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Dave's Daily

Thursday July 2, 2009

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MARKET COMMENT

July 2, 2009

Maybe, maybe not—this is all I can say since bulls have repeatedly demonstrated their “energizer bunny” quality. Maybe over the weekend investors will forget about the sting of today’s drop as no doubt the powers that be will roll-out their spokesmen to cheer everyone up.

This action is why over roughly the past two months our cash balances have been high. Once we got the weekly DeMark sequential 9 counts we were expecting a reaction. Sometimes we just move in a herky-jerky manner sideways while in other circumstances we get an immediate impact. If the trends are very strong then the DeMark 9 can be blown away and that’s the tricky part—how to get back in. But, never mind that for now, let’s look again.

Volume has been higher on down days and you can assuredly know that breadth both sucked and blowed today.

The longer-term Summation Index (not updated with today’s data) no doubt restarted its recently paused rollover.

Our podcast/video interview with the EMM (Emerging Markets Monitor) should be posted sometime this evening or early tomorrow morning for you listening pleasure. These are smart folks and have done a good job in providing thoughtful analysis regarding global markets. You should listen despite some inferior sound quality.

Two articles caught my attention these past few days. The first describes how FNM and FRE are starting to provide 125% mortgage loans. Isn’t this type of activity what got us in trouble in the first place? The next is an amusing expose from the WSJ (subscription required) outlining the inner workings of our friends at the Federal Reserve. You can see clearly from it who’s running the show there and on Wall Street.

We’ve kept a large cash reserve (70% more or less) for some time now. It’s a defensive posture clearly and reflects our lack of confidence in the mixed signals markets are presenting technically. When this is the situation sometimes it’s best to stand aside until things become clear.

For those of you long the markets in general, Mr. Market didn’t give us a happy send off to our country’s birthday. But, let’s see what happens next.

Disclaimer: Among other issues the ETF Digest maintains positions in: MDY, IWM, QQQQ, DBC, USL, XLE, DBB, EWZ and FXI.

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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