mindful of the downside especially in Brazil given previous severe and abrupt downturns.
Here too the market remains on support. It appears obvious StockCharts hasn't yet scrubbed their data of the bad data point.
The market is doing much better than its index would lead you to believe since most of China is in an official bear market off 30% from its highs. Below is the FTSE Xinhua Index weekly chart and you can see the poor tracking. Remember, this is what stale data will produce.
Continue to Concluding Remarks
The attempts by governments whether directly or through proxies to intervene in currency and precious metals markets isn't surprising even though it's disappointing. Markets should be allowed to work without the nanny activities of the oligarchs running the world. Even German and European attempts to thwart CDS trading are amusing since it can't be stopped. Placing restrictions on naked shorting of bonds is understandable frankly but any attempts to restrict shorting in general are a mistake. Again maintaining the integrity of free markets is important. These manipulations of the rules and direct or indirect market interventions are no different than a major casino kicking you out for winning too much.
has this well analyzed anyway.
But I digress.
Obviously, since we're long gold and silver I'm none too pleased with this interference.
Tomorrow we get more Jobless Claims, Leading Indicators and the Philly Fed data which, taken together, and given options expiration and oversold conditions make markets ripe for a rally.
Let's see what happens. You can follow our pithy comments on
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By Dave Fry, founder and publisher of
and author of the best-selling book
Disclaimer: Among other issues the ETF Digest maintains positions in: MDY, IWM, QQQQ, TIP, UUP, GLD, DGP, SLV, AGQ, DPK and FXP.
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
Dave Fry is founder and publisher of
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