Geithner, Bernanke Digest Eurozone: Dave's Daily

On Tuesday, Tim Geithner confirmed the U.S. would add to the rescue fund for Europe via the IMF. While many don't like this, there is nothing to stop them politically from doing so. More money will be printed and "the can" will be kicked further down the road. Believe it or not, U.S. banks have recapitalized and profited through TARP. European banks need to be recapitalized and this hasn't been done yet. Europe doesn't have the political authority to do this and Ben and Timmy feel compelled to help. They've gone too far down the "bailout path" to stop now. Besides, it's an election year and not much else need be said.

Another "down the road" minefield lies in Japan. Their demographics are poor and population is declining rapidly. Being as xenophobic as they are immigration is not an acceptable solution. Their debt is high and the Japanese save heavily buying JGB (Japanese Government Bonds) but, the number of buyers is falling and the debt is increasing. It will end badly. Last night the Japanese government decided to give a gold coin (.50 oz) for each $129,000 of bonds purchased - a clear sign of trouble ahead.

U.S. markets want to rally seasonally. With Ben and Timmy in to provide some temporary help, bulls are convinced troubles will be papered-over (literally). This is the cue to buy and they're trying hard to do it no matter every obstacle thrown in their path. S&P's downgrade threats yesterday were just one such example. Post election troubles in Russia, violence in Syria and threats from Iran can be easily brushed aside until they can't. So let's buy stocks is the thinking.

Stocks rallied in mixed fashion Tuesday as investors seemed timid overall given more news from the eurozone developing throughout the week. Stocks were held back by tech primarily and consumer sectors. The dollar was flat, bonds were weak and commodities mixed.

Volume was light once again and so was conviction. Breadth per the WSJ was mixed to negative.

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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

There isn't much economic news to develop until Thursday. The focus remains the eurozone with hopes for a band aid by Friday. Once that's beyond us we'll have more earnings from retailers and the hoped for seasonal rally.

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: SSO, DIG, FAS, 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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