Market With Two Brains: Dave's Daily

It may be a good thing for the long/short crowd since opportunities are apparent as the DJIA and NASDAQ are heading in opposite directions. Options expiration can explain some of the weird goings on.

Earnings news has been primarily positive and beating lame Wall Street estimates with few misses. General Electric was the star of the show today rising 7% with its beat although some saw trouble with their key energy infrastructure business. But, for most, it was shoot first and ask question later. Financials rallied some despite a poor report from BAC.

The DJIA leaders today (MMM, DVX, BA and UTX) had higher share prices, and this being a price weighted index, it mattered more how those performed than even GE.

The dollar was hit hard again today as the euro rally continued on the belief the ECB will just copy the Fed and support/absorb all troubled sovereign debt sales.

Commodities were mixed with grains much higher while oil and precious metals fell. It's hard to reconcile gold falling with the dollar since the normal relationship would be inverse, but many believe European investors particularly are unloading some gold as risks seem lower now. But Chinese New Year is just around the corner and Asian buying is expected to continue with gift-giving in little red envelopes is the norm.

The Fed was busy with a large dose of POMO which keeps the Primary Dealers well-lubricated with freshly minted greenbacks.

Despite it being options expiration, volume became light once again on the rally and breadth per the WSJ was mixed to negative.

Continue to U.S. Sectors, Stocks & Bonds

Continue to Currency & Commodity Markets

Continue to Overseas Markets & ETFs

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

It's difficult to know if markets are in a topping process or not. DeMark weekly 9s indicate only "trend exhaustion" and nothing more. It doesn't necessarily follow a correction would follow or we'd just move sideways. DeMark weekly 9s in 2010 were quite effective both in calling for a correction (one of the average variety, one major and the last just a shallow almost sideways affair) of one degree or another. Current POMO activity is trying to achieve the Fed's stated goal of "higher stock prices". Will it work? And, if so, at what cost?

The financial media headlines will, and are screaming "8 straight weeks of DJIA gains". That index is just window dressing for the tourists; but, the divergence of major market sectors one to the other is startling since they were all in directional lockstep previously.

The famed David Tepper of the Appaloosa hedge fund who was primary in giving rise to the recent stock market rally and rallying cry "bad news is good, good news is better" was back on CNBC today. Dealbreaker was live-blogging his appearance. Their take is hilarious as usual but adult.

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: TBF, DJP, IAU, SLV, DBA, DBB, and EFA.

 

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 .

 

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

Dave Fry is founder and publisher of ETF Digest, Dave's Daily blog and the best-selling book author of Create Your Own ETF Hedge Fund, A DIY Strategy for Private Wealth Management, published by Wiley Finance in 2008. A detailed bio is here: Dave Fry.

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