The ubiquitous 2:15 PM Buy Program Express was launched on time by HFTs. This started a rally like the wave a crowd would start at a football stadium. It ebbed for a time. But, in the last 20 minutes of trading an HFT short-squeeze from hell occurred. The change in conditions was so abrupt headline writers couldn't keep up.

The stimulant was news that Italy is rumored to be on bended knee to China asking for money. China would have to average down to protect whatever investments it already has in the euro zone. The algos must have this kind of stuff programmed in their HAL 9000s. Greece is all but certain to default and China may not care if they do other than the resulting contagion. Then there's the possible downgrade by Moody's of French banks but that didn't bother the algos late in the day.

The euro zone itself is in shambles politically prompting Luxembourg's Jean-Claude Junker to say: "We all know what to do; we just don't know how to get reelected after we've done it."  That about sums it up doesn't it?

It's ironic to see Obama push a jobs bill today while Bank of America (BAC) was shedding 30K jobs and perhaps more. In the meantime, BAC's strategist Mary Ann Bartels doesn't see anything bullish suggesting a 50% chance the S&P could drop 21%. Maybe she's depressed given her work environment.

Gold fell sharply Monday continuing its recent slide; the dollar, higher early, fell with hopes from a China rescue in the euro zone; bonds, also higher early, fell with the late day stock market rally; and, commodities overall were mixed.

Volume remained elevated but breadth per the WSJ was mixed overall.

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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

A HAL 9000 short squeeze rallied markets nearly 2% in the last 20 minutes of trading. This isn't normal action of course; but, this is the behavior we've experienced over the past few months and especially the last few weeks. I've been hesitant to do much the last few months overall but we did establish some short positions today and felt good for a while anyway. After nearly 40 years in the business, nothing surprises me anymore.

What's clear is our centrally planned global economies have gotten too much in debt because they're too big. The politics of it doesn't lend itself to transparency since no one in charge wants to come clean with what crap they're sitting on. Junker's comment is refreshingly honest at least but that doesn't provide a solution.

China may have a lot of skin in the game with both Europe and the U.S. but even with all their wealth, they don't have that much.

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: SH, SDS, DXD, EUO, EEV, EFU, EUM, EFZ,  VT, MGV, BND, BSV, VGT, VWO, VNO, IAU, DJCI, DJP, VMBS, VIG, ILF, EWA, IEV, EWC, EWJ, EWG, EWU, EWD, 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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