David Fry's Market Outlook for Wednesday

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 |  Includes: DBE, EFA, FXI, IYR, KBE, MDY, SPY, USO, XHB, XLF
by: David Fry

D Fry Market Outlook 01 08 2007

No pretty window dressing for bulls. Just as bullish talking heads were proclaiming the concerns about mortgage markets as being excessive, up pops another disaster from American Home Mortgage (AHM). AHM is experiencing margin calls from lenders and may file for bankruptcy. This sent markets reeling toward the close after an opening gap higher built on much enthusiasm.

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The following are the "problem sectors":

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Breadth looked better than index levels. [Total volume as reported on the NYSE doesn't quite add-up again does it?]

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There was another issue bothering investors -- energy. After the market gapped-up 100 points early, it started to fade at the same time oil prices were rising to new highs for this move.

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There were plenty of "feel good" headlines to begin the day, but the mortgage mess continues to pop randomly to the surface to foil bulls.

We end July with a whimper, and attempts at window dressing were met with more selling. Now it's on to what usually is the slow month of August. But the last few years have seen healthy August rallies. No doubt traders have their laptops and Blackberrys with them as they head to the Hamptons. They've left some troops behind to guard their positions. With the amount of money at risk nowadays, there isn't time for holidays.

Disclaimer: Among other issues the ETF Digest maintains long or short positions in: Financial Select Sector SPDR ETF (NYSEARCA:XLF), streetTRACKS KBW Bank (NYSEARCA:KBE), iShares Dow Jones US Real Estate ETF (NYSEARCA:IYR), United States Oil Fund ETF (NYSEARCA:USO), PowerShares DB Energy Fund (NYSEARCA:DBE), iShares NASDAQ Biotechnology Index ETF (NASDAQ:IBB), iPath MSCI India ETN (NYSEARCA:INP), iShares MSCI EAFE Index Fund ETF (NYSEARCA:EFA), iShares Trust FTSE-Xinhua China 25 Index Fund (NYSEARCA:FXI) and iShares MSCI South Korea Index Fund ETF (NYSEARCA:EWY).