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D Fry Market Outlook 17 08 2007

This may not be the last stand, but it certainly was a stand. After stocks were hard hit, mid-day buyers emerged to take markets back-up in the last half hour. But we've seen this before. The rumor sparking the buying was the Fed was going to hold an emergency meeting presumably to cut interest rates. Would this work to save banks and mortgage markets? Perhaps with the former but not the latter.

Where the selling had been the most severe the rally was the greatest.

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So, does this intra-day sell-off and rally-back mean we're out of the woods and the markets are washed out? Market internals still stink, but the bullish talking heads will be raving about the positive aspects of this action.

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Major damage has been done overseas, but there was a strong rally back.

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McClellan 17 08 2007

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There was some griping on chat boards about the last half hour of trading once again. It seems that even some data streams couldn't handle the flow of data and some traders experienced transmission outages. Some report Schwab was down for over an hour. Naturally they think something nefarious is taking place, but we've had these late inning buying and selling binges over the past month.

Can Bernanke & Co. save the day? Is that the rumor driving financials higher today? We'll see.

It's the third Friday of August and that means, you guessed it, options expiration. If you thought volatility was high Thursday, Friday may be a doozy. And we'll leave you with a little decal to remind you of a serious stock market reality:

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Have a great weekend.

Disclaimer: Among other positions the ETF Digest maintains long or short positions in: Financial Select Sector SPDR ETF (NYSEARCA:XLF), streetTRACKS KBW Bank (NYSEARCA:KBE), PowerShares DB US Dollar Index Bearish (NYSEARCA:UDN), CurrencyShares Japanese Yen Trust (NYSEARCA:FXY), CurrencyShares British Pound ETF (NYSEARCA:FXB), ProShares Short MidCap400 (NYSEARCA:MYY), streetTRACKS Gold Trust ETF (NYSEARCA:GLD), iShares Lehman 1-3 Year Treasury Bond ETF (NYSEARCA:SHY), iShares Lehman 20+ Year Treasury Bond ETF (NYSEARCA:TLT), iShares MSCI EAFE Index Fund ETF (NYSEARCA:EFA), iShares MSCI Emerging Markets ETF (NYSEARCA:EEM), iShares S&P Europe 350 (NYSEARCA:IEV) and iShares MSCI Brazil Index ETF (NYSEARCA:EWZ).