Markets need a catalyst beyond Apple's new products to move them higher. And, if markets are to revisit the previous bearish trend, day-to-day two-way action needs to give way to a more durable trend. Bulls may have wasted some buying power on the last mid-June counter-trend rally despite the low volume quality of the effort. On balance, there hasn't been any positive news.
Confidence and trust in markets (especially among retail investors) has never been lower. With HAL 9000s dominating daily trading it's no wonder such is the case.
The stimulus package has proven a wasteful dud. The Fed has interest rates as low as they can go and Europe finds itself in a similar situation. Some are suggesting the Fed and Treasury will come up with some never before tried monetary tools to combat economic malaise and a double dip.
Durable Goods orders were lower and Jobless Claims (while superior to the previous terrible week) are just crawling along at the bottom of the ocean perhaps mired in BP goo. Meanwhile, financial reform and the Volcker Rule are twisting in an uncertain wind overwhelmed by lobbyists and special interests.
Volume rises again on a down day and breadth is negative approaching a 10/90 day in some sectors.
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
Sure things are a mess especially from daily chart views of the last two months. Developing bullish and bearish trends have been quickly snuffed-out in one or two days. On weekly charts the bearish H & S top seems ominous although never really that reliable. Perhaps of greater significance to us is the rollover of the 22 period moving average which hasn't occurred since the March 2009 low.
The further down into the bowels of major markets the more trouble you'll find. We're coming to a serious "must hold" level.
QQQQ, IGM & QQEW:
It's Apple with its thumb in the dike holding off the bears. Other tech tracking sectors show the difference in weightings of Apple and subsequent performance with the equal weight obviously the most dramatic.
Continue to U.S. Market Sectors, Selected Stocks & Bonds
XLF, KBE, JPM & MS:
There's a lot of maneuvering in the halls of congress over financial regulatory reform. One thing you're not seeing is any leadership whatsoever from the administration and this repeats a pattern for just about all legislation. JPM and MS are posted since not only are they affected by reform but they've got the assignment to sell a big piece of GM that Uncle Sugar owns. Expect them to do their best prop job on that.
As I've been pointing out, materials are a vital sector reflecting possible growth elsewhere since the chain of industrial production starts here.
We all love our little monster Chucky but the charts seem to be saying there won't be a sequel this summer--but you never know now do ya?
Lots of REIT IPO's trying to hit the market. Two have been withdrawn and another priced at the low end of the pricing range. Remember there remains $1.3 trillion in debt to be repaid or refinanced in the next three years. That's a lot of IPOs eh?
Transports fade quickly to their old range as confidence in the movement of goods and people wanes.
IEF, TLT, LQD & PSK:
The quest for safe yield is driving investment decisions for many investors. Popular preferred issues are mostly in the financial sector so keep that in mind. Muni's are always interesting but with so many in trouble saving on taxes may be the last consideration.
Continue to Currency & Commodity Markets
$USD/DXY & FXE:
There were strong rumors throughout Thursday of intervention by central banks to support the euro.
(click to englarge)
Remember, its options expiration for gold and precious metals tomorrow. Some weird things can occur. The "cup & handle" formation above comes to us courtesy of our friend
You'll note this boring and seemingly unending trading range is mostly held hostage by energy markets.
The trading range continues pulled back and forth by supplies, currency and perhaps geopolitical tensions as well.
Trying to hold support but this messy market, even from weekly views, is just hard to deal with.
Base metals took off this week on perhaps increased Asian demand.
Continue to Overseas & Emerging Markets
European markets are just following along with the U.S. so investors aren't getting any true diversification at this point.
Is having "better relative performance" just a cop-out? Only if you're not involved.
It did surprise on the downside given the lift from the new prime minister and rise in base metals prices.
Just another resource rich market performing like it had nothing to offer.
Not a bad performance so far this week considering the high beta and global conditions.
The Russian market like many others is resource rich but in the same trending funk.
India seems more immune from global financial strife and can generate its own internal demand. Further it's a democracy as opposed to a dictatorship.
Yes, over a year of trading range action. There's plenty of different opinions about which direction China will take in the near term economically. There are inflation and housing bubbles, or not; government tightening, or not; a more flexible exchange rate, or not; and many billions in IPOs about to hit the markets. It is clearly the area of growth in the future but it's the near term that has everyone stumped.
Continue to Concluding Remarks
There is really little positive to find in markets today beyond rising base metals prices and perhaps gold. The market is in a funk and conditions are volatile and messy day-to-day. For investors interested in risk protection in uncertain times there is nothing wrong with cash or even SHY.
The news overall has been lousy so it's been unhelpful despite the best efforts to spin it differently. The best thing (and it's important) is low interest rates are the punchbowl that can drive prices higher.
July hasn't been a good month the past four or five years but earnings are forthcoming and good earnings and outlooks can help lift stocks higher.
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Disclaimer: Among other issues the ETF Digest maintains positions in: TIP, SHY, GLD and DGP.
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
Dave Fry is founder and publisher of
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