POMO (link: Permanent Open Market Operations) were launched at 10:15 a.m. POMO currently is an action by the Fed to buy Treasury bonds from, in this case, their Primary Dealer network (dba: Da Boyz). In this case Da Boyz get cash and stocks immediately ramp higher. A mere coincidence? Only if you were born last night.

Further, per ZeroHedge, future operations like this will take place August 19, 24, 26 and September 1 st. So, lock up your shorts and stay out of the way.

By the way, the financial media probably has you believing today's little jam-job was all about great earnings news from retailers like WMT and HD plus a mixed bag of economic data--better Industrial Production but worse Housing Starts.

The bottom line the markets are in full financial engineering mode whether it's via the Fed or companies with high cash balances buying back shares. Granted companies are looking to expand via acquisitions and there's nothing wrong with that but how many companies are spending on R&D beyond mere gadgetry?

Retailers won't do great things until the housing issues are resolved and employment conditions improve. Until then they're just cutting costs and beating estimates without growing measurably.

Volume was once again ridiculously light given all the action (check-out the heavy selling into the close below) which just repeats the previous pattern. Breadth was quite positive.

SPY: We still have earnings to entertain us and more Fed POMO action with the next on Thursday. Hmmm, that's another Jobless Claims day. Another coincidence?

MDY & IWM: The most oversold sectors from last week rallied the most this week with Smallies leading the way.

QQQQ & AAPL: Tech's doing well overall this week but it seems to be struggling higher.

Continue to U.S. Sectors, Stocks & Bonds

WMT, HD & XRT: Walmart owns consumers in their sector and had a good report. Home Depot beat estimates but was short on revenues but the street didn't care at least on Tuesday.

DD & XLB: Their good performance today is in response to better than expected Industrial Production.

MS, GS & XLF: I wonder if the Fed would launch these POMOs just to prop markets to get the GM deal done. I'm just such a cynic.

JNJ & XLP: Johnson & Johnson being accumulated by Warren Buffett which is in a more stable sector.

DYN & XLU: Will there be more M&A in utility land like the DYN takeover? It's possible now that cap and trade seem dead.

IEF, TLT, EMB, MUB, BWX, LQD & PFF: All reflect the demand for yield even when there's little. PIMCO's Bill Gross is buyer of the long end believing in deflation while Buffett is a seller of the long end believing more in inflation. Take your choice there. The congress bailed-out their pals in broke municipalities and perhaps only bought time. But high net worth investors are scared to death of tax increases and are buying munis anyway. 


Continue to Currency & Commodity Markets

USD/DXY: Uncle Buck is taking a hit still with thoughts the euro's a better deal.

GLD & SLV: Like so many other markets, GLD is just range-bound. Silver is also more volatile but too is range-bound.

DBC: The tracking indexes for most commodity ETFs are just in trading ranges.

XLE: Supposedly this is one of the favorite sectors for institutions currently. They're a pretty fickle bunch judging by the price action.

DBB, XME & FCX: The metals complex overall is responding to good Industrial Production data and thoughts that things in Asia are really nothing to worry about.

Continue to Overseas Markets & ETFs

EFA: All things are okay in Europe now after a weekend to reconsider more debt worries. A little time and we forget until the next time.

EEM: EM's are higher with commodities and remain in a trading range for now.

EEB: The BRIC ETF will do for now since everything is in a trading range.

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

POMO and its effects were on full display today. Pay attention to the dates where these activities will occur again and try to avoid them. The markets have never been more peculiar with manipulation, light volume, trading ranges, zero interest rates, high sector correlations and more.

It's frustrating and unproductive to be in trading ranges since they're costly.

Target's and BJ's Wholesale will be much in focus tomorrow with earnings results. And, there will be little in the way of economic data to spoil their show should they beat estimates handily.

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: TZA, FAZ, XLU, TIP, UDN, GLD, DGP and 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 www.etfdigest.com .