MENA Unrest Roils Markets: Dave's Daily

This unrest isn't going to go away it seems. It just keeps escalating country by country. There are some bad actors wishing to take advantage of conditions but that's to be expected. In the end, it should be a positive for this region but the end might be lifetimes away. In the meantime, the U.S. is paying a huge price for not having any coherent and effective energy policy over the last 40 years. This is due to a lack of truth-telling and courageous leadership. Absent this we have outsourced our needs to unstable areas and fought two recent wars to maintain a safe and reliable flow of supplies. This should be unacceptable yet it continues.

Meanwhile back at Wall and Broad markets became unhinged over rumors of Saudi tanks in Bahrain and U.S. ship movements to the Libyan region. Oil prices spiked to $100 again, precious metals rallied while the dollar rallied slightly in a safe haven move. Curiously, bonds were lower most of the day only to close the day higher.

Economic data was focused on the ISM Index which came in higher but near expectations. The headline number was bullish but inside the numbers the "prices paid" component soared meaning higher end prices, a margin squeeze and/or stagflation.

Earnings continue to come in beating expectations overall but we're at the tail end of the season. Earnings to come will center on retailers which should rightly be viewed, given current conditions, as old news.

Bernanke gave his Senate testimony and mostly lied his way through it. I've given up trying to be ambivalent about this since the lying and spin should upset everyone. The "core rate" nonsense is a manipulated smoke and mirrors diversion from the truth. Inflation is rising and we see it in our real daily experience.

Volume increased substantially as has been typical on selling days with SPY volume increasing by 50% from Monday. Breadth per the WSJ was decidedly 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

Is it just my imagination or is this bullish trend becoming less solid. We'll see if the dip buyers come in to save the day soon enough. Be wary of some ideas to tax precious metals holdings as there are some rumors to this effect floating about.

The MENA regions are on fire. There isn't a country in the region not affected. If this continues and oil supplies are interrupted who will we blame? It would have to be ourselves and weak politicians.

Most of the earnings news will be behind us. Retailers may continue to report good earnings over the next two weeks but if oil prices continue to rise or stay in this area, consumers will slow their purchases.

We still have the Fed's Beige Book Wednesday, ADP employment and perhaps more important Crude inventories. Don't forget Jobless Claims on Thursday and the Unemployment report Friday that may have a more positive effect if numbers improve. But, all eyes are on energy and MENA at the moment.

The knowledge a GS board member leaked information to a hedge fund regarding the $5 billion Buffett stock purchase was some of the negative news of the day. It isn't much of a surprise. In this regard, a poll showed 75% of people believe Wall Street lies to the public at least half the time. This doesn't surprise either.

There won't be a report tomorrow as we're traveling.

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: IWM, QQQQ, XLB, XLI, XLY, UDN, GLD, SLV, DBB, DBA, MOO, XME, EFA, VT, MGV, BND, BSV, VGT, VWO, VNO, IAU, DJCI, DJP, VMBS, VIG, TBF, ILF, EWA, IEV, EWC, EWJ, EWG, EWU, BWD, GXG, THD, AFK, BRAQ, CHIQ, TUR, & VNM

 

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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