The debt ceiling has been raised and conventional wisdom had it that we'd rally. That notion was blown apart Monday and Tuesday especially. Americans are facing an uncertain future with debts and ways to pay for them. The debt ceiling will create yet another commission to come up with solutions. This is pretty dumb since we already had a presidential commission with a recent report that no one wanted to deal with, especially the president. The focus has shifted from this Washington melodrama to real stuff like economic data. Today Personal Income and Spending showed the first decline in 2 years. Recent reports taken together indicate a rapidly declining economy. In fact, J.P. Morgan economists have slashed forecasts for the second half of 2011 from 2.7% GDP growth (already reduced) to below single digit. The inference is a trip back to recession. And, noises were emanating from Europe on Tuesday that more debt troubles were about to plague Spain, Italy and even France. Even with markets being already short-term oversold, the "get me the hell out" mantra echoed through the floor of stock exchanges Tuesday. Earnings? Nobody cares right now since they're just so much "old news." Sure, with good earnings reports trailing PEs will look pretty cheap but that would mask what lies ahead. Bonds continued their crazy meteoric ascent as yields on 10-year Treasury bonds dropped to 2.62%. Even those drinking Kool Aid know basic inflation wipes out this yield. The dollar rallied overall against most currencies since with stocks in a major sell-off it was time to take profits wherever available. Further margin calls were no doubt issued and it was time for some dollar repatriation. Gold continued to rise sharply to new highs while commodity markets overall were much weaker given thoughts of weak demand. Whatever 2011 year-to-date gains existed have been wiped-out for the major equity indexes. And today was the worst loss for SPY since August 2010. This shouldn't surprise since we've repeatedly been comparing this summer with last year. Volume Tuesday was quite high once again and one would think we're getting closer to a selling wash-out. Breadth per the WSJ was highly negative but didn't quite make for a 10/90 day. And ETF Digest subscriber David Hurwitz gives us his view of breadth: You can follow our pithy comments on twitter and join the conversation with me on facebook. 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
I could feature some stocks today but the focus now is on sectors and the damage being done overall. Trying to find stocks that standout from the crowd linked to an appropriate index is like looking for a needle in a haystack. We only have almighty Apple to show and that's about it for now. All signs now point to recession. The financial media is scrambling hard to find tidbits of information amid the rubble that are bullish and make you feel better. I wish I could do that but can't. The only positive thing I can say is markets are deeply oversold short-term ($NYMO) and could bounce if only briefly. Earnings are being ignored completely. The market is a facsimile so far of 2010 at this time. The Jackson Hole Summit is coming this month and perhaps Bernanke will find a new Keynesian remedy to pull out of his hat a la QE3. But, he'd be pushing on a string it would seem since the last stock market rally proved hollow and just a result of Primary Dealers (megabanks) being stuffed with freshly minted cash to trade. Wednesday will bring us ADP employment data, Factory Orders and ISM Services Data. Any or all of these could bring us some selling relief. Clearly though the U.S. is in a pickle of its own creation. Who's at fault? The man in the mirror. 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 .