Debt Deal Yields More Debt: Dave's Daily



If the founders could only see what's happening now they'd be disgusted and mighty pissed off! This is hardly a market headline now is it? Well, you won't see it anywhere else but my sense is most people are feeling as Father George would feel right now.

We did, or are getting, the debt ceiling relief everyone was worried and fixated upon. We'll get a vote in the Congress after 6-7 PM EDT.

On the news of this last night, markets in Asia rallied. I was watching breathless and excited Bloomberg anchors in Asia cheering markets. Markets opened higher in the U.S. but quickly turned south as the important ISM Data missed consensus forecasts badly (50.9 vs 54.6 expected). This shows the economy is still contracting. The sell-off continued until we tagged the all-important 200 day moving average in several sectors, and with conditions much oversold, we rallied. The intraday DJIA sported a 280 point intraday swing.

Nobody is paying much attention to earnings news overall since the focus is on debt and the economy.

Gold fell, then rallied and fell again modestly as nervousness remains high. The dollar rallied against the euro and other currencies as the rubber band was stretched too far and Bucky was at critical support. Commodities rallied early but then fell after ISM data pointed toward weak demand. Bonds continued to rally despite ongoing debt and debt ceiling debate.

Volume was quite heavy and could be a selling climax since who's left in the game? Breadth per the WSJ was mixed to negative adding to the short-term oversold conditions.

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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

We're going to get the debt limit increase but we'll still get a rating downgrade. The debt limit settlement is puny frankly.

Now attention is going to turn to the economy which is threatening a double dip back into recession. This won't help future earnings.

The markets are still oversold and I noted over $2 billion left SPY just last week. No wonder ETF sponsors are begging Washington to get things under control.

George Washington and his colleagues would be dismayed to see what has happened to their creation.   

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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