Speaking for myself, and after nearly 37 years of being in the business, I can't remember a period of such despair for the country's future. But, I'll snap out of it, um maybe. The country has been in a bad spot the past few years transcending two administrations. Sure, QE and QE2 plus ZIRP have driven stock prices higher previously but little else has improved.

Unemployment, housing, debt, war and perhaps just as important, no coherent energy policy are at the core of our frustration and disappointment. The country suffers generally from a leadership vacuum and courage to face up to problems.

Sadly most politicians would rather cynically try to score cheap points than be serious. Most Americans would gladly do what it takes to make things right but there just isn't any guts politically to make the hard choices and explain them to the people. Think what you will of Paul Ryan's plan, at least he's put something on the table that's serious. Where are his counterparts' proposals?  

I've felt pessimistic before but I don't believe I've seen this much disappointment, concern and frustration throughout the country.

Meanwhile, back at Wall and Broad, markets continue their correction. From my biased view, what we're seeing is a technical reaction to monthly DeMark 9s completed in May and the likely end to the safety net from QE2. Also markets appear very similar to 2010 when after the May "flash crash" we just churned violently throughout the summer. We haven't had a "flash crash" obviously but so far just a rollover into what is for now a shallow correction. Remember, in the fall of 2010 markets were lifted by the commencement of QE2. A QE3 seems off the table so goes the conventional wisdom but I don't trust the Fed any longer.

Let's not forget some companies are doing great things with Apple ( AAPL) on display today but they're the exception. Others sporting gains are based on a weak dollar, cheap money from Fed policies and financial engineering schemes including stock buybacks financed by low interest bond sales. This isn't productive ultimately even if it makes earnings look better on fewer shares.

Monday, commodities were down overall, the dollar was a bit higher, bonds may be maxed-out in price and stocks are now officially short-term oversold. I expect a bounce in the next day or two but that's about it.

Volume declined slightly from Friday but still is more elevated than we've seen in a long time. Breadth per the WSJ was quite negative and completes part of the oversold picture.


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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

I'm not going to hide from being displeased by the American condition or the dreadful leadership we see all around us.

We're short-term oversold at least per the NYMO but I have to say I've seen it at -100 a few times and you can see in March we were -80. So from this view we could get a bounce. However, at the same time the VIX doesn't indicate any mad dash to put protection which is odd and contradicts the obvious bearish action of late.

There really isn't a lot of data beyond Fed speakers making the rounds until Wednesday's Beige Book then its back to Jobless Claims and that's about it.

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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