Stock Market Wipe-Out: Dave's Daily - TheStreet

Stock Market Wipe-Out: Dave's Daily

Obama got everyone pretty excited on Wednesday by suggesting naively we'd have a good employment number Friday. He probably knew the number already but was uninformed as to what markets were expecting.
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One thing president's and their handlers should learn--

words matter

. Obama got everyone pretty excited on Wednesday by suggesting naively we'd have a good employment number Friday. He probably knew the number already but was uninformed as to what markets were expecting.

Obama Says He Expects Strong US Jobs Report Friday

By Jared A. Favole

WASHINGTON -(Dow Jones)- President Barack Obama, speaking Wednesday at Carnegie Mellon University on the economy, said he expects strong job growth to be reported Friday."

That statement posted in the afternoon Wednesday led to the late day market spike and caused many forecasters to adjust their expectations to as high a new jobs number as 700K.

Therefore, Friday's data was a major miss and disappointment. While the unemployment rate declined to 9.7% that was only because over 300K dropped-off the rolls into oblivion or sleeping in Central Park.

Adding to Friday's stock market rout was a new European problem child, Hungary. This was a surprise to markets and the story is well documented by Bloomberg. So, we add the letter "H" to the PIIGS and get PHIIGS. It does sound better anyway. While Hungary is not on the euro, the news sent the currency briefly below 1.20.

Taken together this was all a bit much for bulls to take and the volatile day-to-day yo-yo market resumed with a vengeance. 

It was take no prisoners' type of trading as those jumping aboard yesterday during the short-squeeze were quickly stopped-out of their fresh positions.

And the previous pattern of heavier volume on down vs up days continues. Although all the calculations aren't made yet, breadth was no doubt a 10/90 negative day.

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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. Fear on parade!

Continue to Major U.S. Markets

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SPY:

Things were down and dirty right from the get-go. PHIIGS and overhyped unemployment data did markets in. Now we remain in the trading range with the potential for a bearish H&S top formation to build on even a rally (look for right shoulder to form). What we're witnessing is just a continuation of the trading desk and hedge fund machines trading back and forth only this time to the down side. The degree of difficulty is greater and a perplexing turn-off to individual investors.

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MDY & IWM:

I would expect these trading ranges in this volatile environment to not last long. The public is out of the market in the sense they're not adding to their portfolios so it remains a traders (day traders that is) market.

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QQQQ:

Tech and the QQQQs especially are performing much better relatively than the herd since Apple is 15% (or more after today) of the index. Apple is still an automatic buy for many institutions.

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

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XLF, C, BAC, JPM, GS:

There was no joy in financial world. GS was so smitten with Obama's Wednesday comments that they raised their jobs number to 600K.

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XLB:

Materials was the "tell" yesterday that the rally yesterday wasn't deep or broad-based. Base metals and commodity prices have been weak which means little demand and not much economic growth. This is what stood out the most all week.

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XLY & XRT:

It just may be consumers are finding comfort in spending and debt like an alcoholic with vodka. The leaders within XLY after all are DIS, TWC, F, KO and AMZN to name a few.  XRT on the other hand is dominated by all those companies you'd find at or near large malls: JCP, HD, BBY, WMT and TGT to name a few. It's interesting if the two might, as they did this week, separate some.

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IYR & XHB:

REITs are supported by dividends "if" those dividends are safe. That's always the question. Homebuilders have been supported by the Fed's low interest rate policies, buying of mortgage backed securities and the government home buyer's credit. The latter two are going to disappear. Plus inventories are still high despite the last minute rush to buy before the credit expired. Lastly demographics don't favor new home building.

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IYT:

Transports weren't immune from selling this week. If economic growth is now peaking then transports will take a dive. Further rail freight shipments of coal and raw materials may be in slowdown mode.

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IEF & TLT:

Everybody and his cousin is trying to short Treasury bonds on the assumption that interest rates will rise due to inflationary pressures, economic growth, the sheer volume of debt to place and stock market gains. Yet, they've been wrong, wrong, wrong. The most recent reason is due to European problems.

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TIP:

So, there is no inflation currently or in the recent past. Why then have TIPs been the steady riser? From a book I read recently whose favorite slogan was, "just in case". Add to that a lack of trust in all government statistics.

Continue to Currency & Commodity Markets

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$USD/DXY & UUP:

Uncle Buck has had a good time at the expense of the euro that's for sure. Maybe a trip overseas would be okay.

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FXE:

Now we're seeing the next down-leg in the euro begin with an objective to perhaps 110 if it even survives.

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GLD & GDX:

They tried to break gold early this week but failed.

My fear about gold stocks is when stocks overall break severely they'll be sold like everything else even if gold prices are stable or rising.

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DBC:

Well if energy prices fall overall, which they did today, along with base metals for example, DBC is stuck.

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$WTIC/CRUDE OIL:

Down today with ideas of slack demand and a potential double dip.

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XLE & BP:

It's really going to be a lengthy problem for all parties concerned--animals, sealife, people, shareholders, company and so forth.

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UNG & FCG

: Natural Gas is back in the news in a positive way as the administration and others come around to our ample supplies and cleaner fuel characteristics.

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DBB:

Base metals, one of the most important commodities that reflect economic growth, fell off a cliff this week.

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DBA:

The strong dollar hurts exports; stockpiles already too high; current over-planting; and, good weather. 

Continue to Overseas & Emerging Markets

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EFA & IEV:

These are at the epicenter of troubles. Support seems clear to me.

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EEM:

EM's suffer worse than others given commodity orientation but this week they were relatively better.

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EWJ:

Japan is suffering politically but it's been a common occurrence there the past few years. But now we've broken initial support levels and head into a new trading range.

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EWY:

At the G-20 Geithner made his first credible comment ever: "...don't expect the American consumer to bail you out." He must know something of the consumers' real condition.

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EWA & EWC:

Australia and Canada are in good shape overall.  But the former suffers from dependence on China while the latter just worries about big brother below.

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EWZ:

Another commodity market oriented market suffering from lower base metals prices in particular.

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RSX:

Commodity market right at support.

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EPI:

India markets seem relatively tranquil.

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FXI:

While Shanghai markets are in bear markets no one's seems to have told international investors about this yet.

Continue to Concluding Remarks

Even ol' Wylie Coyote can't take too much more of this nonsense. But, jumping off the cliff is something we'll leave to Mr. Market. The best thing now is to lay low since this day-to-day volatility is a killer to maintaining positions through thick and thin.

I wonder if Obama learned anything from today's market reaction. Some of this was his fault for over hyping the employment data on Wednesday. This got bulls excited and their analysts raising estimates for the jobs number. Silly isn't it?

The G-20 is meeting and they'll be discussing the eurozone's woes including how they intend to allocate the $900 billion euros for the bailouts. Further, you should expect some grand statements and maybe more currency market intervention. The street is rife with rumors about the IMF and more gold sales since they might be insolvent. Who knows what tricks are up their sleeves both at the G-20 and from the secretive

Bilderberg 2010

meeting?

Next week won't feature as much stress from economic data but the news cycle is a pesky thing. More ships are sailing to Gaza, oil still flows into the Gulf but the good news is that it's summer in New England.

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: UUP, EUO and GLD.

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.