Other than a friendly Supreme Court decision not to review a tobacco case; a "bear raid" on gold; a sharp rally in bonds and a positive report from Micron Technology after the close made Monday pretty dull. I was contemplating an escape from writing much given market action; but, it's raining so I may as well do some work.

This should be a slow week until Jobless data hits on Thursday and Friday. Then action might become more volatile as volume slows before the holiday.

For the most part Monday bulls and bears toyed with one another finding little direction and basically giving up in the end.

Importantly and away from tech some important sectors like materials and consumer discretionary were quite weak.

Monday's volume was again light and breadth modestly 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 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. Fear creeps-in...again.

Continue to Major U.S. Markets

SPY: Investors just didn't give a rip today unless they were in just a few sectors. It's the same story as last week with the obligatory bearish H&S top formation which is only effective when they work (duh!).

MDY & IWM: Mid and Small Caps are showing the same look as SPY overall. Predictions are a dime a dozen and I have none to offer other than what is drawn. The H&S top formations only are predictive randomly; however, the "must hold" lines are more significant. The downside levels beneath those lines are severe in my opinion.



QQQQ: I'm very concerned about the QQQQs given how the weightings of the linked index ($NDX) have become skewed too heavily to Apple. In fact, the weighting of Apple is now 20% of the index which equals the combined weights of MSFT, ORCL, INTC, GOOG and QCOM! This then becomes dangerous for holders if only because it's misleading to the average investor. Further, you must remember the popular futures contracts are linked to the index which can also throw things off. Remember, this is great for QQQQ holders when Apple's stock is rising as it has so well of late; but, when and if conditions for it correct the underperformance could be significant. What's the solution? Investors can use XLK, IGM or VGT for example where holdings of Apple are half that of QQQQ.

From what I can glean from the NASDAQ, they have no intention of rebalancing until Apple reaches its mandated limit of 25%. While the company has been doing great things lately, I'm reminded of the old Chinese adage: "Even the monkey can fall from the tree."

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

SMH & MU: Semi's had a good Monday with hopes strong for Micron which posted great earnings but the stock was down nearly 5% in after hours trading before their conference call and outlook.

XLF, KBE & GS: GS analyst downgraded the banks today (can't do his own) suggesting the tax costs to banks will be costly from the new legislation. However, with Byrd's death the issue has become more complicated for support. Maybe they'll just Rahm it through like everything else.



MO, XLY & XLP: Cigarettes, booze, guns, drugs and gambling are staples in tough times, eh?   


XLB: The action in materials is not encouraging at all.

IEF: Monday was a "wow" day for bonds!


Continue to Currency & Commodity Markets

$USD/DXY & FXE: Not much action in currencies but the euro saw some profit-taking.

GLD: These occasional bear raids from TPTB happen from time to time. Perhaps this light volume week they can work their magic more effectively. Let's face it, rising gold prices are a no vote to global economic policy.  



DBC: Quietly down with precious metals and energy markets.



XLE: This market just makes a trend-follower want to hurl!

Continue to Overseas & Emerging Markets

EFA: Markets were higher early but then had the distinct misfortune of closing and leaving things to the U.S. to deal with.


EEM: EM's are doing better than most markets but captive to their own trading range for now.


EEB: This will wrap it up for us today since the action is slow and progress difficult to measure

Continue to Concluding Remarks

Giddy Up! That's what Kramer would say about having a really good cigar. Courtesy of the courts companies involved in the lethal stuff had a great day even though our friend only deals with Monte Cristos.

Markets should remain quiet as we allow TPTB to keep things maintained until the month and quarter end on Wednesday. Then we'll start getting more serious action with jobs numbers on Thursday and Friday. It could be a pretty good show given the Monday holiday and some light volume.

If things stay like this there's little reason to write (I might not).

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: TIP, GLD & 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 www.etfdigest.com .


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