Monday Market Blues: Dave's Daily

NEW YORK (ETF Digest) --Eurozone issues stole the show on Monday... again. An austerity deal in the Netherlands hit a stalemate, meaning the country could lose its AAA rating. In France election results weren't kind to Sarkozy and it's uncertain, especially with the strong right wing showing, how the final vote on May 6th will work out. If Sarkozy loses and the socialist Hollande wins then the financial alliance for the EU between France and Germany could be undone. To make matters worse Monday, the eurozone reported the important PMI (Purchasers Managers Index) at weak 47.4 vs expectations of 49.3 and prior 49.1. China also reported another weak manufacturing survey also at 49.1. Toss-in recent U.S. data and the three important regions in the world are experiencing clear economic contraction.

Stocks were hit hard again early but recovered some losses as the day wore on. Apple (AAPL) shares were only modestly lower and may remain pegged until earnings are released after the close on Tuesday. The dollar (UUP) was stronger making for weaker commodity prices (DBC, USO, GLD & JJC) while the only bright spots were biotech (XBI) and bonds (IEF & TLT).

Earnings reports are still coming out with many companies reporting losses (TXN) but beating much reduced estimates. Netflix (NFLX) released disastrous earnings after the close and the stock was hammered.

I wrote subscribers over the weekend to "brace themselves" since this week would be rocky. But, it's only Monday and who knows how things will turn out with Apple and the Fed on deck. Bulls must be on bended knee praying for more "happy talk" or QE from the Fed.

The market is starting to resemble the period between the summer of 2007 and early 2008. Then there were volatile battles between bulls and bears until the latter were victorious. As for U.S. politics and no matter how you feel about existing and potential candidates, who the hell would want the job? Whoever the next president is he will have to deal with some serious problems and do so in a hurry.

Volume Monday was a higher than average which has been the pattern on bearish days. Breadth per the WSJ was negative.

Join the banter on twitter and facebook.

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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QQQ - PowerShares Capital Management LLC is passionate about our goal of delivering the highest quality investment management available through one of the more benefit-rich investment vehicles ever created, the exchange-traded fund. PowerShares QQQ¿, formerly known as "QQQ" or the "NASDAQ- 100 Index Tracking Stock®", is an exchange-traded fund based on the Nasdaq-100 Index®. The Fund will, under most circumstances, consists of all of stocks in the Index. The Index includes 100 of the largest domestic and international nonfinancial companies listed on the Nasdaq Stock Market based on market capitalization. The portfolio is rebalanced quarterly and reconstituted annually.
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Continue to U.S. Sector, Stocks & Bond ETFs

FDN - The First Trust Dow Jones Internet IndexSM Fund is an exchange-traded index fund. The investment objective of the fund is to replicate as closely as possible, before fees and expenses, the price and yield of the Dow Jones Internet IndexSM. For a stock to be included in the selection universe for the index, a company must generate at least 50% of its annual sales/revenues from the Internet.
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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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XLB - The Materials Select Sector SPDR® Fund, before expenses, seeks to closely match the returns and characteristics of the Materials Select Sector Index. Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs.
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XBI - The SPDR® S&P® Biotech ETF, before expenses, seeks to closely match the returns and characteristics of the S&P Biotechnology Select IndustryTM Index. Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs.
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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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Continue to Currency & Commodity Market ETFs

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. See more details

FXB - CurrencyShares British Pound Sterling Trust is designed to track the price of the British Pound Sterling net of Trust expenses, which are expected to be paid from interest earned on the deposited British Pound Sterlings.
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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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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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DBC - The PowerShares DB Commodity Index Tracking Fund (Fund) is based on the Deutsche Bank Liquid Commodity Index -- Optimum Yield Diversified Excess Return¿ (Index) and managed by DB Commodity Services LLC. The Index is a rules-based index composed of futures contracts on 14 of the most heavily-traded and important physical commodities in the world. You cannot invest directly in an index. Ordinary brokerage commissions apply.
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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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Continue to Overseas Sectors & ETFs

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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IEV - The iShares S&P Europe 350 Index Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of 350 stocks providing geographic and economic diversity over 10 market sectors, as represented by the Standard & Poor's Europe 350 Index.
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EWQ - The iShares MSCI France 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 French market, as measured by the MSCI France 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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EWN - The iShares MSCI Netherlands Investable Market 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 Dutch market, as measured by the MSCI Netherlands Investable Market 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

The world's economy is in contraction mode with the main drivers of growth, U.S., Europe and China all showing negative economic readings.

It would be better for us to indicate now on the McClellan Summation Index "in free fall" vs "correcting". Now that I've written this we'll rally.

Bulls will be look to the Fed to for the "stick save" they need. Apple will report after the market closes on Tuesday. With the Fed and Apple we should experience another "Big Wednesday".  

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: Lazy & Hedged Lazy Portfolios maintain the follow positions: VT, MGV, BND, BSV, VGT, VWO, VNO, IAU, DJCI, DJP, VMBS, VIG, ILF, EWA, IEV, EWC, EWJ, EWG, & EWU.

 

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 .

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