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Markets were short-term overbought heading into yesterday and even today. With some selling this condition has eased somewhat.

We're still in a position to focus on earnings but, more importantly, Thursday brings market moving economic data from Jobless Claims as well. Over the past two months it seems like consensus estimates for Jobless Claims have remained at 450K. One week numbers are better and the next worse. The bottom line is unemployment statistics are just crawling along the bottom of the deep blue sea with only a blip here and drop there. Why is this? We've outsourced too many jobs that no doubt won't be coming back. Further, while we create cool "stuff" like Apple, the manufacture including parts and labor takes place overseas. It's hard to fault corporations for doing this as we live in a competitive world and there's nothing to stop this other than heavy tariffs. These would beget retaliation. But, currency manipulations should be called what they are--"unfair trade".

Overall earnings are beating expectations but how much of this is "old news" since most economic data point to at least a slowdown? This is the current conundrum.

Volume remains ultra-light while breadth was negative easing short-term overbought conditions.

SPY: It certainly appears as though bulls are a little fatigued. With volume light and the Beige Book mediocre it was time to sit things out.

MDY & IWM: Small-Caps are the most economically sensitive so it wasn't surprising to see them fade with Beige Book.

 

QQQQ: Not much to say as the chart says it all.

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

SMH & AAPL: It's a pretty peaceful Wednesday for tech's leaders.

AMGN, BIIB & IBB: Biotech's were hit hard by profit-taking on Wednesday as they moved too far too fast.

XLF: Financials were really quiet and trading much subdued.

XLB: Materials were weak but base metals strong which is difficult to reconcile at this point.

XLY & XRT: Jobless Claims Thursday could rock Chucky's boat.

 

 

IYR: REITs offer yield but is it a safe yield? That's the burning question.

 

IYT & $BDI: No need to even change the comment.

IEF & TLT: Bonds still not buying the "Recovery Summer". I think that language has been shelved for now.

 

 

MUB: There's a panic to buy munis by individuals fearful of the Obama tax increases. At the same time, many states are insolvent. Further, a few moments ago the Governator just declared a fiscal state of emergency in California. I wouldn't be comfy in munis right now. If the rating agencies push California to junk many muni bond funds will have to unload. Good Grief!!!

Continue to Currency & Commodity Markets

$USD/DXY, FXE, ULE & FXY: The dollar still remains under pressure while the euro rises. Economic data has been better in Europe and then there were those (cough) "stress tests".

 

 

GLD: You're darn right a lot of investors, including myself, didn't like the manipulative action in the NY commodity pits as those criminals took advantage once again of the unsuspecting investors. Please stay away from precious metals options. It's a rigged game.

 

DBC: Commodity issues were hurt by declining energy prices.

 

$WTIC/CRUDE OIL & XLE: Too much supply pushes prices lower.

 

DBB: Base metals price increases indicate better demand. That can generally come from China.

 

XME: Most metals prices were stable to higher but metals related stocks fell.

 

DBA & JJG: There's a lot of chatter regarding grains. Rumors of drought in Europe and Russia Wednesday followed Tuesday's rumor of a grain embargo in Russia. So far my only source isn't that impressed.

 

Continue to Overseas & Emerging Markets

EFA: A little more tentative on Wednesday as markets overseas were mixed.

 

EEM: No change here Wednesday in market or comment.

 

EWJ: A good rally on Wednesday in Japanese markets just because I called them "boring" the other day.

 

EWY: Some were offended by remarks yesterday regarding Korea but I can eat Kim Chee and drink Soju (good when soaked in cucumbers) with the best of them.

 

EWA: Still the same comment as before...at resistance supported by raw materials.

 

EWC: If I say the market's boring, all hell will break loose.

TUR: Turkey is a market where consumer growth is strong.

THD: Thailand is another of the good growth stories out of Southeast Asia along with Indonesia, the Philippines, Malaysia and so forth.

 

EWZ: A flat market is nothing to comment on Wednesday.

 

RSX: But I repeat myself.

 

EPI: Increases in interest rates above expectations were off-putting to some investors.

 

FXI: China markets down Wednesday as investors took profits from a week of gains in Shanghai.

 

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. Accumulation is reoccurring obviously.

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

It appears as though we're in a good position to go either way now that short-term overbought conditions have been relieved. A better than expected Jobless Claims number Thursday combined with more good earnings news will push markets back higher. Conversely a poor economic number will be sold in my opinion.

There's not much to add when volume is this light and conviction seems tentative. Friday will bring more serious economic data and earnings news will continue for the next two weeks or so.

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, UDN, ULE & TUR.

 

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 .