Consumers seemed surprised by the extra bite taken out of their paychecks this last month, so much so, even McDonalds (MCD) and other fast food outlets saw sales slide. Consumers don’t like seasonal record high gas prices at the moment either. Another tax on consumers would be to raise the minimum wage to $9.00 from $7.25 which would hit those “value meals”.

This was all reflected in a poor Retail Sales report (.1% vs .2% expected & prior .5%) and ex-Autos & Gas (.2% vs .3% expected & prior .7%) and a slide in the Consumer Discretionary (XLY) sector. Business Inventories were also light (.1% vs .3% expected & prior .3%); Import prices increased .6% while exports only .3%; and, energy inventories were bullish as stockpiles of crude, gas and distillates fell sharply.

Markets seem rather range bound and even tired as the recent melt-up starts to slow. These markets need oxygen at this altitude and we already have seen most of what’s deliverable in that regard with QE, economic data and earnings. We’re stretched at levels some expected as the target and trend exhaustion.

There has been much rotation within sectors domestically and internationally. Some believe bonds are a sell now. Below is an annotated DeMark weekly sequential chart which I like to use to indicate trend exhaustion. When a 9 count is registered this can indicate some exhaustion as noted within the chart previously and currently.

High Yield bonds like HYG have also been closely watched on weekly charts. Clearly we’ve seen some selling but two weeks ago a weekly 9 was registered indicating trend exhaustion. You note we’ve rallied well off that low at least in the short term. If you were bearish and missed the move perhaps now would be a better time to enter a short position or vice versa if you were bullish.

One thing has been certain with high yield bonds; they’ve been trending “with” the stock market rally until lately which seems a divergence. 

Stocks were mixed with the Dow (DIA) leading the charge lower as McDonalds (MCD) and other high priced stocks in the price-weighted index (BA) (CAT) (KO) led markets lower. Tech was mixed to higher primarily by semiconductor (SOXX) and biotech (IBB). Other sectors with modest gains were in more conservative sectors like healthcare (XLV) and consumer staples (XLP). 

The dollar (UUP) was slightly weaker while gold (GLD) can’t seem to get out of its own way. Commodity (DBC) prices were stable while energy (USO) & (UGA) prices were mixed. Bonds (TLT) were weaker and yields higher.

Late breaking earnings from Cisco (CSCO) were 51 cents vs 48 cents expected while revenues were slightly higher at $12.10 billion vs $12.07 billion expected. As of this writing shortly after the close the stock rose then fell. Whole Foods (WFM) reported good earnings but the rate of growth fell slightly causing investors to sell the shares after the close.

Volume was “crazy light” is the creative way to define it. Breadth per the WSJ was slightly positive.

Among other issues the ETF Digest maintains positions in: MDY, IWM, QQQQ, UDN, GLD, DBC, DBB, DBA, USL, EFA, EEM, EWZ and FXI.

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