Eurozone Madness: Dave's Daily

Are we having fun yet? Even P.T. Barnum couldn't make this stuff up! Eurozone members reached a tentative deal on closer fiscal ties after meeting late into the night. Those pesky details need to be worked-out which may not occur until March. Nevertheless, this news combined with better Consumer Sentiment (67.7 vs 64.1 previous) got the animal spirits stimulated enough to reverse much of Thursday's losses.

Bulls are quite determined to put markets higher with a Santa Claus rally. Negative news about recession in the EU, U.S. or slowdown in China will be brushed aside for now. Lowered earnings guidance from Texas Instruments (TXN), DuPont (DD) and suggestions that FedEx (FDX) shipments will slow will be ignored for now.

The lagging tech sector led markets higher followed by any sectors in the buy program basket.

Commodities regained some strength, the euro stabilized and dollar fell slightly. Bonds experienced some selling as stocks advanced.

Volume was light given the magnitude of the rally making a short squeeze rather easy for Da Boyz. 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

That wraps up a tension filled and volatile week. Now we move toward what might be a Santa rally as long as bulls can keep ignoring any bad news.

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, FAS, UYM, DIG, 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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