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Intraday Market Notes -- August 7

|Includes:DBC, First Trust Water ETF (FIW), IEO, PHO, PIO, PPA, SMH, SOXX, UHN, VGT, XLY, XOP

4:00 pm ET: No negative news from Europe combined with some decent retail sales numbers was just the fuel needed to support this rally, at least for one more day. As noted yesterday, the SPX has been rallying in an upward trending sawtooth pattern. With just an hour before the close, the market is starting to show weakness. A rising VIX could indicate that this upward leg is about to come to an end, and a close over 16 could mean a lower open tomorrow.

Commodities are having a great day as the risk-on trade is on in full force. Several groups are breaking out: 1. Water (FIW, PHO, PIO--all have 1-2% dividends), 2. Oil & gas explorers/producers (XOP, IEO--both pay a small dividend), and 3. Heating oil (NYSEARCA:UHN). Reflecting this strong commodity rally is the Commodity etf (NYSEARCA:DBC) which is also breaking out.

Sectors are showing strength as well especially Semis (SOXX, SMH), Aerospace & Defense (NYSEARCA:PPA), IT (NYSEARCA:VGT), and Consumer Discretionary (NYSEARCA:XLY) which are experiencing their own break-outs.

Trade Update: In July 27th's blog we noted how the Spain and Italy country funds were breaking out. Since then, the Spain fund (NYSEARCA:EWP) tacked on 8.3% (over its closing price on July 27th) while the Italy fund (NYSEARCA:EWI) gained over 9.5% Both stocks are up over 2% today alone!

Stocks: FIW, PHO, PIO, XOP, IEO, UHN, DBC, SOXX, SMH, PPA, VGT, XLY