Things got going nicely for bulls out of the gate on M&A hopes but then things quickly started to fade. One piece of news bears seized on was
even during the usually more robust back-to-school period. Slow PC sales trickle through tech sector's negatively affecting semis in particular.
Then there's this
thing spooking investors looking for a prophecy or a prophet. There's lots of this stuff (Death Crosses, DeMark counts, Head & Shoulder tops etc.) going around and technicians need to stay aware of these. Other investors just scratch their heads, particularly individual investors heading toward the exits. This is especially true in a vacuum of bullish news now that earnings season is about over.
For bulls this just leaves the Fed and its POMO (Permanent Open Market Operations) which will continue to Tuesday and Thursday as they buy more Treasury bonds from Da Boyz (Primary Dealers) who will then either: A. Lend it to small business B. Rebuild their balance sheets C. Pay themselves large bonuses D. Trade the hell out of it. It's good to be the king!
Volume was summertime light while breadth was especially negative. Early rallies waste buying power and just extend selling. A washout is preferable.
: The situation is more boring than grim technically unless you're watching overhead for zeppelins.
MDY & IWM
: The further down into the bowels of the markets the worse things look on down days and vice versa on up days.
QQQQ & AAPL
: Apple's done great things this year despite the little iPhone antenna snafu yet investor's always want another act. I'd say new product engineers at Apple are probably pretty fatigued by now.
Continue to U.S. Sectors, Stocks & Bonds
SMH, INTC, MSFT, DELL & HPQ
: If PC sales are down then companies like these will and should suffer. Yeah, not a brilliant observation but what else is there to say? MSFT has been a favorite of buyers of big name tech since it's become such a cash cow.
XLF & KRE
: The Fed's "bad boy" Hoenig was again lamenting Monday how badly community banks are being served by Fed policy. KRE doesn't represent community banks but its pattern is clear.
: The sector is plagued by ideas of a softening economy and materials are at the root of industrial growth.
XRT, WMT, XLY & DIS
: I suppose if you were sending your kids back to school you'd get your pencils and backpacks at WMT and then take them to a Disney movie.
: The Joneses need toothpaste, shampoo and toilet paper.
: Utilities are thought to be dull but safe-parking.
IYR & XHB
: The panic for yield drives IYR as investors shut their eyes and jump.
IYT & $BDI
: With the Baltic Dry index rally may reflect fewer ships in service carrying more goods. The index is bizarre frankly.
Continue to Currency & Commodity Markets
$USD/DXY, FXE, FXA & FXY
: The election outcome in Australia brings uncertainty and some cross rate unwinding. All this favors the yen for the moment. In the meantime, European's return to work and must confront financial realities forgotten on the Riviera.
GLD & SLV
: Investors should pay attention to options expiration on Thursday at the COMEX where mischief is common.
: Most commodity tracking indexes are heavily weighted by energy which is again weak.
$WTIC, XLE & FCG
: Energy markets just declining with anticipation of poor demand from weakening economic growth.
DBB, JJC & FCX
: Base metals seem stronger than all the economic worries suggest. Their strength may also account for some of the rise in the Baltic Dry Index.
DBA, JJG & JO
: Weather problems affect many ag products. A La Nina is causing havoc to many crops in South America where the weather is much colder than normal. This affects coffee especially.
Continue to Overseas Markets & ETFs
: European markets remain tentative as summer ends and financial realities set-in.
: EM's are caught in market between economic slowdowns in developed markets while excited about internal growth.
: Japan is facing similar debt and demographic problems as the U.S. but seems to handle things without all the political nonsense that occurs here.
: The election has created a legislative stalemate mate which to my way of thinking might be a good thing.
: Things are fine in Brazil but it's still all about exports to places like China for now.
: Russian markets are dominated by commodity prices especially in metals and energy but you knew that.
: Monday the Indian government is providing credits/subsidies to exporters. I wonder if that's part of the fair trade thing.
: Unless you were extremely nimble you couldn't make any money the past year in FXI. If you tried to position with reasonable stops you'd be in a meat-grinder of small losses which add up.
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.
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.
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
Tuesday we get more Fed POMO in mid-morning. It should be in the $3 billion range. That should provide a lift unless Existing-Home Sales are worse than expected.
It's good to be on the sidelines in a light volume market which should continue until after Labor Day. It's too easy in this type of environment to be squeezed if short or stopped-out if long.
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: GLD, TIP, and EPI.
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
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