Does This Sell-Off Have Legs? Time Will Tell.
July 31, 2014

You picked a fine time to leave me Lucille
With four hungry children
And a crop in the field
I've had some bad times
Lived through some sad times
But this time your hurtin' won't heal
You picked a fine time to leave me Lucille

The markets saw bloodshed that tripped about 6 stops with perhaps more coming before the weekend. One of the signs that this would happen came from the trusty McClellan Summation Index (see below) which had been indicating the market was in “correction” mode. Now the shorter term McClellan Oscillator is very short term oversold. But it can remain so for long than some would expect.

Chart #1 is the McClellan Summation Index which is an intermediate term indicator of just what’s going with weak market breadth being the determining factor.

8-1-2014 4-21-17 AM NYSI















Chart #2 is the McClellan Oscillator which is short-term oriented. And by the look of it, it would be perhaps too late to launch major short positions since it’s oversold.

8-1-2014 4-24-58 AM nymo















So, what’s bothering Gilbert Grape to use a Hollywood metaphor? It sort of runs like this. Argentina defaults but they’re a serial debt beat and just how are folks going to collect monies owed from 14 years ago. Do the hedge funds have a fleet of gun boats to sail into Buenos Aires and collect? Of course not but it just seems unseemly. Embedded into today’s Jobless Claims was the disturbing data point that wage pressures might be increasing. Why would that be bad since wages have been declining for some time anyone and can’t the average working man get a raise? So the boogie man of inflation may be around the corner. Then of course there’s that Putin fellow with sanctions to perturb investors.

But the real story is just what I alluded to in Wednesday’s commentary—there’s a budding change in the previous dominant maxim that “bad news is good and good news is better”

This is being severely modified by bears “good news is bad and good news is worse” meaning the Fed is backing away from micromanaging the economy and (gasp!) removing the training wheels bulls have enjoyed.

What’s important now is does this sell-off have legs? Well why not? Time will tell.

8-1-2014 4-06-07 AM Diary



Charts of the Day










Closing Summary

We press on to California over the next two weeks.

We’ll be monitoring conditions daily but not necessarily producing a written commentary. Let’s see what happen

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Headshot David Fry xsmall

Dave Fry is founder and publisher of ETF Digest and has been covering U.S. and global ETFs since 2001.

He is the author of "Create Your own ETF Hedge Fund: A Do-It-Yourself Strategy for Private Wealth Management" published by Wiley Finance and "The Best ETFs: U.S. Equities, A Companion Guide to Building Your ETF Portfolio".


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Disclaimer: The charts and comments are only the author's view of market activity and aren't recommendations to buy or sell only any security. Market sectors and related ETF's 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 annotation's 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


ETF Digest

Market Summary
NYSE Composite Index S&P 500 Index Nasdaq Composite Index Russell 2000 Small Cap Index NYSE Composite Index S&P 500 Index Nasdaq Composite Index Russell 2000 Small Cap Index 10 Year Treasury Note Yield Gold Bugs Index Morgan Stanley High Tech 35 Index Market Chart
Commodity Quote Change Change % NY
Gold1,283.902.400.19 % 06:10
WTI Crude Futr97.51-0.66-0.67 %05:36
Index Quotes Change Change % Local
CRB294.43-1.68-0.57 %17:28
US Dollar81.54-0.01-0.01 %16:58
Index Quotes Change Change % Local
VIX16.953.6227.16 % 07/31
MSCI Value Daily MTD YTD
Brazil2430.577-2.70 %1.68 % 9.58 %
Russia658.866-0.85 %-10.88 %-16.27 %
India496.120-1.44 %0.71 % 21.80 %
China66.0080.02 %7.34 % 4.60 %