Alcoa beats repeatedly lowered estimates by a penny and bulls go nuts. Once again volume was quite low for this type of rally day. Perhaps those "in the know" know more than us peons looking for more substance and commitment to markets -- meaning we're the idiots, or sold out bulls.

I don't know if analysts are playing a game or the companies mislead them regarding this never ending "earnings beat estimates" situation. Are the analysts incompetent? Or, are they deliberately low-balling numbers to get the best pop from stocks they're covering? I don't know.

YUM Brands just reported and they beat estimates (55 cents) and reported 59 cents. They also upped guidance. Intel just checked in with earnings of 51 cents beating 43 cents estimates. Revenues increased more than expected and Intel guided higher. So the "beat" goes on.

Bulls must believe good earnings as trumping poor economic data and that's all one can conclude. Wednesday this belief will be tested with a slew of economic data from Retail Sales to the FOMC minutes.

Again, volume remains on the light side given the scope of the advance and breadth was positive. This continues to indicate a game for trading desks and few other players.   

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

SPY: I can't be too cynical about all this--well maybe I can. Volume will matter perhaps when everyone is sucked-in. The H & S top remains intact with the right shoulder staring at us. All we see now is a trading range but that won't last probably. If we climb above the neckline at around $115 bears will have to throw in whatever towels they have left.

MDY & IWM: Again, on up days we outperform in these sectors while the opposite occurs on down days. Again, where's the volume?


QQQQ & XLK:  Today we see where the heavy weighting (20%) of AAPL in the QQQQs can hurt or hold back performance. Stay tuned for my write-up about this with data from the NASDAQ. XLK has a much lower weighting in Apple than QQQQ and underperformed when Apple was on a tear higher. Now, with the stock under pressure there is underperformance for the QQQQs.

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

SMH, INTC, AAPL & GOOG: Chips are leading the way as Apple deals with its PR problems and duct tape on iPhones. Google is also bogged-down in PR issues and being sued by all manner of countries. Their episode with China was a loser, and despite their initial strong stand, they caved to the dictators in the end.







XLF: The government will pass a watered-down financial reform package that Da Boyz will handle with ease. The smaller players will be pushed out of business since many don't have the economies of scale to keep up with the paperwork. It's the way this stuff goes all the time--punish the little guy and protect those that "pay" and reward the polls.




XLB: Alcoa didn't deliver positive results for it as it did for the rest of the market. Silly.

XLY & XRT: A good trade might be short XRT and long XLY since they're really different animals.




IYT, CSX & $BDI: To add to the confusion railway data indicates heavy loads while BDI indicates little action in hauling commodities like iron ore about. What's a fella to do?


IEF & TLT: Auctions will be coming early and often as there's lot of debt to finance. Gee, I wonder how this could happen?

Continue to Currency & Commodity Markets

$USD/DXY, UDN, FXE & ULE: Well Uncle Buck is taking it on the chin these past few weeks as investors perceive all is well in the eurozone. It could be a mirage of eliminated toxic waste from stress tests and let's not worry about Portugal downgrades.  



GLD: Gold can't make up its mind if it wants to rally with the euro or do the opposite. These are strange times.


DBC: The commodity tracking funds are going nowhere slow.


$WTIC/CRUDE OIL, XLE, FCG & BP: Energy markets higher on lower dollar primarily.




DBB: Base metals prices moving lower does fit with the subdued performance in materials, Alcoa, the Baltic Dry Index and a declining Chinese stock market.



DBA: We'll be doing a podcast interview with Darin Newsom of DTN tomorrow for broadcast by the week's end.



Continue to Overseas & Emerging Markets

EFA: European markets are in phase with every other market in this low interest rate environment. This comment applies everywhere.


EEM: The focus is more on the U.S. at the moment.



EWZ: Once again the focus now is on the U.S. but that could change.


RSX: In a trading range but probably not for long.


EPI: Still U.S. focused this week with earnings but a stable market relatively.


FXI: But I repeat myself--U.S. markets in focus.

Continue to Concluding Remarks

You can argue all you want (and I do) with the low volume but the tape is bullish at least short-term. How durable this trend is open to debate since we've seen this only the previous month. Then we had the same magnitude of rally heavily sold on economic data which is now ignored. But, more economic data is coming forth Wednesday and it could be market moving the other way.

Clearly, in after hours trading, Intel's results have lit a fire under markets.

So there's no messin' with the bulls for now. But volatility hasn't completely left us.

It's strange how everyone was excited about Alcoa and CSX which got the rally started, but those stocks basically did nothing or fizzled out.

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: GLD, ULE, UDN & EPI.


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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