Not Quite a Reversal: Dave's Daily - TheStreet
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It's hard to call Wednesday's stock market action a reversal. Let's just say selling slowed and markets moved a bit higher.

JP Morgan Chase

(JPM) - Get Report

reported earnings beating expectations, and even "whisper numbers", but after an opening rally the stock fell. Why? Investors for a change looked beneath the superficial numbers and didn't like adjustments for credit card loss loan reserves. Companies reporting their results on Thursday will include

Google

(GOOG) - Get Report

,

Fairchild Semiconductor

(FCS)

,

SuperValu

(SVU)

and

Check Point Software

(CHKP) - Get Report

.

Retail Sales Wednesday were below expectations at 0.4% vs 1.1% previously and a little better ex-autos and gas.

Commodities recovered as oil "stabilized" following bullish inventory data.

Meanwhile David Stockman released part 2 of his scathing commentary regarding

"Crony Capitalism"

. This is a must read.

The "in-thing" for politicians is being a cost-cutter. Obama is launching his proposal to cut $12 trillion in spending over the next 12 years. He'll be out of office by then but the country may be bankrupt before this happens. Nevertheless, the overall tone in DC is becoming more positive and responsive to public sentiment. They all read the polls evidently.

Thursday will feature Jobless Claims & PPI data, which should give bulls and bears something substantive to chew on.

Volume Wednesday was again rather light but becoming more average over the past few months. Breadth per the WSJ was basically flat.

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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 Sectors & ETFs

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The chart of EEM below shows a consolidation area from November 2010 to April 2011 highlighted with blue trendlines.  Using Auction Market Principles, EEM had been in Horizontal Development for many months.  The recent breakout from this consolidation area was strong and now we have had the classic throwback to the prior resistance area.  That recent high we just made a few days ago is now in my opinion the extreme area of this balance area, and a break above that recent high will have me taking an initiative trade to the long side in EEM, or perhaps a leveraged issue and possibly using options.  I believe the probabilities are favorable for Emerging Markets to enter a phase of Vertical Development afterward on that breakout.  My initial risk at that time will be established beneath this current support level if it holds.  Over time, taking these types of initiative trades from a mature balance area leads to positive expectancy of the trading system.

Scott Pluschau for the ETF Digest.

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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

The action Wednesday was choppy and uninteresting overall but that doesn't mean we can't comment a little.

Jobless Claims are supposed to remain in the 385K area as most forecasters are just ripping-off and repeating previous estimates and reports.

PPI and "core" PPI data should be fun to watch and the spin served with a heavy dose of Kool Aid will be even more amusing.

Let's see what happens.

Disclaimer: Among other issues the ETF Digest maintains positions in Lazy & Lazy Hedged Portfolios: GLD, SLV, VT, MGV, BND, BSV, VGT, VWO, VNO, IAU, DJCI, DJP, VMBS, VIG, 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.