Markets Mark Time: Dave's Daily

News of an S&P rating downgrade for Greece to CCC was hardly a shock but it took a toll on stock market bulls. They couldn't manage to hold onto gains despite some positive M&A activity. More telling perhaps was the broad decline in just about all commodities where the mood and prices seem to indicate a lack of demand for just about everything. This may be the more accurate takeaway from Monday's action since economic softness is starting to have an effect.

Energy, precious and base metals, grains and softs were down across the board. Grains may rally, as with carryover stocks very low, any disruption to supply could cause prices to rally. The flooding of the Missouri River now underway could be such an event. The dollar traded in a wide range but ended the session slightly lower despite the Greek situation while bonds were mostly flat.

Former Obama economic advisor Larry Summers posted an op-ed piece suggesting what the country needs is another round of economic stimulus from the government. This will go nowhere other than to let people know he still exists.

The Fed is still engaged in POMO activities and Primary Dealers (Da Boyz) can expect 12 more trading days ($5 billion per day) of bond buying (12 days of Christmas?) from the Fed until QE2 ends. 

And, yes by most reliable measures stocks remain short-term oversold as breadth continues to be negative. Volume on Monday was a little heavier than average. 

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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

It was a pretty boring day but the bottom line is the NYMO says we're much oversold and should see a rally of some proportion.

Economic news starts first from China, then Best Buy ( BBY) earnings news, PPI and Retail Sales will be in focus. I expect some sort of rally for a Turnaround Tuesday. There will be more M&A not to mention an IPO from Pandora.

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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