Friday Outlook: Commodities, Global Markets

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The government is too big. That means too much money, patronage, political favors (more money) and bad programs like Fannie (FNM) and Freddie (FRE). Corruption and scumbags like Rahm Emanuel, per this story in Chicago Tribune, are the end result. (Yeah, yeah, yeah… the GOP has its share of scumbags as well.)

The news is bleak and disheartening but the tape is downright cheery. Which matters more? For us it must be the latter although we’re intrigued by the accuracy of DeMark’s monthly indicator signaling a potential change of direction.

The Treasury sold $57 billion in bonds while the Fed bought $33 billion. The money from the latter is propping both bonds and stocks since what would the sellers do with the money? Buy bonds? Silly isn’t it? That money may be routed to trading desks where they (wink, wink) know what to do with it.

With the end of month upon us very soon and the G-20 meeting on tap, window dressing is on the front burner. Be careful out there with markets overextended.

I’d say the efforts of authorities to “stabilize” markets are working; however, they haven’t “fixed” a thing, that’s for sure.

Let’s see what happens. Have a great weekend.

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

[Willie Loeb]

Is MOO "peaking" above resistance, or is that "peeking?"

2009 Mar 27 06:49 AM

[Dr. O]

Cash is surely being punished this month. The one month T-bill briefly flipped to negative yield yesterday, suggesting a rather odd aversion to risk with all the equity euphoria.

Likewise, the Financial Times reported yesterday on the historically high, and stubbornly high spread between investment grade corporate bond yields and Treasurys (the report was from DB). The implied default rate at 5 years out is 40%.

They conclude that either the bond market is still massively over-pricing risk, or equities are over-pricing growth (and solvency by implication).

However, with zero percent interest rates and Dollars and Yen falling from the skies, one must seek alpha where one can.

2009 Mar 27 07:03 AM

[prudentinvestor]

Dave, thanks for the great data summary and charts.

"We’re much overbought but that doesn’t seem to be slowing bulls down and you just have to stay out of the way....". Overbought, yes, but why stay out of the way? Personally, I've been feeding the hungry bull some stocks which had gotten too far ahead of their fundamentals, and I expect to re-purchase the same more cheaply within a few weeks, after we hear of their earnings and probable dividend cuts.

2009 Mar 27 07:16 AM

[prudentinvestor]

"The Treasury sold $57 billion in bonds while the Fed bought $33 billion."

NBR's Suzie and other msm told us that the treasury auction was a success, and reassured us that China still has an unslakable thirst for our safe haven treasuries. So I am puzzled that the fed had to "buy" more than half. Perhaps a whiff of things to come.

2009 Mar 27 07:21 AM

[Contrarius]

Eventually this technical religion will fail, with all the others.

"We're much overbought" Only by technical indicators, which ignore the real world.

In the real world, on Feb 11-12 we were at this same ~830 level on the SPX, in the wake of Geithner's poorly-received speech. That 830 level was regarded as very low -- a sign of extreme despair in the market, because the Treasury and the Fed had failed to save us.

Now a dozen macro and earnings indicators are looking much better and we are a month and a half nearer the end of the recession. And we are STILL at the 830 level!

And you technical fundamentalists think we're OVERBOUGHT.

SPX will be at 1000 by the end of May, if not before.

2009 Mar 27 07:33 AM

[Seeking Advice]

I've never loved technical analysis, but the patterns do seem to have meaning. My current feeling is that a combination of fundamental analysis of economic conditions combined with TA is necessary or at least very helpful in deciding what to do.

Economically, I'm not convinced that we've solved anything as David says, but the market was longer term oversold and ready to rally. I'm leaning towards adding a little to my low equity position but awaiting that overbought indicator to come down to earth. In the past, I've foolishly ignored the indicator and not been happy. I intend to be more respectful of it in the future.

2009 Mar 27 08:04 AM

[toobad41]

I am not sure but I think you might have missed a chart or two.

2009 Mar 27 09:30 AM

[AndrewBaker]

Thanks, David, for making it that much easier to get some clear thinking going. I'm beginning to realize it helps to be bi-polar at this time in these markets. It does seem that in the intermediate term, we are heading higher, yet today (and Monday next?), we are going lower. Consolidation, or the start of a new downtrend? The signs of a bull further out are increasing, but I feel that we have got to get that (final?) big bear downleg out of the way first.

So for now, I'm daytrading leveraged ETF, especially financials; holding some good individual long-term stocks - which I'll sell and rebuy to give the bulls some feed in-between times (I'm with you there, prudentinvestor) - and going in and out of gold, oil, metals and agricultural ETF in the short to medium term.

Bull, bear or uncommitted, the charts are a tool I can't do without, so keep 'em coming, David.

2009 Mar 27 10:20 AM

[4Annie]

If you don't appreciate Dave's work, don't waste your time reading & following. Many of us appreciate his work. I start the day looking for his most recent commentary. Keep it coming Dave!



Agree

On Mar 27 06:11 AM ozcutty wrote:

> David, i'm not convinced your commetry is particularly useful. Most
> is stating the obvious and as with most technicians you are not really
> predicting a future direction just merely commenting on past events.
>
> I'm not sure your love of agricultural commodites is going to make
> you big bucks, they've been on a downward trend for 100 years.

2009 Mar 27 10:37 AM

[Mad Hedge Fund Trader]

I love crude, but not right here. The recent 69% leap in crude prices from $32 to $54 may mean that the next spike has already begun. We have been sowing the seeds for the last nine months. The US drilling rig counts has dropped by half to 1000, and it could go as low as 900. Credit squeezed companies have chopped exploration budgets to the bone. The few new wells that are being drilled are becoming increasingly expensive to bring on line. Mexico is the second largest foreign supplier of crude to the US, delivering 1.2 million barrels a day. But production at its main Cantarell field in offshore Yucatan is falling off a cliff, and the country will soon become a net importer. Buy that Prius while the lots are still full.

2009 Mar 27 11:36 AM

[Conan the Barbarian]

Peeking or maybe Peking Duck, Doesn't matter.

The basic metals sector had many marginal mines open. Now they are closed, too expensive to operate.

Silver took it on the Chin as an Industrial Metal but with the closure of the Marginal mines in the other base metals, Silver output declines rapidly. It was a byproduct of many of those metals.

On a percentage basis, I would expect Silver to outpace gold when industrial demand picks up.

IMO

2009 Mar 27 11:41 PM

[Chezfrederick]

Thanks for the charts and insight... I refer to your posts very often... and thanks for the humour, it makes it easier on bad days.

2009 Mar 28 07:59 AM

[corey mendel]

I'm boggled by the "hate mail"... Do you guys realize that you're reading this information for...... free? Only on the internet would people even bother to talk such nonsense. Ozcutty and Contrarius seem to have all the knowledge huh? What are your credentials to lay your expertise out here? 25 comments 10 comments.... Dave has over 1000 articles written for free which most enjoy to read everyday.

2009 Mar 28 03:19 PM