Markets finished Friday higher but only did so due to a final 10-minute options related (I think) burst. I said it would get weird today with conditions short-term much oversold and options expirations.

More liquidations was the early market feature then the usual suspects, trading desks, hedge funds and maybe (Big Brother) pounced forcing a short squeeze. That lasted until mid-day when things started to drift away lower. But then most likely, options related activity kicked things higher into the close.

The Germans did what they had to do and the euro rallied further.

Volume was especially heavy much due to options-related activity. Breadth reversed course and was positive.

This presentation will be brief today as we have meetings that are a priority.

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. Sharp rally Friday leaves it still much oversold.

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. 10-15 minutes of buying doesn't alter the current fear measure.

Continue to Major U.S. Markets

SPY: This was a pretty crazy day all things considered. But the week, no matter how you slice the nonsense of the last 10-15 minutes of trading, was a stinker.



QQQQ: Frankly, most markets have the same look about them. Next week should prove interesting to see what kind of follow-through we get.

Continue to U.S. Market Sectors, Selected Stocks & Bonds

XLF: Banks were front and center Friday feeling they can weaken further financial reform legislation in conference.


XLB: Looks like even commodities rallied today.

XLY: Chucky the Consumer is still doing okay so says Mr. Market.

IYR: REITs also found support today. Are you getting the sense I have little brilliant to say today?

IEF, TLT: Bonds were popular most of the week but not Friday.


Continue to Currency & Commodity Markets

$USD, DXY, FXE: The Germans helped things out with their vote while options expiration took care of the rest.



GLD: Gold was hit hard with the reversal in the dollar oddly. Remember, precious metals options expire on Tuesday.


DBC: Commodity markets did reverse Friday but dominated by energy reversed course if only for today at the bottom of the range.


$WTIC/CRUDE OIL: Crude oil markets are still under pressure but the trading range remains.


XLE: Those that could probably caught and exercised some $50 strike prices.


DBB: Some, or even a large part of the rally here today was due to Australia reconsidering tax on miners.


Continue to Overseas & Emerging Markets

EFA: Germans saved the day today and kept most markets from collapsing.  This may be just temporary as there are miles to go before things are settled "over there".


EEM: Stick save at support Friday as commodity markets reversed course.


EWA: The Australian government proposed a 40% tax on miners which blew a hole in their markets. Now they're reconsidering. They did engage in a strong intervention to support the Aussie dollar. Don't you love these activist governments?


EWC: Loaded up with natural resources which are under pressure. A good rally Friday helped but a 6% down week isn't anything to cheer about.


EWZ: You can rest assured there a plenty of options specialists in the pits who cleaned up exercising $60 strike prices.


RSX: Russia markets held support even thought the week overall was highly negative.



FXI: A great week only being down slightly less than 2%.

Continue to Concluding Remarks

This post is deliberately short but the essence of today was manipulation caused by engineered short-squeezes by trading desks and hedge funds. The markets are broken and the last 10-15 minutes of trading Friday made the case.

Next week things should become "normal", whatever passes for that these days. Economic data will flow and hopefully markets will respond logically. Earnings are about done so those are now out of the way.

My apologies for the rushed and abbreviated post but other events prevent us from being more comprehensive.

Let's see what happens. You can follow our pithy comments on twitter and become a fan of ETF Digest on facebook.By Dave Fry, founder and publisher of ETF Digest and author of the best-selling book Create Your Own ETF Hedge Fund.


Disclaimer: Among other issues the ETF Digest maintains positions in: MDY, IWM, QQQQ, UUP, GLD, BOM, DPK & FXP.


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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