With his senate testimony over and with another shot at it at the House Thursday, Bernanke no doubt is preparing markets for QE2 (Quantitative Easing Part 2). Trial balloons or rumors were launched yesterday noting the Fed might eliminate interest paid to banks on reserves. The idea with this is to stimulate lending. If that doesn't do the trick in stopping a double-dip then the next sound you hear will be a massive fleet of helicopters with built-in Kinko's.

Ben did not provide a bullish message Wednesday noting the economy is softening and even seemed perplexed ("unusually uncertain" prospects) by this.

Despite being in a sea of mostly positive earnings reports markets sold-off sharply Wednesday. Bernanke's testimony is perhaps more forward-looking than last quarter's earnings news. 

Off topic slightly, I hosted interview with Senior Analyst Darin Newsom of DTN Telvent. Therein we discussed the usual suspects like stocks and bonds but spent a good deal of time focused on Darin's specialty, commodities including: base metals, gold, currencies, energy markets, grains and softs. You may listen at this link HERE.  

Wednesday's volume picked-up some on selling which repeats a familiar pattern. Breadth was negative.

Continue to Major U.S. Markets

SPY: With all the bullish earnings news this has to be a pretty disappointing day for bulls. All I see is an ongoing trading range currently but admit to being blinded by H&S tops everywhere.

MDY & IWM: Not a very encouraging picture by mid-week, then again, the week's not over.




QQQQ & XLK: I'm seeing H&S tops in my dreams.

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

AAPL, SMH & GOOG: The standout performer in tech this week was Google while everyone's attention was squarely on AAPL.

XLF, MS, WFC, JPM, BAC, GS, BRK/B & C: The above referenced charts comprise the heavyweights found in XLF. You'll note we're negative on the week for the ETF with spotty performance within the group.



XLB: Still up on the week with thoughts that Chinese demand will improve. This is hard to know if that's correct currently.

XLY & XRT: The consumer sector isn't doing much in the trading range.





IYR & XHB: Real Estate with REITs is a risking enterprise given heavy debt loads and iffy economy. Homebuilders? Well, you don't need me to tell you they're not doing well.


IYT & $BDI: Airlines are reporting mixed earnings depending on carriers but the bulk of the sector is shippers which are at the crossroads.




IEF & TLT: Bonds are this week's winners it seems with the economy weak. The 10 year is below 2.90% which seems ludicrous but shorts are getting squeezed since logic kills.


Continue to Currency & Commodity Markets

$USD/DXY, FXE & FXY: Currency markets don't know which way to turn next. Further, intervention from central banks, when properly timed, can scare off the most determined trader.


GLD: Gold is under attack as the commitment of traders reveals large commercial shorts and in the options markets heavy call option activity creating a stalemate perhaps.


DBC: There isn't much to say about this long trading range that Darin Newsom and I didn't discuss in our video podcast.


$WTIC/CRUDE OIL, XLE: Darin Newsom and I also discussed every commodity sector that follows. You'll get more fundamental news from him than me.


DBB: See Newsom review with the link in the intro.



DBA: Grains, softs and most agricultural commodities are thoroughly discussed in the video podcast in the intro as well.



Continue to Overseas & Emerging Markets

EFA: All markets seem well-correlated at the moment.


EEM: Emerging markets still have residual strength primarily due  to base metals strength.


EWJ: Japanese shares continue to languish overseas and concerns about debt levels increase within the country.


EWY: South Korean markets are strong. Samsung has all the business for many of Apple's semiconductor products.


EWA: Base metals and other commodities keeps Australian markets stable.


EWC: Same story north of the border as with the land down under.

EWZ: Brazil markets very strong relatively on continuing hopes for higher commodity prices especially in minerals. You can see how we backed-off some at resistance but the week's not over.

EWM: Malaysia offers a wide variety of commodities like rubber and palm oil.

ECH: Chile stock markets have been on a tear higher the past few weeks. Most people think they're buying copper but the government owns all those deposits.


RSX: Not much new to report as the trading range continues.


EPI: India seems immune from problems plaguing other developed markets like too much debt and economic worries. You just don't want to ride on a train or bus there.


FXI: There was a lot of positive action in China markets the past few days as investors speculate the government won't tighten the screws further and may relax previous tightening.


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 Concluding Remarks

Well, that wasn't very nice was it? This stock market volatility continues unabated and until solid and more durable trends can be discovered it's best to stay out from our perspective.

It's hard to know what traders were expecting Bernanke to say. Perhaps they thought he'd provide some clues as to the next round of quantitative easing. No matter, even before his testimony, traders were taking some profits even from great earnings reports.

Thursday is Jobless Claims, Existing Home Sales, Leading Indicators and more earnings.

After the bell on Wednesday good earnings were well-received from Baidu and EBay, but Netflix issued a poorly received report. And so it goes.

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 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 www.etfdigest.com .


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