It looked like bulls had things well in hand as the 2:15 PM Buy Program Express left the station on time; but, methinks Da Boyz left some amateurs minding the HAL 9000s and they messed-up with just 15 minutes left in the day.

Bulls weren't helped when Fitch downgraded Spain from AAA to AA+. The rating agencies are really on top of things, aren't they? Fitch stated: "Despite government debt and associated interest costs remaining with the AAA range and blah, blah, blah... the economic adjustment process will be more difficult and prolonged than for other economies with AAA rated sovereign governments, which is why the agency has downgraded Sapin's rating to AA+." Fitch also downgraded CDOs guaranteed by Spain similarly.

Dow Jones released this news item at around the same time markets took their first tumble on the day:

The U.S. Federal Reserve is also active in currency markets, German Economics Minister Rainer Bruederle said Friday.
His comments come on the heels of remarks made by his Swiss counterpart who said that the Swiss National Bank purchased euros to buttress the single currency.
"It is a regular procedure of central banks," to intervene in currency markets, Bruederle said. "It is not a secret," that central banks have a foreign exchange rate target, he added.
Bruederle said "eruptive" movements have to be avoided. He previously said that China holds 25 percent of its foreign exchange reserves in euros.

Why is this important? It just confirms how active central banks around the world are at manipulating markets. I'm sure Minister Bruederle has gotten some, um, official phone calls.

The rest of the news today was running about as expected. Consumer Spending was flat, Personal Income was higher (Chucky saving or paying down debt?), there is no (cough) inflation if you don't use energy or eat and Consumer Confidence was slightly higher than expected. However, the closely watched PMI was lower meaning business expansion was slower than expected. This also means next week's ISM reading probably will be lower also.

May ended with around an 8% loss for the Dow Jones Industrial average while the NASAQ was down a little over 8%.

Volume today was moderate due to the impending holiday meaning many traders settled-up trades yesterday to extend their holiday maybe. Breadth again returned 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 short-term situation could lead to another down leg.

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 correction continues but hasn't reached bear market status yet.

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. Fear still remains present as markets remain unstable.

Continue to Major U.S. Markets

SPY: On daily moving averages we lose the 200 day MA but things seem well-defined technically despite the high volatility. Weekly chart views herald a possible trading range which only can occur if volatility is reduced. That's hard to imagine.

MDY, IWM: Both these sectors, especially IWM, is where a view of risk tolerances exist. When investors are feeling good about the economy and future earnings prospects we rally. If the opposite view, we underperform.

 

QQQQ: Tech leads the way higher for American business for the most part. Here we can clearly see support and resistance.

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

AAPL, DELL: Apple and Dell--a tale of two companies moving in opposite directions. Dell wants to compete which is a good thing and I hope they do well. Apple launched in Europe today with long lines wanting the product. The early bird gets takes the lead.

C, GS, KBE, XLF: Citigroup will do its reverse split when the government exits completely or when they tell them to? Goldman and the banks overall have friends in high places (Schumer, Frank, Dodd and so forth) so it's hard to imagine them being hurt by new regs. The ones that will be hurt will be smaller companies without the connections or economies of scale to deal with all the new government BS.

 

XLY: Chucky is shopping but the data say he's saving last month. You wouldn't know it from XLY.

 

IYR: Chasing yield sometimes is just a matter of closing your eyes, holding your nose and jumping in.

 

IEF, TLT, TIP, MUB: IEF is tied to mortgage money making mortgages cheap. Further duration risk is more limited than with say TLT where higher interest rates are always a threat to long term holders. TIPs present the obvious argument--if there isn't any inflation why are investors bidding these issues up? They don't believe the data or those that conjure it up. MUB is a very dangerous vehicle now. I say this as a former Municipal Bond Principal. Many municipalities are broke and bankruptcy rumors persist throughout the nation. Further, many of these issues are insured by MBIA or AMBAC garnering higher credit ratings than they deserve not to mention that these insurers couldn't cover any losses if necessary. It's understandable investors are interested in tax free income especially since most expect income tax rates to rise. But, be very careful.

Continue to Currency & Commodity Markets

$USD/DXY, UUP: The dollar is alternating from strength to weakness with each passing day so looking at the longer view is more profitable.

 

 

FXE: One day Greece, next day Spain. Wax on, wax off. This is a crisis that will stay with us sporadically since most governments won't tell the truth.

 

GLD: Gold appears to be reconstituting itself for another push higher especially given anecdotal evidence of European's in panic buying mode.

 

DBC: Weighed heavily buy energy and dollar considerations DBC can't break out of the trading range it's been in for many months.

 

 

 

$WTIC/CRUDE OIL: Crude oil also remains in a large trading range pulled around by demand concerns and currency issues. Then there remain geopolitical issues that remain for another day.


 

XLE: Investors don't know what the future is for this sector. We need oil and even most serious environmentalists know this. But, clearly the spill is going to hasten change one would think.

 

Continue to Overseas & Emerging Markets

EFA: Spain provided no lift today. Expect this two-way, day-to-day nonsense to continue.

 

EEM: EMs are pushed and pulled by commodity markets and all the other factors disturbing or encouraging investors.

 

 

EWZ: Brazil had a better week than many of its peers as commodity prices stabilized.

 

RSX: Moving higher with commodities period.

 

FXI: The number one economy on the planet was off last night but not today. Strange.

EWP: A huge range (nearly 18%) for the week for what should normally be a steady market one way or another. It's just another problem in Europe. Maybe investors will soon get the idea this crisis isn't going away anytime soon.

Continue to Concluding Remarks

It's a tough market ride. There's no question markets got oversold which seemingly created another one day meteoric rise. Was it just a one day wonder again? Based on the light volume Thursday it seems this way.

June is upon us already and no one's making money unless you owned Apple and some gold. That seems the conclusion for index followers versus stock jockeys. These conditions can alternate frequently favoring one method over another.

Next week will be short but not without news certainly. Will the oil spill be stopped leaving us still with the awful aftermath? What are the next dominoes in Europe? What will employment data look by Friday? This makes it a good time for an extended weekend.

I hope you enjoy yours!

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: MDY, IWM, QQQQ, UUP and GLD.

 

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 .