Traders Spent The Day Picking Each Other's Pockets

Includes: GLD, UUP
by: David Fry

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The action on Tuesday was centered on confusion and mystery.

Why was there heavy gold selling in Asia? The dollar was also quite weak. Is the inverse gold/dollar relationship broken?

Sure, the fiscal cliff looms and it makes for good theater and sells soap, but answers few questions regarding other issues -- like what's going on with commodities and precious metals. Let's just say there are plenty of nefarious dealings taking place in commodity markets overall.

This post is brief since there's no reason to try and solve these puzzles, perhaps even inspector Clouseau-style.

As indicated, the dollar (NYSEARCA:UUP) was quite weak, and so too was gold (NYSEARCA:GLD). Stocks just churned about, making little progress one way or another. Pending other events, stocks may just remain camped until the cliff is resolved or not.

Given this lack of progress away from currency and commodity markets, there was little else to do but remain a spectator Tuesday. This lack of direction makes this commentary very short.

Volume was once again quite light, and breadth per the WSJ was mixed to flat.

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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.

Concluding Remarks

Wednesday features the ADP Employment Report, Productivity and Costs, Factory Orders, ISM Non-Mfg Index and EIA Petroleum Status Report. We'll also have more entertainment from politicians.

Disclaimer: The ETF Digest maintains an active ETF trading portfolio and a wide selection of ETFs away from portfolios in an independent listing. Current "trading" positions in active portfolios, if any, are embedded within charts: Lazy & Hedged Lazy Portfolios maintain the follow positions: VT, MGV, BND, BSV, VGT, VWO, VNO, IAU, DJCI, DJP, VMBS, VIG, ILF, EWA, IEV, EWC, EWJ, EWG, & EWU.

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.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.