Thursday Outlook: Commodities, Emerging Markets

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It doesn’t take much to stampede an oversold market. We got that today with news from China that they’ll toss more yuan into their stimulus package. Is it just a one day wonder? Perhaps, since the trusty McClellan Oscillator is very good at extreme readings spying short-term moves.

The late day sell-off must have disturbed bulls since it showed a lack of conviction to hang around. Volume and breadth were also unremarkable. Nevertheless, it will take a lot of work to relieve oversold conditions. Just some sideways action would be healthy for both bulls and bears. But we don’t have an inside track on Mr. Market’s thinking—nor does anyone else.

There aren’t any professors to beat up on today and Bloomberg didn’t post any new ways to define PE ratios to mean stocks are cheap. Few objective people would argue the markets like much of what the Obama administration is doing. You might ask Jimmy Cayne how he feels about Tim Geithner and you’ll get an X-rated earful. Not that we should care.

Tomorrow we’ll get more employment data, chain store sales, factory orders, a Kohn speech surely designed to pump us up, followed by a Natural Gas report which seems to be an appropriate tag for Kohn’s speech. Of course Friday is the employment data where even a horrible number may be perceived bullishly as before… if only briefly.

Let’s see what happens.

Disclaimer: Among other issues the ETF Digest maintains positions in IEF, TLT and GLD.

Comments

[Conan the Barbarian]

In re the SPY, we better be at or above or we are all in it up to our eyeballs.

2009 Mar 05 01:54 AM

[Moon Kil Woong]

Your market assessment is so on the mark today. Anyone who thinks China can pull the US out of a downturn by inflating commodities prices and military arms buildups need their heads examined.

At most we might see a perk up in equipment sales like Caterpillar before a new flood of spent Chinese US dollar reserves starts entering the market making it even harder for the government to inflate without causing inflation.

Lack of conviction is so on the mark.

2009 Mar 05 03:32 AM

[rayman]

Awesome article!
Love the chart notes as well.....thanks for telling it like it is David!

2009 Mar 05 05:09 AM

[prudentinvestor]

Thanks. Your articles and analysis are always succinct and informative, and the witty notes add zest to the dry data.

".....when things do turn around, China may emerge as the leading economic power in the world much sooner than anyone expected. Is that possible?......". Well, it depends when "anyone" expected. For several years now, I've been telling my friends that, barring political instability or war, I expect China to become the leading economic power by 2020. Now it seems it may happen even sooner, given how quickly our leaders are messing up our economy with desperate measures to sustain impossible consumption, support inept bankers and irresponsible consumers, punish savers, and discourage creative enterepreneurs.

2009 Mar 05 08:15 AM

[F. Bradeen]

Thanks for the comments on Crammer. You can add his buddy Kaass. Here is a short seller complaining about leverage and short funds. They both lost all my respect for them.

2009 Mar 05 08:27 AM

[patio]

My day now starts with two cups of coffee, ground myself, and David Fry.
It's unfortunate, because then most of the other SA articles fail to inspire or amuse.

2009 Mar 05 08:56 AM

[xsellside]

Terrific line up of charts as usual. Subscribed.

2009 Mar 05 08:57 AM

[goldhammer]

I wonder how much gold China has, and if they convert all the $ to gold, could they base the Yuan on gold? Of course the Yuan would soar, but cash would stampede in. Then what, just buy the US, like we bought Alaska/Louisiana (from broke, failing governments...Uh-oh...... Sorry, what a bummer.

Love the columns, Mr. Fry. Count me as an everyday reader.

2009 Mar 05 12:16 PM

[Tdurdan]

I just signed up on Seeking Alpha yesterday and read quite a few blogs posted. I must say David, your blog carries a great amount of substance that is very intriguing. No wonder you're at the top of the watch list. I'll be looking forward to your daily post.

Thanks -
T

2009 Mar 05 06:17 PM

[corey mendel]

Can I copy what "prudentinvestor" said? Great stuff Dave!

2009 Mar 05 06:19 PM