It is an incredible performance Mr. Market has put on this week and there's still the grand finale with Friday's employment report. Markets are oversold and that can continue longer than most expect. There isn't a shred of good news to be found unless you like low mortgage rates. This week's economic data and news releases have been dreadful overall and Thursday was no exception. Pending Home Sales fell off a cliff and Jobless Claims were worse than expected as well.

A gold bear raid and euro short squeeze were highlights of the day. I can't prove it but clearly banks were hard at work on the COMEX in light preholiday trading to slam the metal. Were they acting on behalf of their patrons on high? Who's to say? It seems more than a coincidence.

At the same time, bonds are ridiculously overbought and yields hardly worth chasing unless you're an institution (insurance company, pension plan and so forth) that "must" own them.

Volume Thursday was heavy once again as (ahem) some bottom pickers early weakness to do some buying. But, once again breadth was negative meaning markets by that measure are oversold short-term. (See NYMO)

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 is on the rise still.

Continue to Major U.S. Markets

SPY: With a day to go, markets at critical support, oversold short-term and an important employment report Friday puts a bear market close at hand.

DIA: I don't usually post the Dow Jones Industrial Average but there should be an exception now. But, you can see we're at a critical level.

MDY & IWM: There's not much room to maneuver in these markets either. But, selling has intensified.


QQQQ: You've seen the bearish H&S pattern drawn here the past few weeks and the only thing that's changed is we're now at a more critical level of support. By the way, I've spoken with officials at the NASDAQ regarding the overweight situation perceived by many of AAPL in the index. More on that later as I'll write a report.

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

XLF: I'll just single out a few market sectors that are critical at this time. Financials would lead the way and right now it's failing.


XLB: Materials are also at the roots of economic growth and things aren't looking good.


XLY: The much discussed consumer is supposedly two-thirds of our economic growth and current reports suggest they're spent and discouraged.



IYT: Transports tell us how much "stuff" is moving about and it seems things are slowing down.



XLU: Aside from the obvious slow going in demand from the meter readers from too many vacant dwellings, government policy toward energy and power lack clarity.

IEF, TLT & TIP: The charts tell us bonds at nosebleed levels and correspond with fear levels and low trust in authorities. TIPs on the other hand show a fear of a government money printing binge.

Continue to Currency & Commodity Markets

$USD/DXY, FXE & FXY: The euro rallied on a successful auction from Spain while the dollar fell and yen advanced. Since the situation in the eurozone continues to bubble to the surface like tar balls in the Gulf, one day does not a trend make. A good summary can be found here.


GLD: Da Boyz put on a pretty good raid at the COMEX today acting with volume getting light before the holiday they could have a more substantial impact. Were they acting for their bosses at central banks afraid to see gold breakout too far? A good question, but they're not going to answer it ever.


DBC: Back to the bottom of the range once again. Durable progress one way or the other is hard to achieve.


$WTIC/CRUDE OIL: Still in a trading range and crushed by poor economic data.

XLE: A messy market, energy products down and with it energy stocks.


DBB: Base metals suffering from poor economic data which translates to equally poor product demand.


Continue to Overseas & Emerging Markets

EFA: European shares continue to suffer but many like EWG and EWP rallied Thursday.

EWP: Spain's shares rallied in the U.S. with the euro and a successful bond auction in the country. Trouble over? Hardly.


EEM: EM's struggle along with commodity slide.


EWA: A reflection of lower commodity prices and lower demand from China.



FXI: There's a slowdown in China underway.

Continue to Concluding Remarks

Friday puts the nail on what proved to be a truly negative week. I'll leave it right there and await the week's final outcome.

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 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 .


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