Global Leadership Crisis: Dave's Daily

The further down the road we go without confronting problems head on, the more difficult things become. Globally, there is a lack of political will, honesty and leadership. It's the Achilles Heel of the election cycle where politicians and central bankers are too afraid of making serious decisions fearing they'd lose their jobs. We go along with band-aids, useless stimulus, money printing and hope. It's BS and smoke and mirrors policies. If your life was on the line you'd do what you could to save it, wouldn't you? But in our global political world, being honest with people doesn't pay with votes--they mislead you with weak policies and Kool Aid spin.

"Trust us" is their mantra. 

Trust us? Not a chance. Their credibility is shot.

It's no wonder investors are fleeing markets. Over $200 billion in equity mutual funds have left the markets since 2010. As I update our Top Ten ETF lists by sector, I see assets under management (AUM) declining 25-45% just in the last four months.

The great October stock rally was a "eurozone is fixed" mirage.

Thursday markets received mixed economic news in the U.S. as Jobless Claims fell somewhat (higher previous revisions again and people dropping off the rolls like flies accounts for some of this) and a poor Philly Fed Survey (3.6 vs 9 expected and previous 8.7). Housing Starts were unchanged, and frankly we don't need more home construction.

The eurozone and U.S. congress remain at the epicenter of current troubles. France wants the ECB to be the lender of last resort in the euro zone while Germany doesn't. Spanish bond yields climbed to euro area record at 6.80%. Meanwhile the congressional deficit committee remains at a stalemate over just coming up with a pittance in deficit cuts. The process is laughable as are the "talking points" participants.

Stocks hit the skids as HFTs were in full gear. And, you probably could care less that its options expiration Friday but this enhanced the sell-off Thursday. Hardly any asset was safe from selling including commodities where crude oil dropped 3.67%, gold fell 3%, silver 7%, copper 3.5% and so forth. The dollar was flat if only due to repatriation to Europe but U.S. bonds were quite strong.

You could pick a few downside leaders but financials (XLF), materials (XLB) and tech (XLK) will do just to get you started.

Volume was the heaviest on the week so far and breadth per the WSJ was quite negative with some sectors at another 10/90 day.

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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

As noted Wednesday, the high levels of the VIX with the NYSI then still advancing was a divergence too hard to ignore.

Friday is options expiration and that's enough to put everyone on the sidelines unless you're a trader in the options pits. We might see even more volume and weird behavior. It's also another occasion for Fed governors to make the rounds talking up their policies. We've had at least two of these folks on the hustings making speeches.

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, IWM, QQQ, XLK, XRT, XLB, EEM, EWZ, 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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