I am extremely concerned about the continuing risk in International ETF’s. For those of you that read my earlier post on this subject (”International ETF Bubbles”), I regret that I did not complete my research weeks before the most recent decline. The few days following my post and before some serious damage was done were not met with concern and I doubt any protective action. In fact, all the feedback echoed a theme that went something like this - “You don’t know what you are talking about.” “You are panicky.” “It’s not time to get out yet.” etc. etc. Given that I have a thick skin to go with my contrarian thinking, I proceeded to change all 26 UP signals to DOWN over those two weeks. I suspected that I would be wrong for a while but given that my signals only change weekly, I thought I would just take the opportunity to get out of the way.

While I don’t like beating the drum over and over, I DO NOT believe this situation has improved. Once the initial selling pressure declined, these ETFs reflated over a period of 5 or 6 trading days largely with the help of the crowd who loves to tell everyone to buy on the dips. While I heard a lot of talk about international and emerging market stocks, very little of the discussion was focused on advising people to exit. Most of it was an attempt to be comforting, tell people the worst was over, and encourage them not to sell. I am always amazed that the smarties come out after a market event and tell investors what to do. If they were so smart and worth listening to, wouldn’t they have been warning people before the declines? Regardless, the reflation came on light and decreasing volume - not a base building flow of new capital.

For those of you that disregard technical analysis, shut your eyes, close your ears and put your head back in the fundamental-only sand for the next sentence. TODAY’S ACTION WAS VERY DESTRUCTIVE TO THE TECHNICALS IN MOST INTERNATIONAL ETFS!!

And if you don’t want to listen to my rants…this weekend Jim Rogers closed out his appearance on Neil Cavuto’s Fox network program by expressing his concern about further pain in the international markets. Kudos to him for speaking out on this topic. Please don’t listen to me or Jim - DO YOUR OWN RESEARCH AND LISTEN TO YOURSELF.

Last week’s market action was a bit encouraging. Not overwhelmingly great but after getting beat up on Tuesday, I was impressed by how the rest of the week played out. Weak stocks got stronger and few strong stocks got weaker. To me - this implies that it was more than just a decline in selling pressure and that there was some incremental buying power coming into the market. Defensive names like the utilities and some of the REITS stood out as I went over the charts. I would have liked to see more volume but with the holiday-shortened week, that was unrealistic so I’ll take what we got. I am told that it’s rare for me to appear positive and I am taking this opportunity to show that I can be even-handed.

This Iranian threat to disrupt oil shipments through the Straights of Hormuz is discouraging but I doubt it will impact trading much longer than one day. It may be a catalyst to spike the price of oil into a longer-lasting move but on its own, this is not new news. The mullahs and President Ahmadinejad have made this threat several times and unless this causes the rhetoric to accelerate, I suspect that oil will go back to trading on other risk factors.