News Comes Back to Haunt Bulls: Dave's Daily

Was there much news that wasn't known by investors Monday? I don't think so. Eurozone economic contraction data was in full view Monday as was a report of a slowdown in China's economic growth. The only thing causing a "stick save" Monday was a Morgan Stanley note suggesting the odds of QE3 had grown to 75% before June so as not to interfere with (cough) the November election. Since bulls are QE-addicted that sparked an afternoon rally (2:15 Buy Program Express--I should trademark this) lifting stocks off their lows.

Yes, there was more news about a Greek structured default but that isn't anything new or unexpected. Creditors have until Friday to accept or participate in a bond swap and Greece said it will not extend the offer. But this too was already known.

Back in the news on Tuesday Morgan Stanley (MS) and Goldman Sachs (GS) were surprised when S&P "derailed" a $1.5 billion commercial-mortgage bond sale (CMBS) last July. Now these companies have turned to Kroll Bond Ratings (who? You might ask) and Morningstar (MORN) for ratings assistance. It turns out CMBS sales are moving forward normally (even if I rated them) given the demand for product according to this Bloomberg story.

All this aside, stocks were sold-off showing steep declines Tuesday. Bonds and the dollar rallied while commodities sold off as worries about declining demand hit the sector. Let's just say stocks were ripe for a correction as Tom DeMark suggested as his often reliable technical indicators had suggested.

Volume was much heavier on the sell-off. The signature for this market, light volume rallies and heavy volume selling, continues. On sell days trailing stops are triggered adding to downside momentum. Breadth per the WSJ was highly negative and may have resulted in a 10/90 day.

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SPY - The SPDR® S&P 500® ETF is a fund that, before expenses, generally corresponds to the price and yield performance of the S&P 500 Index. Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs.
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IWM - The iShares Russell 2000 Index Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the small capitalization sector of the U.S. equity market as represented by the Russell 2000 Index. The index represents the approximately 2,000 smallest companies in the Russell 3000 Index.
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XLK - The Technology Select Sector SPDR® Fund, before expenses, seeks to closely match the returns and characteristics of the Technology Select Sector Index (ticker: IXT). Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs.
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KBE - The SPDR® S&P® Bank ETF, before expenses, seeks to closely match the returns and characteristics of the S&P® Banks Select Industry Index (ticker: SPSIBK). Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs.
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XLF - The Financial Select Sector SPDR® Fund, before expenses, seeks to closely match the returns and characteristics of the Financial Select Sector Index. Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs.
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XLV - The Health Care Select Sector SPDR® Fund, before expenses, seeks to closely match the returns and characteristics of the Health Care Select Sector Index. Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs.
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XLY - The Consumer Discretionary Select Sector SPDR® Fund, before expenses, seeks to closely match the returns and characteristics of the Consumer Discretionary Select Sector Index. Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs.
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XLP - The Consumer Staples Select Sector SPDR® Fund, before expenses, seeks to closely match the returns and characteristics of the Consumer Staples Select Sector Index. Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs.
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XLI - The Industrial Select Sector SPDR® Fund, before expenses, seeks to closely match the returns and characteristics of the Industrial Select Sector Index. Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs.
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XLU - The Utilities Select Sector SPDR® Fund, before expenses, seeks to closely match the returns and characteristics of the Utilities Select Sector Index. Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs.
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IYR - The iShares Dow Jones U.S. Real Estate Index Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, to the performance of the real estate sector of the U.S. equity market, as represented by the Dow Jones U.S. Real Estate Index.
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IEF - The iShares Barclays 7-10 Year Treasury Bond Fund seeks to approximate the total rate of return of the intermediate-term sector of the United States Treasury market as defined by the Barclays Capital U.S. 7-10 Year Treasury Bond Index.
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HYG - The iShares iBoxx $ Investment Grade Corporate Bond Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the corporate bond market as defined by the iBoxx $ Liquid Investment Grade Index.
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UUP - The PowerShares DB US Dollar Bullish Fund (Symbol: UUP) is based on the Deutsche Bank Long US Dollar Index (USDX®) Futures Index¿ (DB Long USD Futures Index). The Index, which is managed by DB Commodity Services LLC, is a rules-based index composed solely of long USDX® futures contracts.
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FXE - CurrencyShares Euro Trust is designed to track the price of the euro net of Trust expenses, which are expected to be paid from interest earned on the deposited euros.
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FXA - CurrencyShares Australian Dollar Trust is designed to track the price of the Australian Dollar net of Trust expenses, which are expected to be paid from interest earned on the deposited Australian Dollars.
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GLD - The objective of the SPDR® Gold Trust¿ is for the Shares to reflect the performance of the price of gold bullion, less the Trust's expenses.
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GDX - The Gold Miners ETF seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the NYSE Arca Gold Miners Index. The Index provides exposure to publicly traded companies worldwide involved primarily in the mining for gold, representing a diversified blend of small-, mid- and large- capitalization stocks. As such, the Fund is subject to the risks of investing in this sector.
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SLV - The objective of the iShares Silver Trust is for the value of the shares of the iShares Silver Trust to reflect, at any given time, the price of silver owned by the iShares Silver Trust at that time, less the iShares Silver Trust's expenses and liabilities.
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JJC - The Dow Jones-UBS Copper Subindex Total ReturnService Mark is a sub-index of the Dow Jones-UBS Commodity Index Total ReturnService Mark and reflects the returns that are potentially available through an unleveraged investment in the futures contracts on physical commodities comprising the index plus the rate of interest that could be earned on cash collateral invested in specified Treasury Bills.
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DJP - The iPath® Dow Jones-UBS Commodity Index Total ReturnService Mark ETN is linked to the Dow Jones-UBS Commodity Index Total ReturnService Mark and reflects the returns that are potentially available through an unleveraged investment in the futures contracts on physical commodities comprising the index plus the rate of interest that could be earned on cash collateral invested in specified Treasury Bills.
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USO - The United States Oil Fund, LP ("USO") is a domestic exchange traded security designed to track the movements of light, sweet crude oil ("West Texas Intermediate").
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UGA - The United States Gasoline Fund LP (UGA) is an exchange traded security that is designed to track in percentage terms the movements of gasoline prices.
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XLE - The Energy Select Sector SPDR® Fund, before expenses, seeks to closely match the returns and characteristics of the Energy Select Sector Index. Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs.
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JJG - The Dow Jones-UBS Grains Subindex Total ReturnService Mark is a sub-index of the Dow Jones-UBS Commodity Index Total ReturnService Mark and reflects the returns that are potentially available through an unleveraged investment in the futures contracts on physical commodities comprising the Index plus the rate of interest that could be earned on cash collateral invested in specified Treasury Bills. The Index is currently composed of three futures contracts on grains traded on U.S. exchanges.
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DBA - The PowerShares DB Agriculture Fund is based on the Deutsche Bank Liquid Commodity Index Diversified Agriculture Excess Return¿ and managed by DB Commodity Services LLC. The Index is a rules-based index composed of futures contracts on some of the most liquid and widely traded agricultural commodities. The Index is intended to reflect the performance of the agricultural sector. You cannot invest directly in the Index. Ordinary brokerage commissions apply.
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EFA - The iShares MSCI EAFE Index Fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in the European, Australasian and Far Eastern markets, as measured by the MSCI EAFE Index.
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EZU - The iShares MSCI EMU Index Fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in the European Monetary Union (EMU) markets, as measured by the MSCI EMU Index.
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EEM - The iShares MSCI Emerging Markets Index Fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in emerging markets, as represented by the MSCI Emerging Markets Index.
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EWA - The iShares MSCI Taiwan Index Fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in the Taiwanese market, as measured by the MSCI Taiwan Index.
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EWC - The iShares MSCI Canada Index Fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in the Canadian market, as measured by the MSCI Canada Index.
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EWG - The iShares MSCI Germany Index Fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in the German market, as measured by the MSCI Germany Index.
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GREK - The Global X FTSE Greece 20 ETF seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the FTSE/ATHEX 20 Capped Index.
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EWI - The iShares MSCI Italy Index Fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in the Italian market, as measured by the MSCI Italy Index.
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EWY - The iShares MSCI South Korea Index Fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in the South Korean market, as measured by the MSCI Korea Index.
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EWJ - The iShares MSCI Japan Index Fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in the Japanese market, as measured by the MSCI Japan Index.
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EWZ - The iShares MSCI Brazil Index Fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in the Brazilian market, as measured by the MSCI Brazil Index.
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RSX - The Russia ETF seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the DAXglobal® Russia+ Index. The Index provides exposure to publicly traded companies that are domiciled in Russia, and traded in Russia and/or on leading global exchanges. As such, the Fund is subject to the risks of investing in this country.
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EPI - WisdomTree India Earnings Fund seeks investment results that correspond to the price and yield performance, before fees and expenses, of the WisdomTree India Earnings Index.
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FXI - The iShares FTSE China 25 Index Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the FTSE China 25 Index.
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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

 

This was a mystery market Tuesday based on similar, if not the same, news from Monday. Inspecting the NYMO you'll note we're short-term oversold. We may get a bump higher with better employment data over the next few days. 

 

Let's see what happens.

 

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