While the DJIA eked out a small gain, other sectors struggled all day. The inflation bugaboo you're not supposed to see is making its presence felt in emerging markets. Their authorities aren't using "pretend" inflation measurements and are taking action by raising interest rates. This has happened in India, China and threatened in Brazil.

At the same time, the COMEX, rumored to be short deliverable silver, have instituted draconian margin increases to knock prices lower. This reduces the likelihood of delivery demand -- who said this is a free market? CFTC Commissar Gensler, a former Goldman Sachs director, now conveniently is in the hen house and one wonders if that's a good thing. Nevertheless, silver prices plunged from their lofty levels dragging gold and many other commodity markets down with it. Now we'll see if this engineered bear raid is over or not. Silver had gone parabolic and the volatility could only increase. I've been involved with silver since the Hunt Bros. days in the 70s and it's not a game for neophytes.

Economic data was good with Factory Orders stronger than expected and Auto/Truck sales strong. However, with the latter it's always a case of channel stuffing by the carmakers to the dealers. Now we'll see if the inventory can be sold.

Earnings data was not so great with Sears (SHLD) and Clorox (CLX) providing disappointing results. The DJIA while barely closing higher internally was a messy picture. Tech struggled all day with Google (GOOG) and Broadcom (BRCM) leading the way lower while Apple (AAPL) and Intel (INTC) held things together somewhat.

Most multinational companies reporting good results profit by the weak dollar and it's just that simple frankly.

Volume increased marginally with selling which is typical. Breadth per the WSJ was quite negative.


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Below is an ETF Digest internal monthly chart of DIA (SPDR DJ Industrial Avg ETF) with DeMark Sequential Counts highlighted. May is presenting a "9" count even as the month is quite young. It would take a close beneath $118.60 for a "9" not to be registered. Importantly, this presentation is also seen on most major market ETFs (MDY, IWM, QQQ, EFA and many others). This may indicate "trend exhaustion" which may also lead to sideways action or even a correction. The last "9" that failed occurred in January 2010 with the correction within the 9 itself. One reason these indicators may fail has much to do with Fed monetary policies which can steamroll many technical indicators. That said, QE2 and POMO will end supposedly in June coincident with this presentation. This also corresponds with the "sell in May and go away" maxim.


Continue to U.S. Sector, Stocks & Bond ETFs

Continue to Currency & Commodity Market ETFs

Continue to Overseas Sectors & 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

Without lifting a finger, the Fed and Treasury have succeeded in taking some heat out of commodity markets. We'll see how long this lasts. If global economies are going to go soft and enter a stagflation period this won't be good for stocks.

M&A is the key to keeping the animal spirits alive as rumors of an Alcoa takeover feed the beasts.

BRIC countries are leading markets lower overall as they tighten monetary conditions leading to lower stock prices.

ISM Services data Wednesday along with Crude Inventories.

Let's see what happens.

Disclaimer: The ETF Digest maintains active ETF trading portfolio and a wide selection of ETFs away from portfolios in an independent listing. Current positions if any are embedded within charts. Our Lazy & Hedged Lazy Portfolios maintain the follow positions: VT, MGV, BND, BSV, VGT, VWO, VNO, IAU, DJCI, DJP, VMBS, VIG, 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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