The routine lately has been for bulls to step in and buy any lower gap open. That was true today as bullish momentum still dominates no matter the poor data. Jobless Claims continue along the ocean floor and disappointed Thursday, but Home Sales were better than the previous month as perhaps seasonal factors with summer closings before school opens. Also, home buyers are adjusting to the absence of the first time home buyers credit so this could be the new normal for transactions. Finally, Leading Economic Indicators were better than expected which cheered bulls for a while. Then along came more troubles from Europe with Ireland's GDP reported at a negative 1.2%. The HAL 9000s must be programmed for bad news from Europe to trip the sell program button, and down we went.

The damage from selling wasn't too severe but there were some losers in financials while commodity markets were mixed overall.

Volume was still light but heavier than recent days with most coming in the late afternoon on selling. Breadth was negative.





SPY: Dare I repeat myself? The H&S top may be a thing of the past even if the market declines because too much time has passed (possibly).

MDY & IWM: For both major markets we're now down on the week which given the greater volatility should be no surprise.

QQQQ, XLK & AAPL: Apple ended higher on the day but not close to the intraday high. The problem most investors should have is the overweight of one stock within the index.

Continue to U.S. Sectors, Stocks & Bonds

SMH, AMZN & MSFT: Just wandering through tech-land spotting winners and losers. You can buy just about anything at AMZN now while semis suffer since most are made offshore. Why are conditions at Microsoft bizarre? Most of their large cash hoards, like many large multinationals, are offshore. If they repatriate it, they must pay high U.S. corporate taxes in addition to the lower corporate taxes offshore -- a double tax. So, to increase the dividend, they sell short-term bonds for less than 1% and avoid the tax. Most Americans don't know U.S. corporate taxes drive companies offshore to friendlier environments. We outsource jobs and wealth -- pretty stupid.

XLB: Materials suffered in the sell program basket despite higher base metals prices.

XLF: I don't think the new FinRegs are as friendly to banks as initially advertised by TPTB.

XLY & XRT: Retail is a sector I don't get since the data driving consumer confidence and spending (employment and home prices) aren't supportive.

XLI: Weak with sell programs and a slightly stronger dollar.

IYR: In the volatile trading range still.

IYT: Backing away from resistance with sell programs.

XLV: Health care issues caught in a tight range with sell programs Thursday.

IEF, TLT & TIP: Bonds just continue to defy any notion to sell them.

Continue to Currency & Commodity Markets

$USD/DXY: The dollar seems merely pausing at support as problems in the eurozone bob to the surface randomly like tar balls in the Gulf.

FXE, FXY & FXF: Ireland hit the euro some today but elsewhere the dollar is still very weak.

GLD & SLV: Gold and silver still showing the way higher.

DBC: Very slow market higher but confined in the range.

$WTIC & XLE: I know this is getting repetitive, but above indicates the way things remain.

DBB & JJC: Base metals are leading the commodity complex higher among others.

DBA, JJG, JO, SSG: Weather and crop reports drive markets overall.

Continue to Overseas Markets & ETFs

EFA: European shares hit by troubles in Ireland, but still up on the week.

EEM: iShares announced Thursday that EEM reached one billion shares outstanding. Does this scare you?

EWJ: Japan's shares are churning more because of yen pressures than anything else.

EWA: Base metals price increases can't hurt markets down under.

EWC: Canada shares hit resistance overhead like it's made of concrete.

EWZ: Brazil shares are sharply higher this week with base metals prices, but now at resistance.

RSX: Russian markets go basically flat on the week with uncertainties in the financial and energy sectors.

EPI: India markets became quickly overbought and are seeing some profit-taking.

FXI: China markets are quite uncertain and have been for a long time -- the trading range reflects this. The ying and yang between hyper-growth and government tightening keeps markets in check for now.

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

Thursday's market mischief was entirely machine driven as programmers must have lower gap opens programmed to buy while any negative news from Europe is programmed to sell. Honestly I think it's that simple.

The weekly charts so often posted here for the major indexes still have the lingering bearish H&S tops. But, they're quite long in the tooth now and are losing their validity if only because markets didn't crater. A trading range environment is all this pattern has yielded thus far. The Fed's policies of near zero interest rates and POMO have kept markets propped as investors have few investment choices except bonds, Apple and precious metals. Bonds with negligible yield aren't much more attractive than cash at the moment. But investors are a yield hungry group and prone to take risk taking on the notion they'll get their principal back eventually. This is a bad situation.

Durable Goods and New Home Sales are on tap for Friday as we near the end of September.

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: IYR, GLD, DGP, SLV, AGQ, DBB, BDD, DBA, DAG & EEM.


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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