Tuesday Outlook: Commodities, Emerging Markets

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Last week I wasn’t commenting too much, believing a lot of the action was window dressing on light volume. Sure, there was a lot of talk of the new Obama financial team that investors seemed to like at least temporarily. Also bulls believe stimulus packages and massive liquidity injections globally will turn the tide eventually.

Unfortunately for them, the deflationary trend remains intact. This is troubling and try as authorities might the trend isn’t reversing. Further, bond markets are sending a highly negative message regarding deflation and negative economic growth.

The behavior of American shoppers [dba, Chucky] is an embarrassment. But it seems more about event hysteria than anything else. More importantly preliminary data indicates strong sales but only on heavily discounted merchandise which means little profits for retailers. I’m still thinking Chucky and the kids will be stringing popcorn to decorate their twig of a Christmas tree. But, they’ll do it watching their plasma TV and eating the old maids.

Have a pleasant evening.

Disclaimer: The ETF Digest [thankfully] has no positions.

Comments

[Pipo:]

“If sentiment gets worse and equities move lower we could see oil go to $40.” Gerrit Zambo, an oil trader at BayernLB in Munich.

oiltradersblog.blogspo.../

2008 Dec 02 06:54 AM

[Chipset35:]

I like your video of the "Herd" of mindless drones charging into Best Buy like the idiots they are. It is this same herd that invests based on panics and euphoria. I wonder what teh herd will do now that we see headlines that say we are now "officially" in a reccession....surprise... you and I already knew that, but the dumb herd will be panicing as if this is some prophecy of doom from above...anyway, i am enjoying your articles as usual. FYI, had to cancel my sub to your website...send me an email and I will tell you why....hint...get a new webmaster.

2008 Dec 02 08:18 AM

[NOWHEREMAN:]

$40 Oil? Brent or WTI?

I think Brent could close below but WTI might do it intraday only. All of the producers will panic at that point.

There will be some really, really great bargains in the next couple of weeks. IMHO

One question, is there a chart available for the Municipal Bond Market or does one have to make do with various Mutual Fund charts?

2008 Dec 02 09:32 AM

[me3tv:]

I like your charts and analysis. I've been tracking several as indicators overall. EWZ for instance tells me a bit about how Vanguard's emerging market fund might perform - so I chew on that information as I look for an entry point on the Vanguard. Obviously there is a big demand destruction all around. How can China perk up if Chucky is home watching his Plasma Tv that was made in China four months ago? I think your charts are helpful as I try to judge when all the air is out. Sure looks close but my guess is it might have another 10 - 15% to go. Is there a fund or ETF with "Obama" winners - like infrastructure and education?.

2008 Dec 02 10:29 AM

[L Moore:]

Is the next grand bubble GDP? What happens when it pops?

2008 Dec 02 11:04 AM

[cma cma:]

Notice that Fry tends to do his update after big down days, not after big up days, to reinforce his broken-record bearish view. His cash book is warping his analytical view.

2008 Dec 02 01:00 PM

[NOWHEREMAN:]

It doesn't matter whether its after up or down days, the trend is what is being depicted.

If you can show me a single chart which looks bullish, I would say you are "holding the chart upside down in front of a mirror". IMHO

2008 Dec 02 01:17 PM

[nmelendez:]

If you look at the charts you can see a consolidation. If Gold can hold at these levels with all the deleveraging taking place, where will it go once the dollar run is over? Any guesses.

2008 Dec 02 02:50 PM

[parnelli96:]

another great post, dave. love the video.

2008 Dec 02 04:12 PM

[pitaking:]

The view has been negative because the charts have been negative, David helped alot of traders to see the coming drop a year ago with unbiased and easy to read work, when the market changes from bull to bear, I'm sure the sentiment will follow but you rarely win trading with hope over charts. Keep up the good work.

2008 Dec 03 01:07 AM

[NOWHEREMAN:]

Gold will definitely rise but oil has to stop dropping first.

Freeport's disclosure regarding its mining operations will cut some Gold supply off but gold is ancillary to their operations nowadays. Gold is a byproduct of their copper operation in India.

Deflation is still in play.

IMHO

2008 Dec 04 02:28 AM