Markets rallied early then faded quickly into the close led by Microsoft (MSFT) and Intel (INTC). Since both are/were big hedge fund positions, one might imagine the big money is heading to the exits on the heels of Apple (AAPL) another previously large hedge fund holding.
There wasn’t any economic data Tuesday from the U.S. In overseas market China enacted property taxes for the first time in Shanghai and Chongiq. Somewhat related in Hong Kong, seemingly always in a property bubble, a condo sold for over $8K per square foot…seriously. Pundits in China are now worried about falling retail sales. In the eurozone, Greece (no surprise) has been given a 2 year extension to implement austerity reforms and an agreement for interim funding has been put off until November 20th. At the same time the Greek government is running out of money and needs $32 billion by Monday I believe. However, the troika has not figured out how to fund this yet. The Greeks are wearing us all out. Beyond this, German Investor Confidence fell to -15.7 vs -11.5 which is hardly encouraging and perhaps the Germans are getting worn out by their southern neighbors.
The dollar (UUP) and gold (GLD) were basically flat on the day. Stocks were led higher by a positive report by Home Depot (HD) which some assumed translated to a strong or recovering housing market. I’d say that is misleading. As I look about New England what I see are people remodeling existing homes they are unable to sell not to mention demand from destruction from Sandy. Commodities (DBC) were also mostly flat. Bonds (IEF) and (TLT) were higher.
Truth be told we’re short via a half dozen leveraged ETFs. This hasn’t been a profitable thing to do when the Fed is in QE and ZIRP mode. That said, we’re also long a few markets putting us in a long/short position.
Volume picked up on selling but is still relatively light. Breadth per the WSJ was negative and perhaps markets are short-term oversold again.
Premium members to the ETF Digest receive added signals when markets become extended such as DeMark triggers (as seen below) to exit overbought/oversold conditions.
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.
The low VIX is perplexing and may not be as useful a guide as it used to be. But that remains to be seen.
Cisco (CSCO) did beat earnings and revenues “slightly” which occasioned an “after hours” rally. How durable this is remains to be seen.
Economic news in the U.S. Wednesday will feature Retail Sales which are always entertaining especially how they get sliced and diced, ex this and that. Also PPI and Business Inventories will be featured.
What many presume to be Bernanke’s successor, Janet Yellen in a speech today stated that inflation from Fed policies is “not a worry” and “risk-taking doesn’t threaten stability”. She has her own HFT account.
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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.
Among other issues the ETF Digest maintains positions in: MDY, IWM, QQQQ, UDN, GLD, DBC, DBB, DBA, USL, EFA, EEM, 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.