Europe Procrastinates But Markets Rally Anyway: Dave's Daily

A statement from Germany and France: " The President and the Chancellor will meet Saturday night in Brussels ahead of the European Council summit in the euro area on Sunday. France and Germany have agreed that all elements of this ambitious and comprehensive response will be discussed in depth at the summit on Sunday in order to be finally adopted by the Heads of State and Government at a second meeting no later than Wednesday." Okay, got that? So Sunday's grand deadline has been postponed thus relieving some tension temporarily. Whatever they decide, it's said to be much too small and might be backstopped by new derivatives freshly minted in Berlin.

Jobless Claims came in still over 400K after revisions from the previous report showed a slight improvement meaning we're still wallowing along the bottom there. The surprise was a strong Philly Fed reading 8.7 versus -9.8 expected and prior of -17.5. This leap featured the Shipments Index rising from -22.8 to 13.6--the largest jump ever. This must be iGadgets hitting the road. That number is set against Bloomberg's October Economic Index which dropped to -45 versus -34 previously.  

Stocks recovered from a serious mid-day sell-off on more rumors from the EU which didn't seem very bullish especially given the last statement of "another meeting". The algos driving HFTs and markets higher jumped on a 12:30 announcement that the German government would make an announcement at 1:30 PM EDT which accounted for the rally off the low. The announcement came to nothing.

Earnings continue to rollout with some winners like Nucor (NUE) and Fifth Third Bank (FITB) but some notable losers like Ingersoll Rand (IR), Southwest Bank (OKSB) and USG Corp (USG). Many companies will report earnings after the close led by Microsoft (MSFT) which reported revenues of $17.37 billion or $.68 per share versus consensus of $17.24 billion and $.68 per share--a beat on revenues. MSFT stock was down about 1% after the report.   

Gold prices were much weaker again. The dollar was slightly weaker even as some grumbled about the dollar being too strong which is hard to believe until you see the logic of the "weak dollar/strong stocks" argument from bulls. I'm sorry but I still want a vacation in Greece Italy Germany. Bonds were somewhat weaker.

Not that it matters to HFTs but equity mutual funds saw the greatest weekly outflows since August with $5.9 billion leaving for safer havens. This brings the total for 2011 to nearly $100 billion.

Volume was a little higher than average while breadth per the WSJ was mixed.

 

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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

The reading on the VIX still indicates high levels of fear from put buying for protection. This combined with a rising NYSI suggests much confusion and worry.

LATE BREAKING: The Nasdaq has revealed a security breach from hackers who then were able to get information on directors of publicly traded companies. This is pretty serious story.

Tomorrow will feature fewer earnings and little in the way of economic reports. What we can expect is more anxiety and rumors from the euro zone.

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, 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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