Skip to main content

Uneventful Quad-Witching: Dave's Daily

We head into the last quarter of the year with bulls very much hopeful of repeating many previous profitable periods.
  • Author:
  • Publish date:
Image placeholder title

We head into the last quarter of the year with bulls very much hopeful of repeating many previous profitable periods. Anyway, they have control of the tape even with light volume on quad-witching. Their goal is to breakout of this trading range even if doing so on little volume.

Weak Consumer Confidence data weighed on indexes early, but true to form, bulls brushed it off as "old news" focusing instead on Oracle's report and the trusty "core" CPI number.

The belief must be select heavyweight companies are doing well with their balance sheets and cost cutting. This should bode well for future profits even with few employees in the U.S.

I've got this mid-to-late 1970s feeling when we saw commodities and selective stock sectors (natural resource and tech) boomed. Of course missing now is high interest rates and soaring inflation. We may see both at some point. Further, we have new players in control and visible from emerging markets, sovereign wealth funds, hedge funds and high frequency trading. Developed markets have poor demographics, slow growth and heavy debt. This situation is why more investment opportunities are abroad in developing countries and U.S. tech.

Volume was light for expiration while breadth was mixed.

Image placeholder title
Image placeholder title
Image placeholder title
Image placeholder title

SPY

: The bulls are ready to break the H&S top formation even with light volume. Overseas investors are picking up the slack for retail investors.

Image placeholder title
Image placeholder title

MDY & IWM

: The further we move away from the H&S top the less relevant it becomes.

TheStreet Recommends

Image placeholder title
Image placeholder title

QQQQ & AAPL

: Apple sells iPads in China and that should give earnings a kick.

Continue to U.S. Sectors, Stocks & Bonds

Image placeholder title
Image placeholder title

IGV & ORCL

: Oracle drives the software sector higher.

Image placeholder title

Image placeholder title

Image placeholder title

FDN, GOOG & AMZN:

Another sector leading tech higher.

Image placeholder title

XLB

: The important materials sector weakens of Friday which isn't a good sign for domestic growth.

Image placeholder title

XLF

: This might remain a weak or boring sector for some time to come.

Image placeholder title
Image placeholder title

XLY & XRT

: The tape is the tape and sometimes it's just not logical. Nevertheless, acceptance of the situation is a necessity.

Image placeholder title

IYR

: The quest for yield trumps safety issues.

Image placeholder title

IYT

: It does seem monotonous with so many sectors at resistance the image remains the same.

Image placeholder title

IBB

: Biotech is a tougher chart from a trend view but you can see the potential for a breakout clearly.

Image placeholder title
Image placeholder title

IEF & TLT

: Bonds remain the mystery for many investors. The yield curve steepened this week.

Image placeholder title

TIP

: The government says there is no inflation and you believe everything they say right?

Continue to Currency & Commodity Markets

Image placeholder title

$USD/DXY

: Uncle Buck is hung-out to dry but gaining some support from BOJ interventions.

Image placeholder title
Image placeholder title

FXE & FXY

: The charts have changed little, so too the comments.

Image placeholder title
Image placeholder title

GLD & SLV

: Both gold and silver stuck new highs with only the latter seeing some Friday profit-taking.

Image placeholder title

DBC

: Commodity markets are rising but energy markets holding it back.

Image placeholder title
Image placeholder title

$WTIC & XLE

: Energy markets on the defensive as pipeline is fixed.

Image placeholder title
Image placeholder title

DBB & JJC

: Base metals are showing some strength but still need to move to new highs out of the range.

Image placeholder title
Image placeholder title

DBA & JJG

: Ag markets are threatening a major breakout which would foil the no inflation crowd...oh, silly me, I forgot food and energy aren't in the numbers we're supposed to watch. You don't use either do you?

Continue to Overseas Markets & ETFs

Image placeholder title

EFA

: More troubles for some banks in Ireland and Spain evidently.

Image placeholder title

EEM

: EMs hurt only temporarily by tightening moves in China.

Image placeholder title

EPI

: The India Sensex Index made another new high on Friday.

Image placeholder title

FXI

: This market is suspended in the trading range as investors attempt to determine the extent of Chinese tightening.

Image placeholder title

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.

Image placeholder title

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.

Image placeholder title

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

A pretty uneventful quad-witching as light volume continues to dominate trading.

Tech is in the lead especially with various subsectors (software and internet) taking the lead.

Commodity markets are heating up. And, one must address the message of gold's major breakout. It usually isn't positive.

Next week we get more events and data beginning Housing Starts, an FOMC rate decision, Jobless Claims, Existing Home Sales, Leading Indicators, Durable Goods and New Home Sales. It should make for an interesting week.

Have a great weekend!

Let's see what happens. You can follow our pithy comments on

twitter

and become a fan of ETF Digest on

facebook

.

Disclaimer: Among other issues the ETF Digest maintains positions in: IBB, FDN, IGV, IYR, TIP, GLD, DGP, SLV, AGQ, DBB, BDD, DBA, DAG 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

www.etfdigest.com

.

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.