Wednesday Outlook: Commodities, Global Markets

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So there was some profit-taking today on lighter volume which is about the only conclusion you can reach. Not one unconflicted economist (those without any stocks to sell you) likes the Geithner plan. I don’t like anything the Fed or Treasury have done in this administration or the last. Particularly galling is the former Chairman of GS operating as Treasury Secretary bailing out his old firm with taxpayer funds. Not to be left out is Congress which... well, never mind.

But bulls see all this as a great buying opportunity and as someone just watching the tape, you have to hand it to them. The end of the month approaches and no doubt bulls will want to paint the tape to prop things up.

Tomorrow is Durable Goods and more Home Sales data sure to provide the media an opportunity to spin things in the manner they wish. Also on tap, the Fed rolls out two governors to provide more encouraging happy talk.

Let’s see what happens.

Disclaimer: Among other issues the ETF Digest maintains positions in GLD, DGP, DBP, DBB, DBC and USL.

The charts and comments are only the author’s view of market activity and aren’t recommendations to buy or sell any security. Market sectors and related ETFs are selected based on his opinion as to their importance in providing the viewer a comprehensive summary of market conditions for the featured period. Chart annotations aren’t predictive of any future market action rather they only demonstrate the author’s opinion as to a range of possibilities going forward.

Comments

[CautiousInv...:]

Thanks David

The indicators I read are somewhat mixed with the exception of what you point out and slow stochastics, which is higher than this past January and signaling a change of direction.

Overall, other chartists and technicians expect a choppy consolidation with some saying there is room for several more days of gains.

I'm glad Treasury is targeting the root problem but worry about bank solvency and the scale of the effort compared to legacy asset levels. Not knowing what potholes we might hit, it would be easy to get ahead of ourselves.

Mar 25 06:31 AM

[prudentinve...:]

Thanks for the usually great summary. Short-term, I expect some more upside before the end of the month, and hope to continue taking some profits, whilst keeping a solid core of equities in case I am wrong about the longer term, which I still see as negative for some time.

Mar 25 08:02 AM

[EMS:]

Must be nice to be GS, all the while knowing they would be bailed out, could trade on that sweet, "inside" track. Bet that was pretty profitable. Someone should investigate...

Mar 25 08:09 AM

[stonedinvestor:]

David I'm not sure what the point is of telling us what happened yesterday and then calling Weds Outlook a bear reversal but good luck with that. Your point on TLT is that due to the promise of US buying bonds have reversed up when they should be going down?- that's how I'm taking the Chinese comment- you should flush these charts out a bit with better commentary. On the book you read by Walter McDougall’s “In the Throes of Democracy” I was wondering if there was any mention of Ivar Kreuger?- if so I would pick it up.
Thanks~ stoney

Mar 25 08:18 AM

[Seeking Advice:]

Still the most useful analysis on the site. And it's true as you say that there are few economists from the right or left of the spectrum that seem to like the Geithner plan. I don't either. I guess that doesn't mean it can't work, though. I also have trouble seeing the catalyst for equities rising sustainably for some time, despite some media cheering lately (e.g. misleading headlines like "Housing starts unexpectedly rise in February"). I see no real evidence that anything has fundamentally improved in the economy.

Mar 25 08:28 AM

[David Fry:]

Stoney, I don't write the headlines for SeekingAlpha posts. I write the commentary after the close and then post it by around 6-7 PM EST. What they do with it then is their business.

Dave

Mar 25 08:55 AM

[PDL27:]

Stoney,

You wrote to David: "Your point on TLT is that due to the promise of US buying bonds have reversed up when they should be going down?- that's how I'm taking the Chinese comment- you should flush these charts out a bit with better commentary."

I think you need to bring a little bit of your own knowledge and study to this blog: the Fed announced unprecedented purchase of Treasuries last week... the ramifications of this are rather evident: TLT and IEF have been rallying... and the Chinese have raised concerns about the potential loss of value over time in Treasuries... since they've been the largest purchasers for years, don't you think that is a concern? And now they are calling for an international currency standard to replace the dollar... Don't you think that should be a heads-up for potential investors in TLT and IEF among others?

Mar 25 09:30 AM

[Franklin Bird:]

All this talk among short-sellers about "manipulators" when there is buying. So, hedge funds & specs hammering the pre-market futures, gang trading, naked shorting and using CDOs to panic bond holders and reguators is what? "Healthy activity?"

Mar 25 09:55 AM

[investor88:]

David is not too optimistic, far from raging bull. Maybe good to be a little cautious here.

Mar 25 10:00 AM

[CTMike:]

It's beginning to seem like the half life of major events such as the Fed buying treasuries is not much more than a day; after 1 day the impact is 50% diminished, 2 days 75% diminished, 3 days 87.5% etc. This clearly says the market is without direction and the next piece of news will whip it in another direction. Also, makes the market incredibly susceptible to short term manipulation. Unless you have the inside track on the next piece of news, you have a 50% chance of winning/loosing in the short term. I'm with David, might as well go to Las Vegas than invest in this market.

The next collectors book will be "The Great Financial Crises of 2008-2010; How the Public Was Fleeced in the Greatest Con Game In Human History". Do you really think the world would come to an end if some of the super banks disappear. I've never seen a vacuum last more than a few nano seconds. The vultures and local banks would immediately step in and pick the carcases of anything of value and let the toxic assets rot as they should. My local small town bank does a great job at supporting the community the old fashioned way - nobody on the payroll makes 7 digits and they don't even know what a financial engineer is. (AND, when GE money market recently put a 21 day hold on a credit union check even though it cleared after just 3 business days, my local bank worked with me to avoid problems.)

Waiting patiently for reality to come back.

Mar 25 10:16 AM

[Conan the B...:]

David: most of your charts look like they may be on the "Brink".

Which look the best, in your opinion?

Mar 25 10:52 AM

[j_remington:]

Manipulation is the name of the game. Just know when to press the buy and sell button at the appropriate time.


On Mar 25 10:16 AM CTMike wrote:

> It's beginning to seem like the half life of major events such as
> the Fed buying treasuries is not much more than a day; after 1 day
> the impact is 50% diminished, 2 days 75% diminished, 3 days 87.5%
> etc. This clearly says the market is without direction and the next
> piece of news will whip it in another direction. Also, makes the
> market incredibly susceptible to short term manipulation. Unless
> you have the inside track on the next piece of news, you have a 50%
> chance of winning/loosing in the short term. I'm with David, might
> as well go to Las Vegas than invest in this market.
>
> The next collectors book will be "The Great Financial Crises of 2008-2010;
> How the Public Was Fleeced in the Greatest Con Game In Human History".
> Do you really think the world would come to an end if some of the
> super banks disappear. I've never seen a vacuum last more than a
> few nano seconds. The vultures and local banks would immediately
> step in and pick the carcases of anything of value and let the toxic
> assets rot as they should. My local small town bank does a great
> job at supporting the community the old fashioned way - nobody on
> the payroll makes 7 digits and they don't even know what a financial
> engineer is. (AND, when GE money market recently put a 21 day hold
> on a credit union check even though it cleared after just 3 business
> days, my local bank worked with me to avoid problems.)
>
> Waiting patiently for reality to come back.

Mar 25 10:52 AM

[schlumpf:]

what do you think the chinese do, when the US is buying there own bonds ( what joke ), for price manipulation.
They are happy and sell. Or do you think chinese are stupid???? This idea must be from the kindergarden. Ore all investors are stupid and dont see this.

Mar 25 11:24 AM

[AndrewBaker:]

Both ends pulling against the middle, schizophrenia, bi-polar disorder are all terms that come to mind when I look at David's charts today. One minute you're up, then you're down, and no discernable reason for the change. Trading is tricky, with financials the trickiest (especially when you're trading FAS and FAZ!). Gold was up, then it's down, whilst gold miners were up and down then up again in the space of two days. Oil can't decide which direction it's going in, whilst copper and other base metals rose and have started to fall back, all with no demand at all on the horizon. The dollar manages to be both up and down at the same time against different currencies. What can cause such mis-direction and (in)action. Ahh ... Bernanke, Geithner and Obama have been speaking about different things and telling us what a great plan they have, and their pals (Mr. Big Bank Boss and financial wizards everywhere) have leaked out what a good time they had in January and February, taken their money and oiled a few palms, whilst optimists and the gullible have responded by buying up such cheap stocks whilst they can; with a few down days when reality looks like setting in until the next dose of prozac. Hold fire, I say, and you will be buying those stocks even cheaper not far down the line: the easy investment money is nearly all spent out. Wait for it ...

Mar 25 02:33 PM

[Daniel Herkes:]

"During the Panic of 1837 most banks and businesses collapsed. So too did employment and the then burgeoning stock market."

Great analogy. The US at that time had an emerging manufacturing economy, but was predominantly a nation of farmers. A very different time.

Mar 25 06:48 PM

[pacman1947:]

David,
Looking at your charts to decide the next move is like peering into the mouth of a hungry lion to count its teeth.

You gotta be kidding, right? Can one make decisions this way?

My view of the booms and busts of history looks into the mind of the human being. The process of human psychology reflects a constant battle between fear and greed.

Look at the flow of price fluctuations to measure that balance. Don't try to swim against that current. If you want to make it to the other side, go with the flow.

People make decisions based upon the balance. Perhaps these charts can pinpoint the moment that balance is disturbed. What I see clearly is that the markets are frightened and that greed is taking a holiday from the venue.

Trillions are on holiday at the moment. That may be wise.

Great article, sir!

Mar 26 08:53 AM

[raytayzmd:]

...uhhh, wrong:

"During the Panic of 1837 most banks and businesses collapsed. So too did employment and the then burgeoning stock market. Folks were wiped out but President Andrew Jackson did absolutely nothing."

...well, yes, banks, businesses, employment, and the stock market collapsed ...BUT -- big "BUT" -- Jackson's actions CAUSED the panic of 1837 by blocking rechartering of the Second Bank of the United States...this led to a proliferation of state and local banks and a coincident expansion of uncontrolled credit and speculation...the speculation was funded by paper notes issued by the banks but NOT backed by anything substantial (e.g. gold or silver) -- something kin to derivatives...to rein in the speculation Jackson had the "brilliant" idea to require gold and silver be used to pay for purchases of government land...that, in turn, led to a huge demand for gold and silver...but when people tried to trade in their notes, the banks didn't have the gold and silver necessary to redeem them...the banks collapsed and the panic was on...but it wasn't anything Jackson needed to worry about he didn't do anything because he LEFT OFFICE in 1837 -- hmmm, who does that remind me of?...and, similar to today, trying to cope with the mess he left the country in caused the federal debt to skyrocket...and saying "none were resolved by government intervention" is rather absurd since every panic has been dealt with by government intervention -- no one knows what would have happened had there been no intervention...and most people are uncomfortable with the govenment standing around twiddling its fingers while the economy goes down the toilet.

Mar 26 02:09 PM