Wednesday Outlook: Commodities, Emerging Markets

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Major market sectors as well as many subsectors were, and many still are, much oversold.

Let’s not forget we’re approaching the end of October with window dressing efforts still in play. Further, this month is when mutual funds must book gains and losses. I’d guess they’d like to minimize the loss part.

We also have the Fed meeting results today with an expected rate cut announcement and lots of attention focused on “words” in the statement with the customary spin.

Many have wondered why we’re sitting on so much cash and not heavily short. Yesterday was a good example of why. Some wonder, why not be a buyer? Well, we had that 900 point rally a few weeks ago and look where that got bottom pickers.

It was pointed out yesterday by Merrill Lynch (MER) [remember them?] that during the bear market of 2000-2003 we had 15 days with 300 point or more rallies. With 800-900 point days being the new norm, should we expect more? Why not! This is a casino-like environment.

Then in a week’s time we’ll know [hopefully] who the new president is going to be. Despite some misgivings about future policies it shouldn’t surprise that a patriotic rally could occur. How long that would last is anyone’s guess. But the honeymoon will be short since the new president will face challenging economic conditions.

Sitting it out for a bit isn’t a bad policy to my way of thinking.

Disclaimer: The ETF Digest is long FXY.

Comments

[Dr. O:]

I'm confused. The FXI (the Chinese market ETF) was up 20% yesterday. The Chinese stock market, as represented by the Shanghai Composite was DOWN 3% last night. And down the night before. So, why does FXI go UP 20% with the Shanghai Composite DOWN about 4% the past 2 days?

2008 Oct 29 07:02 AM

[David Fry:]

Dr. O you're confused by stale out of time zone data. Forward-looking as the world turns is the operative way to view these issues.

2008 Oct 29 08:34 AM

[Dr. O:]

I am confused.

2008 Oct 29 08:39 AM

[gabe borens...:]

It suffices to say ,that prior to yesterday's rally we have heard the most bearish market perspectives.The word Depression has been used non stop.
What we have seen yesterday is not a part of the market correction in the bear market but rather a beginning of unprecedented rally.
The market volatiolity will continue but ahead lies another spike that will dwarf what transpired yesterday.
Investment community/investors need to understand that all of the approved measures were not fully implemented yet.Then there is a lag (monetary and fiscal).
By the second half of 2009 the U.S GDP will be expanding at 5% .
This will be as difficult to comprehend as my warnings on September 18 of 2007 when I have issued a warnig (one out on many) during the Bloomberg TV interview -Brian Sullivan).
I believe that the author of the current article was still somewhat bullish.
In the next two years,the Dow will reach the 20,000 level- period.
But the fear mongers certainly are contributing to a mass paranoia and psychosis.
One more thing,the synonym for the mega rally will be Gabe.

2008 Oct 29 08:49 AM

[Internet2k4:]

Dr. O:

FXI tracks (for practical purposes is) the FTSE Xinhua China 25 Index, mainland companies trading on the Hong Kong (not Shanghai) exchange. It's about 40% banks/insurance. There's a PDF Factsheet here:

ftse.com/xinhua/englis...

2008 Oct 29 09:36 AM

[Sidj:]

It might be worthwhile to note presidential-election cycle patterns in the markets. That said, post-election years historically have been the weakest on the Dow (according to chartoftheday.com)

2008 Oct 29 10:16 AM

[pitaking:]

Gabe, there is no way we see 20K on the dow any time in the near future. I'm playing this from the long side for a Obama/Santa rally but it will be a bear market rally and nothing more. Buy your oversold's this week but don't fall in love yet, this won't be some crazy V reversal.
Disclosure LVS, ACI, X, FCX

2008 Oct 29 11:43 AM

[gabe borens...:]

My final response on the topic.
There is a"mother" of the rally in the period ahead.
It will redefine the concept and notions of the bull market.
It will dwarf in magnitude of what transpired yesterday(I have called this rally at 4 A.M).
Yes ,the Dow will hit 20,000 within two years.
We are the witnesses to a market history in making.
The only thing that we should fear is the fear itself.

2008 Oct 29 01:38 PM

[juicyjoo:]

Who is the Gabe Borenstien guy and how can he be so deluded?

How many bottoms have you tried to pick Gabe? How much have you lost at every bottom picking effort claiming a super rally that will be heard across the universe?

How do you manage to keep down all that Kool-aid you've been drinking?

How long do you expect to be wrong before you're proven right?

we're sitting on at least 9 months and counting....

2008 Oct 29 03:21 PM

[RobW:]

I've spent a good bit of time "ghosting" various message board, and gabe's comments are classic "pump and dump".


On Oct 29 01:38 PM gabe borenstein wrote:

> My final response on the topic.
> There is a"mother" of the rally in the period ahead.
> It will redefine the concept and notions of the bull market.
> It will dwarf in magnitude of what transpired yesterday(I have called
> this rally at 4 A.M).
> Yes ,the Dow will hit 20,000 within two years.
> We are the witnesses to a market history in making.
> The only thing that we should fear is the fear itself.

2008 Oct 29 07:41 PM