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Usually when I post an image and headline like this conditions quickly reverse the very next day. And here it is only Wednesday and it's almost a perfect storm of bad news. I say "almost perfect" because earnings reports overall are still pretty good with some stellar results from Boeing (BA) and Amazon (AMZN). Of course we can ignore a few bad apples like Juniper Networks (JNPR) and Corning (GLW), which is typical behavior.

We can't worry about everything when new issues like Dunkin Donuts (DNKN) can go up 50% on a day like Wednesday. (Hell, that was almost as much as the debt clock is rising every month!) But, current earnings results are "old news" and economic data indicates worse conditions ahead.

We have plenty of debt crisis anxiety combined with crummy economic data with the latter featuring poor Durable Goods and Fed Beige Book with both missing estimates...badly.

Let's put it this way--we're oversold now and any debt settlement will spark a rally. But, then we have to face the fact the economy is declining and rating agencies may still cut U.S. credit ratings no matter whose plan is accepted. It's hard to have imagined this outcome a few years ago. Who would want to be the POTUS with this on your record no matter who you blame?

Some have suggested

the Fed in advance of default could sell some of its multitrillion dollar stash of Treasury bonds giving the proceeds to Turbo-Tim to pay bills. That would depress prices of bonds depending on how many they'd have to liquidate. Call it QP, "Quantitative Purging".

"Event Risk" markets are the hardest to trade or position but you probably don't need me to tell you this. Even the HFTs don't have algos programmed for something like but they're busily programming it now.

Volume was higher again and folks are leaving Dodge quickly putting markets short-term oversold. Breadth was quite negative and it looks like a 10/90 day.

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Continue to U.S. Sector, Stocks & Bond ETFs

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Continue to Currency & Commodity Market ETFs

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Continue to Overseas Sectors & 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

The markets are oversold at least short-term while from an intermediate view we dwell in a trading range. Once again conditions are similar to the summer of 2010 although the news is different the craziness remains the same.

Thursday brings us Jobless Claims and Pending Home Sales. Earnings should feature Exxon Mobil among many others.

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: 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

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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.