Wednesday Outlook: Commodities, Emerging Markets

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The Fed pleasantly surprised markets by taking the gloves off and lowering interest rates to where we already knew they were: zero.

Isn’t it interesting that when the markets are down you get carnival barkers like Cramer trashing inverse or leveraged short issues but no mention of the leveraged long issues today? That’s part of the populist conflicted con game these guys play. When markets are steamrolling south or north, it’s the sell or buy programs, linked to futures, which do all the damage, not ETFs. To suggest otherwise is absurd.

There are really only 7 [not shortened or low volume affairs] serious trading days left in the year. Today was a classic Fed abetted window-dressing affair. But, it is what it is. For technicians you can’t fight the tape.

Friday is quad witching [I’ll get this right yet] and there should be plenty of crazy action this time.

Many times, the day after a Fed decision, markets reverse course if only briefly. The momentum today was excellent. What I don’t like are still escalating bond yields with stocks rising strongly at the same time.

The Fed has elected to throw caution to the wind and is pulling out all the stops. This should encourage you but also make you wonder just how bad things are. The danger is that Bernanke, like Greenspan before him, won’t know when to take away the punch bowl.

Let’s see what happens.

Have a pleasant evening.

Disclaimer: The ETF Digest is long GLD, FXE and FXI.

Comments

[investor88:]

Conclusion "let's see what happens" despite all the bullish technicals and money thrown at the markets. David doesn't seem convinced it is a great buying opportunity, seems the right stand although by standing aside we are missing the robust rally.

2008 Dec 17 07:55 AM

[SW Richmond:]

Buy the rumor, sell the news, if you're a trader.

If you're an "investor", capital preservation is still the order of the day. Capital is going into hiding all over the planet, as it rushes into gold and Treasuries.

MOO and DBA are starting to look like nibbles, but I'm not convinced yet. I've been too early before.

2008 Dec 17 08:29 AM

[teegee:]

Ben Bernanke is now called "CarpetBomber" Ben on Fast Money last night. I like David's take on Cramer....he's so much a momo guy, but since an up day is followed by a down day so consistently now, his populist true colors come shining through as he flits back and forth like a water bug. Of course, he'll brag that he "called it" back whenever ( not counting retractions). Now he says a "depression" is out of the question .However, I too wonder how bad things really are! and how many other counter-insurgency "bombs" will still drop.

2008 Dec 17 09:23 AM

[Internet2k4:]

I've been curious about following $COPPER index instead of the iPath Dow Jones-AIG Copper Total Return Sub-Index ETN (JJC) which seems to be tracking that index quite well.

2008 Dec 17 11:19 AM