ETF Midweek Peek: France, Spanish Debt And Greece Austerity Measures

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 |  Includes: DOG, ERY, EUO, EWZ, FEZ, TIP, TLT, ZSL
by: David Fry

Last week's jobs number seemed to be the mortal wound for the market. The wound was heavily salted by the election in France, Spanish debt downgrade and rising interest rates followed by Greece now murmuring of rejecting austerity measures, jeopardizing the next round of bailouts.

The Fed's plunge protection has had little effect other than slowing the rate of decline. Hopeful technical levels or candle patterns have been rejected as traders flock to T-bills for safety. The 10 year bill (NYSEARCA:TLT) has broken out. Now the fight is at the critical upward level of 80.17 on the Dollar. Chairman Bernanke seems to have an impossible task like trying to hold a beach ball under water as each time he crushes the Dollar, it immediately pops right back up.

Astonishingly, with regular daily triple digit swings in the Dow, the VIX remains in the sub 20 complacency level.

Top Performers This Week

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The rapid rise in the Dollar hits commodities the hardest, thus the mega bears hit the top of our performance table this week. Traders had shied away from the Ag and precious metals sectors and had been focusing on oil. Now, in a broad-based selloff, oil and energy are taking the hit, both from a technical standpoint and from the fundamentals of global economic slowing.

Tech is another area to watch as it is completely dominated by AAPL.

AAPL got a huge pop on the earnings report, but sold ever since. It is nearing a critical support level of $554. Breaking below that could trigger major selling and pull tech and the Nasdaq down hard.

New Highs

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Traders are fleeing into safety of US Treasuries and German bonds. The 10 year note has broken out of its range and yield is currently at the lows of the year at 1.8%.

The German bond hit a three year low of 1.5% today.

New Lows
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Speculation, hype and Fed policy ran gold to extreme highs. Gold miners have been in a free fall for a month coming off two significant selloffs over the past seven months.

We also notice that the relative volume indicate this is not a drift down, but rather hard selling of these positions.

Unusual Volume

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As Europe closes today, selling was hard in the broad European market. The VIX got a pop at the open, but was crushed by Dollar manipulation.

A routine is developing of running the US market up after the close of Europe after the overnight selloff. Risk-on, risk-off is now running in half cycles, but at the end of the day, the market continues in its decline.

Overbought

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Even with the Fed's attempts to hold the Dollar down, traders shorting gold, silver and oil have been emboldened by the Fed's lack of "success."

Although these positions have crossed the threshold of overbought, they still have room to run.

Oversold

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Brazil and Russia are a causality of the sharp decline in natural gas prices and selloff in oil. Typically, the most oversold are the first to pop in a recovery. All of these are directly Dollar related. Another round of QE will likely spring these quickly.

By relative volume, we are also seeing some selling exhaustion, with the exception of gold miners.

Trending Up

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Shorting the Euro is a position in virtually every fund manager's portfolio and has been for a year.

Bonds continue a drift up that has been in place for most of this year as investors showed distrust in the recent rally. Although Homebuilders haven't broken the upward channel, hard selling is likely to prove a reversal.

Retail, lifted on higher consumer prices and investors seeking safety in consumer staples has stalled.

Trending Down
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It appears that the unleveraged short Dow is the last holdout from the 2012 rally. The mega caps and dividend players of the Dow are the last to go in a sell off.

In summary, the Fed is leaving elephant tracks in the market at critical levels and timing. 100 point Dow swings in a matter of hours is a dream for day traders and algos, but investors and swing traders have a very negative outlook on the market currently. Central bankers seem to have a mandate to fend off panic, but not much else as the market continues to decline despite miraculous intraday pops.

Equities fly wildly on an intraday basis driven by central bankers and media. The charts to watch are the Dollar index (.DXY) and the 10 year yield (.TNX) to see what central bankers are up to. The market is completely in their hands.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.