Dear members and readers.
Update: Dave's Daily posting will be intermittent this week as Dave is recovering from injuries as a result of a fall last week. His doctors are optimistic as this will prevent him from raging at the tape and market. Premium members will continue to receive the daily HI/LO Indicators and updated stops on current positions. He is appreciative and grateful for all the well-wishes and outpouring of caring support sent from many of you. Thank you. ETF Digest admin team
“You can check out any time you like, but you can never leave.”
That seems the way bots have programmed markets to suit their needs, but that doesn’t make market action any less bizarre or Orwellian. Just sayin’…
It may be a blessing for bulls to see a sell-off in stocks to put a dent in the severe overbought conditions we’ve been posting for the past few trading days. On the one hand bulls can get values back to more reasonable levels given other considerations (weak economic and earnings data) while bears can start to make their case again the rally is based on a rise in crude oil prices only and little else. Even today, the IMF has warned the global economy is “..clearly at a delicate juncture, where risk of economic derailment has grown.” As to the latter, it’s been whispered that banks are buying crude oil and energy stocks to protect themselves from massive collateral failures in debt they’re exposed to. I don’t know if that’s true but it makes some sense. And, it’s not just U.S. banks with this exposure, so too are international banks, funds and many others.
Stocks fell sharply at the open then rallied once Europe closed again and trading bots rushed in to defend their long positions. By the end of the trading day stocks, commodities (oil in particular) fell after making back some the large portion of early losses.
Below is the heat map from Finviz reflecting those ETF market sectors moving higher (green) and falling (red). Dependent on the day (green) may mean leveraged inverse or leveraged short (red).
Volume increased on Turnaround Tuesday as selling seized the tape. Breath per the WSJ was negative.
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Moving from extremely overbought to just plain overbought is still overbought. Hmm, is that too many overboughts? Anyway, it was just a matter of time before markets came down near earth.
Who knows what tomorrow will bring? One thing in the future that stands out is next week’s Fed Meeting. It sees bulls may be confident there will be no more interest rate hikes in the near term.
Wednesday provides the EIA Petroleum Report. Given recent trends, this will be much watched.
Let’s see what happens.
Dave Fry is founder and publisher of ETF Digest and has been covering U.S. and global ETFs since 2001.
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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 www.etfdigest.com