For over a year we've been reading about PIIG
Portugal, Ireland, Italy, Greece debt problems, so why the big surprise now? It seems a silly excuse. It may be markets are tired and DeMark
9 readings have confirmed a trend correction was at hand.
I've posted these readings for the past few weeks and markets have responded accordingly despite ongoing QE
quantitative easing and ZIRP
zero interest rate policy. This indicator doesn't necessarily mean we'll have a steep sell-off; maybe just some trend exhaustion and even sideways action ahead. This is not to say we couldn't experience something more significant, but for now, that's all we can say.
Also, earnings season is behind us for the most part so from where is the stimulus bulls need to keep the good times going? Economic data has been weak overall.
I've focused on overbought Small Caps (IWM) and lagging Financials (XLF) feeling their action were the keys to future market direction. So far these markets have responded in a manner suggesting more weakness.
It wouldn't surprise that many investors are selling to beat the theoretical end of QE2. Markets are forward-looking after all. Some believe the Fed will find another way to keep the good times going suggesting a bond put selling strategy to keep interest rates stable. In the meantime, it's business as usual at 33 Liberty with another $7 billion in
Volume ran about average for the last 3 month period. Breadth per the WSJ was quite negative.
Here are highlights of my comments about individual stock components of ETFs that appear in the following charts:
-- Monday's Performance has to be viewed as a win for Apple. But, the week's young and the uptrend channel is being challenged. Apple is held by 117 ETFs.
Bank of America
--Many leading banks are breaking down which is a negative obviously. Bank of America is held by 108 ETFs.
-- Lots of subpoenas to many institutions over mortgage deals. More than 120 ETFs hold JPMorgan.
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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.
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.
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
This was a pretty rough day for markets. There is a correction underway and it may be shallow or not. Primary Dealers still are being fed plenty of hot money from QE2 and they'll deploy it to the best trading sectors as usual.
It's a concern that financials never matched recent bullish trends. Rarely have markets rallied without comparative results in financials. Small Caps are where much hot Fed money has sought returns. It appears to be rolling over as well but we've seen this previously.
Our active portfolios remain nearly 85% in cash with some short positions.
Let's see what happens.
Disclaimer: The ETF Digest maintains active ETF trading portfolio and a wide selection of ETFs away from portfolios in an independent listing. Current positions if any are embedded within charts. Our Lazy & Hedged Lazy Portfolios maintain the follow positions: EUM, EFZ, 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
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
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