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We're still feeling the aftershocks of the earthquakes emanating from the Arab world as dominos continue to fall. But, as we've been pointing out, the light volume melt-up over the past month only meant with stocks much overbought and complacency high, the inevitable correction would be sharper.

So, even though Primary Dealers have been well lubricated with QE2 it still wasn't enough to stem the selling. Stocks weren't helped yesterday by WMT and today from HPQ's poor report.

Oil prices have been at the center of concerns naturally and Libya's issues have made it a bigger domino. Clearly should the fire jump to Saudi Arabia there would be hell to pay. This is why Saudi king Abdullah returned home and is plying his people with an extra $37 billion in handouts. There are rumblings that a "day of rage" will take place there in a week or so.

The most overbought major index and market leader on the upside has been the DJIA and it has taken the most heat the past two days while SPX decline was more modest given the strong energy component within it.

Volume once again was higher on selling then the prevailing three-month average (which also had been deteriorating) while breadth per the WSJ was again negative. 

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Below is a weekly chart of

DIA (DJ30 ETF)

annotated primarily by Tom DeMark sequential counts that end with 9s. These generally will produce a reaction; but, you can see with the most recent occurrence DIA (and others) ran past this indicator. DIA has now returned to the previous exit point. Generally, these counts mark trend exhaustion and nothing more than some sideways action or perhaps a more severe reaction in the opposite direction.

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TheStreet Recommends

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Continue to U.S. Sectors, Stocks & Bonds

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Continue to Currency & Commodity Markets

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Continue to Overseas Markets & ETFs

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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 Concluding Remarks

Accidents can happen; it's just not pleasant when it's your money. Thankfully, with the exception of Lazy Portfolios, we're very lightly invested given previous DeMark readings moving us to the sidelines in mid-January. That left us scratching our heads as the light volume melt-up continued with little correction until things started coming unglued with Egypt. Even the reaction to this event was brushed off if only briefly.

Thursday is Jobless Claims once again and Durable Goods Orders. While earnings will still draw attention the primary view will be oil prices which will hit consumers hard eventually.

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: IWM, QQQQ, XLY, XLI, UDN, FXE, DGP, GLD, SLV, AGQ, DBA, DBB, XME, EFA, VT, MGV, BND, BSV, VGT, VWO, VNO, IAU, DJCI, DJP, VMBS, VIG, TBF, ILF, EWA, IEV, EWC, EWJ, EWG, EWU, BWD, GXG, THD, AFK, BRAQ, CHIQ, TUR, & VNM

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

.

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

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.