Markets were worried early in the day when another disappointing housing market report (Housing Starts) was released after Tuesday’s Home Market Index disappointment. This combined data caused homebuilders (ITB) shares to fall sharply  (-5.79%) after previous outsized gains.

In addition, “currency wars” are in full swing and this has caused the dollar (UUP) to rally. In turn, the dollar rally caused commodities, priced in dollars generally, to continue its decline along with corresponding ETFs including (DBC) -1.10%, base metals (DBB) -1.14%, copper (JJC) -1.54%, and gold (GLD) -2.51%. Crude oil (USO) -2.29% saw a two-second raid on markets from sellers as shown in the chart below near 11 AM.

We’ve also seen some disturbing and extraordinary conditions develop between some markets. The following table and chart typifies how markets are becoming distorted most likely due to ZIRP and QE activity. Using poor Caterpillar (CAT) sales as an example, Zero Hedge shows the divergence from normal pre-Fed policy relationships have changed. 

CAT sales:

 Note the obvious divergence among normally linked markets and sectors.

We’ve handled gold reasonably well by staying out it for the most part since September as displayed in the annotated chart below. Once again, a weekly DeMark 9 count precipitated our long exit and move to the sidelines. Unfortunately we’ve been unable to find our way into the short side yet.

A good read for you from our colleague David Gillie offers his ETF midweek look at markets Wednesday morning. In the commentary he cleverly reviews several dozen ETFs and their current status including U.S., overseas, leveraged and alternative market sectors.

Stocks succumbed to selling after minutes were released. Tech (XLK) led the way lower (-1.35%). As I’ve been saying these past few weeks, the light volume melt-up had become accident prone from any combination of events that would draw sellers in. FOMC minutes combined with currency wars and a dollar rally did markets in on heavier volume providing a Black Swan-like event. With the decline in stocks, bonds (TLT) rallied slightly.

As expected volume rose on selling as stops were hit on the way lower. Dip buying was not seen since the Fed offered little encouragement. Breadth per the WSJ was negative.

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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.