So much for jawboning and "happy talk" since we're back to the yo-yo environment once again. The Fed really doesn't have much left it can do to help the economy. They want to sell not buy more mortgage backed securities and interest rates are already next to nothing. The administration can't help housing further as the stimulus credit expires and new mortgage applications are already dropping like a stone.
Perhaps it's something else bothering markets. How about a potential BP bankruptcy filing? Or, Germany's Merkel's suggestion it's time to withdraw stimulus just as economic conditions in the eurozone are weak? Whatever it is, it has the herd spooked. And, even short-term trading is difficult day-to-day. A lot of investors are getting whipsawed and are very weak handed.
Some report investors found the Fed's Beige Book of economic activity uninspiring and leading to a late day sell-off. I think it's something else but that's just a feeling.
Volume was light today with the heaviest volume on late day selling. Breadth was mixed to negative.
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 Major U.S. Markets
The war is raging for the past six weeks as bulls and bears fight it out for control. The long "tails" on weekly candlestick price bars attest to this battle with in a well-defined trading range.
MDY & IWM:
Both these markets are harder to chart given their more volatile action but the H&S bearish top may be forming. I'm not much of an adherent, and sometimes you see these patterns everywhere, but there they are.
Tech should be the strongest sector but it's struggling perhaps hurt by the rising dollar suppressing overseas profits.
Continue to U.S. Market Sectors, Selected Stocks & Bonds
SMH, INTC, TXN & AAPL
: Semi's are at the core of the tech industry. Without them those processors not much will take place even with the Apple's of this world. They're all quite weak which is a bad sign. But, as usual, the week's not over.
XLF, KBE, KRE & GS:
Financials were notably weak late in the day today. Perhaps Merkel's comments spooked them. KRE has already fallen more than the obligatory 20% from its high to qualify as being in its own bear market. Commercial real estate would be the trouble there.
Materials "were" the weakest sector heading into this week but had two powerful rally days and are now only up a little. There's still two days left in the week.
No, it just doesn't make sense sometimes but consumers are still shopping with housing data only somewhat better and unemployment terrible.
Here's another sector that confounds you emotionally. I know many investors are on a mad hunt for yield but the news here still remains cloudy. Fortune wrote a good summary of the situation
well outlining the issues and the eye-popping $1.4 trillion in debt coming due from commercial real estate over the next 3 years. That's a lot to rollover!
Transports are in no better shape than any other sector so there's nothing brilliant to say about it.
IEF & TLT:
Treasury 10-year auction was well bid and with stocks falling bonds could recoup earlier losses. The 30-year auction is tomorrow and we'll see how averse investors are to duration risk.
Continue to Currency & Commodity Markets
$USD/DXY, UUP & FXE:
Uncle Buck is facing overhead resistance and a lot of pressure from a few central banks, lately the Swiss, to support the euro. It will be interesting to see how this works out since so many are speculating the euro's demise.
Gold is facing some profit-taking from those believing a double-top is at hand. We'll see about that but let's face it, demand is strong.
Crude inventories saw a decline allowing prices to rally and with them DBC followed suit.
Crude oil remains in a trading range period.
XLE & BP:
It just may be that a BP bankruptcy filing is imminent. It would not surprise given the scope of liabilities and lawsuits.
Base metals rallied early and then fell with the market. Rumors of strong (+50%) from China drove prices higher.
Continue to Overseas & Emerging Markets
The yo-yo market continues but now we're just back to support with a lot of mixed messages from the euro zone.
EM's have this same "double top" look about them as commodity markets keeps everyone on their toes.
Japan is in a funk in all aspects, politically and economically.
The Euro 350 is leading the charge lower so be careful.
Holding its own against volatile commodity prices.
Just another market at support.
India markets are steady to higher and seem more insulated from the chaos of Europe.
China markets rallied nearly 3% last night on rumors of a big gain in exports which rallied banks. Funny thing about FXI is it never succumbed much to the 30% decline in Chinese markets.
Continue to Concluding Remarks
The late day decline today many attribute to Merkel's "withdraw the stimulus" chatter not to mention an uninspiring Beige Book. But, I'm thinking the Fed is out of bullets beyond jawboning. Perhaps they'll reinvent money and banking custom and rules but that remains to be seen. What is clear is the U.S. is out of bullets as far as stimulus is concerned at least until after the elections in the fall. Then we'll be faced with a major tax and spending debate.
Investors are nervous and it shows. Tuesday's late day rally didn't bring broader markets along like Mid and Small Caps for example. Wednesday started off gangbusters but bulls couldn't hold it and once again we faded into the close.
Thursday will feature Jobless Claims and the little watched Treasury Budget. Speaking of the latter, it was quietly released that the U.S. debt will reach $19.6 trillion in 2015.
Lastly, and also little noticed by the press was the news two days ago of five U.S. soldiers killed and today another four perished. This should get more attention and it's quite sad.
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: SPY, SH, SDS, SMN, UUP, EUO, GLD, EFZ and EUM.
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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