Yesterday's oversold bounce was just that and now we're getting oversold again. The dollar's sharp rally Wednesday took most commodities, except precious metals, to the woodshed. So why would the dollar rally with a trifecta of lousy economic data? It's more likely repatriation and a flight to safety as risk avoidance remains job one.
And, the data was horrible led by the Empire State Manufacturing data (-7.8 vs 14 expected), Industrial Production (.1% vs .2% expected) and the Housing Index (13 vs 16 previous) which combined to hit stocks hard. Yesterday's theme, "not as bad as feared" was quickly forgotten for the spin it was.
Sure, folks are worried about Greece but it's a small country. Nevertheless, it's symbolic of the debt crisis contagion moving around the developed world from PIIGS to as far as Madison, Wisconsin. Political leaders must confront realities born of this growing cancer. It won't by pretty, it won't be fun but it must be done. Where's the leadership?!
If you care, there's Jobless Claims Thursday (Care to guess? Most experts are just picking numbers out of the air now); Housing Starts and the Philly Fed Survey.
Volume Thursday was again much higher on selling than the previous rally. Breadth was quite negative and approaches another 10/90 day.
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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
The market has two very large days ahead of it. First is the economic data Thursday and then quad-witching on Friday. Once behind us, we'll see exactly where we go.
There's a lot of smoke and mirrors from those with soap to sell so be very careful. Most of our portfolios, away from Lazy Portfolios, are overwhelmingly in cash.
Let's see what happens.
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Dave Fry is founder and publisher of
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