Some of us know the old poem but the punch lines always was: "All the king's horses, and all the king's men, couldn't put Humpty together again." But times have changed we're told...again. France and Germany have mandated that Greece and any other EU member will be saved no matter what. How many times have we heard this? Too often to mention.

Nevertheless, the chart we posted last night regarding the high level of short interest in SPY (SPDR S&P 500 ETF) matched levels not seen since 2009. This was the setup for a short squeeze and this is what we saw Wednesday. This rally combined with Monday and Tuesday wiped-out most of Friday's large losses. Bulls weren't much bothered by Moody's downgrade of two French banks; Credit Agicole and Societe Generale since these threats were much expected so they say.

 

Stocks rallied mightily supposedly due to Merkel's and Sarkozy's comments. Clearly HFT algos were programmed to respond positively and they did. You'll note heavy profit-taking in the last 20 minutes which is the opposite of Tuesday's computer driven jam-job. (You won't hear any HFT whining today from the financial media.)

Most stocks rallying had financial engineering and/or M&A type features coloring them. Dell (DELL) would buyback more shares; General Electric (GE) would cash-out Buffett; Cisco (CSCO) moderated its outlook; and, vultures were circling Yahoo (YHOO).

Gold fell less than 1% while the dollar fell .25%. Oil was down over 1% on higher supply data, commodities overall were weak and bonds were higher on the day.

Volume remains elevated and breadth per the WSJ was quite positive once again perhaps even taking us to short-term overbought conditions.

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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

Wednesday was a classic HFT day and it's easily demonstrated by the 5 minute SPY chart. Tuesday offered similar action only with a late day ramp. As you look at other markets around the globe you're not seeing HFT action because there isn't any. Markets in those countries are behaving normally despite them having an abundance of their own ETFs domiciled within their own exchange. I think this makes an excellent point.

In the U.S. markets are rumor driven and programmed algos pick this stuff up. As to the euro zone and Greece they should just shut-up and play their hand. Over time these press releases will become tiresome and lose their credibility.

Thursday will yield The Empire State Manufacturing Survey, Jobless Claims, CPI, the Philly Fed Survey and Industrial Production. There may be few surprises and weak reports will just produce more QE the following week. Friday produces Consumer Sentiment and the always entertaining Quad-Witching.

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: EUM, EFZ, SH, 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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