Papandreou Changes His Mind: Dave's Daily

Clearly, Germany has more skin in the eurozone fix than any other nation. Merkel likely had an unpleasant and direct conversation with Papandreou convincing him his referendum gambit was a mistake. While she wins the argument, the German people no doubt will lose the most given their obligations. The IMF is also rumored to be making some contributions to the EU, and that my fellow citizens, would involve American taxpayers.

Making things more euro-centric Thursday the ECB surprisingly cut interest rates from 1.50% to 1.25% citing poor economic conditions. Eurozone inflation is running hot at the moment but new ECB head Mario Draghi (sounding Bernanke-like) stated this was "transitory". The G-20 summit is underway and who knows what if anything will come of it.

Back in the U.S. jobless claims were better than expected at 397K vs consensus at 400K with prior claims revised higher once again at 406K vs 402K. This has been the consistent trend with revisions always moving previous data higher but making for a better headline now. Factory Orders were higher at .3% vs .1% previously. Productivity data was also better at 3.1% vs previous -.1% but Unit Labor Costs were -2.4% vs 2.8% previously which is good for the employer vs the worker. ISM non-Mfg data was a little worse at 52.9 vs 53 previous.

News of Papandreou's reversal helped markets rally overseas and in the U.S. on this and economic data. Stocks in the U.S. are poised with a good unemployment report Friday to reverse the week's large losses. No folks, you can't make this stuff up really!

Gold and silver prices zoomed higher once again as easy global monetary policies are assumed to be inflationary no matter what authorities would have you believe. The dollar was weaker once again on news of another "fix" while commodity prices (base metals, energy, grains and so forth) overall were higher. Bond prices once again declined slightly with the stock rally.

The stock market rally was led by some euro zone relief for financials (XLF) but which remain negative overall. Also leading the averages higher were tech (XLK) and frankly most other sectors including retail (XRT). Let's remember, correlations have never been this high from sector to sector.

Volume was strong on Thursday and breadth per the WSJ was quite positive.

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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

Friday is the all important employment report and the latest consensus seen is for job increases of 90K with a range of 65-150K. I've not seen this much volatility since during and shortly after the 1987 market crash.

The euro zone problems will remain with us for awhile it seems. Greece will have to go along and that's it. It remains to be seen if the Obama can be convinced to assist in the bailouts. If he agrees, where will the U.S. get the resources to do it unless the Fed prints the money to do it.

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: SPY, RSP, IWM, QQQ, KBE, KRE, XLK, EWZ, EPI, RSX, FXI, 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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