ETF Update: Market Is Testing Extremes

That wasn’t the type of greeting Obama was expecting from markets I suppose. (I think markets behaved similarly the day after the election.) Maybe it’s just that most investors were hanging out at the Mall in DC or watching TV.

This is one ugly market featuring disappointments atop disappointments. It seems simple enough: earnings and outlooks suck, write-downs continue, plant closings continue apace, a new administration isn’t up to speed yet and so forth.

Then we have dramatic recent headlines like “biggest rally since WWII” and today “worst yearly start since 1928″ and so forth. Nothing is being done moderately.

Selling today was broadbased early with materials (Alcoa (AA)), energy (Conoco (COP)), drugs (Pfizer (PFE)), financials (State Street (STT) trashed and so were others) and tech (IBM (IBM)) leading the decline.

Volume was moderate to heavy and breadth both sucked and blowed. (We’ll grab Yahoo/Finance’s data before it falls apart.) Nevetheless, without all the data yet, I’d say we probably had a negative 90/10 day.

Then we get really scary headlines and stories of an impending debt disaster (I thought we already had one!) from the Economic Times.

Bonds were down sharply early, then the flight to safety trade reemerged and a bid appeared.

Gold was up early only to fade somewhat toward the close as investors were seeking safety.

Gold stocks bear more watching since if stocks collapse overall so too can gold stocks.

Oil prices are doing their thing still but this article from Bloomberg was pretty shocking. Do you think its right for MS and C to take government funds to buy and store crude oil offshore?

Testing extremes is what this market action has been all about. Whether it’s the VIX (^VIX), McClellan or record low monthly RSI readings markets aren’t doing anything moderately. It’s a dangerous situation for investors and more like wrestling a boa constrictor.

We’re on the sidelines completely. That pretty much sums up the situation for us. Nevetheless, in this rapidly changing environment it’s hard to know what our next move will be.

Let’s see what happens.

Disclaimer: The ETF Digest has no positions.

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