There's a clash between ongoing worse than expected economic data and better than expected earnings. Seasonally, it's generally been a good time for bulls with earnings rolling out. Some, like Intel's Tuesday after the close had their CEO downright giddy. Ironically, the stimulants for Tuesday's rally were earnings reports from Alcoa and CSX, but while nobody was paying much attention both stocks closed flat to mixed. That was weird.

Economic data Wednesday revolved around poor Retail Sales data and a continuing implosion in mortgage applications. Also, the Fed Minutes were released showing governors pondering an economic slowdown.

The WSJ published an excellent article detailing why individual investors have left stock market sectors leaving it to (ahem) "professionals". This makes manipulative activities easy for Da Boyz.

So, with volume light again launching an end-of-day "stick save" prevented indices from doing that "sell thing" that is antithetical to current marching orders. Although the indices finished higher breadth was decidedly 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.

Continue to Major U.S. Markets

SPY: Sure, everyone's writing about the obvious bearish H&S top on daily and weekly charts. These impress me more on weekly charts as you see them less frequently and more consequence. The bullish inverse H&S top is quite apparent on weekly charts from the March 2009 low. Then there's that "death cross" deal which never has seemed "that" effective to me but there it is.


MDY & IWM: Things seem very clear and similar with weekly charts for Mid and Small Cap stock ETFs.

QQQQ & XLK: Once again tech leads markets higher, but note the difference between under and outperformance of QQQQ vs XLK. In the former, AAPL is 20% of the index while with XLK the weighting is much less. So when AAPL is doing really well as previously, the QQQQs outperform but that's changed this week.

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

SMH & INTC: Intel's CEO was downright giddy over company prospects and that got bulls perhaps a little too excited as some sold into the rally.

XLF: The big banks will do well because the FinReg deal is a sham and the Fed has their backs. What's to argue about?


XRT: It's hard to imagine retail doing well with mortgage applications imploding, consumer confidence down and retail sales soft. Ah, the answer? Program trading since this sector is in the basket.


XLB: All the hoopla yesterday over Alcoa seems a distant memory as is the stock.

IYT & $BDI: Airlines will report and do well since they'll charge you for sleeping or taking off your shoes in flight. Railroads have good traffic so there's a lot of "stuff" moving about the U.S.. But, overseas demand for commodities from China must be terrible since the Baltic Dry is falling apart.


IEF: Bond auctions will continue to flood markets and the Fed's minutes released Wednesday indicates little appetite for a change in policy.


Continue to Currency & Commodity Markets

$USD/DXY: Uncle Buck continues to slip, slide away.



GLD: I just link to Jesse once again who believes there's a determined seller over $1215.00. Gee, who could it be?


DBC: Commodity tracking funds have been going nowhere slow for a long time. Most are heavily weighted by energy.


Continue to Overseas & Emerging Markets

EFA: European markets and all markets frankly are doing about the same thing.


EEM: Once again, a U.S. centric market with earnings dominating for now.


EEB: Once again it's a U.S. centric market for now.

Continue to Concluding Remarks

Due to other commitments this commentary started late and is therefore somewhat hurried and brief--my apologies in that regard.

My personal opinion is "the punchbowl" is still the driving force for most stock markets and sectors. As long as interest rates remain this low investors will find any excuse to buy even while ignoring obvious economic negatives.

We've published a podcast video with Direxion Shares Sr. VP Andy O'Rourke regarding the launch of 4 new leveraged products Wednesday for retail and natural gas. You may listen HERE

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, and UDN.


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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