ETF Midweek Peek

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

By David Gillie

NEW YORK ( ETF Digest) -- Tuesday's selloff got no help from the media with a Greek salvation story or any economic data to spin. All eyes are focused on the weekly and monthly payroll reports on Thursday and Friday. Expectations on the monthly report have been lowered 20% from the previous month so a "beat expectations" is almost a certain headline to help the market. Downward revisions of the previous month rarely get mentioned. AAPL continues to dominate the market.

A big down day like Tuesday can give us excellent insight into the market's weakest hands wiping out a week's worth of melt up.

 Top performers this week


Ever volatile silver tops the table this week by virtue of its highly favored leveraged inverse. As with many commodities that reach nosebleed highs, gold became speculative and was quickly dumped on the rising Dollar.

Precious metals were largely responsible for pulling down the basic materials sector, but copper has struggled though most of February as well.


The small caps of the Russell 2000 had already began their rollover before the selloff. A bear raid on them was inevitable. Although the energy mega bear hit the top performance table this week, oil broke through the $104/bbl resistance and has now retreated slightly to retest support. GAZ is the lone survivor of the major natural gas ETFs still holding onto a gain.


New Highs
n/a

The fact that there are no news highs shows us that individual issues have moved in tandem with the overall market in the melt up. The extremely low volume we've seen over the past weeks is indicative of a market being traded by the major index ETFs. 


New Lows

With all the fanfare we saw on the pop in natural gas, there has been an eerie silence as it has fallen to new lows.


Unusual Volume

On a market pivot, volume is an interesting tell. Here we see selling volume in the small-caps and Europe. While simultaneously, buying volume on the VIX and gold inverse. This tells us traders aren't holding out much hope for small-caps and have aggressively bailed out of these positions. Volume has been increasing the volatility positions for a few weeks as market conviction has grown weaker. Choppiness ahead should be expected.

There are two ETFs on this table that stand out of particular interest, IDX and HYG. Indonesia has been very strong on elevated commodity prices and this recent drop put it on the lower trend support. Should it hold this support, it could be strong going forward.

HYG is perhaps the weaker hand in corporate bonds. Yield seekers have chased corporate bonds to extreme levels of overbought. Yield hungry investors are not going away. A dip in corporate bond ETFs could be an excellent buying opportunity.
 

Overbought

What a difference a day makes (okay, a week). Last week I limited the table to only the top 10 overbought positions, but noted that the total of overbought position was actually triple the number shown on the table. This week, we only have two. But those two tell a vivid story. Even in a selloff, investors are hanging on to their high yield holdings. This is a great tell of their security. As mentioned on the table above, look for dips in high yield corporate bonds as a buying opportunity.

Although there are no oversold positions, this will be a key table to watch if the selling continues. This will show us what sectors and industries get hit the hardest. Extreme oversold conditions are also a trigger for the algorithm buy programs. Algo can't pass up a deal.  Although it may not lead to a rally, we may see some short term potential pops as buying opportunities.


Trending up

Everybody and their grandma is short the Euro, so there's no surprise there. Utilities and consumer staples trending up on average or better volume shows clearly a defensive move in the market. The Nasdaq 100 (QQQ) is levitating on Apple (AAPL). AAPL appears to be struggling to hold onto its gain.

The iPad HD announcement should give it another day of life. In the event of hard selling in AAPL, QQQ will be obliterated. Watch AAPL very closely over the next few days as a measure of the Nasdaq.


Even with this week's drop of 3% on PID Intl Dividend, it has not broken its upward trend. This is a sign of strength for this position.


Trending down


The miners have left a trail of tears in a long down trend. Hopeful traders have jumped in on pops only to get crushed once again. Even with gargantuan losses this week, there is still significant travel room to the downside in the miners to their 52 week low support. There should be a clever statement about plague and miners here, but it's not coming to mind.
The three ETFs at the bottom of the table are critical. Although they have not broken their downtrend they are showing gains on a significant increase in volume. This is evident on a reversal in the works. PSQ and TYP are the bears just preparing to lunge the minute AAPL spits out a bad seed.

In summary, the market is pivoting and pausing. The pause is most likely waiting for the monthly jobs number at the end of the week. In front of an election, we can be almost assured this will be a positive report despite this morning's ADP report miss (which is getting positive spin, anyway). Dips have been bought through this melt up, but these have been mostly intraday dips. We have yet to see how traders will react to a big down day.


Futures held positive going into the open being carried by Apple and the announcement of the iPad3 despite selling just before the bell. The "chatter" I hear is traders intend to sell AAPL after the expected iPad3 pop. Early trading on SPY looked desperate for something to save it -- AAPL? Oil? Greece? Anybody? Finally Greece pulled through with the "good" news of bond holders agreeing to take a fat loss. Let's see how long the euphoria on Greece holds as APPL slides downward in early trading.

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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.

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