Friday Outlook: Commodities, Global Markets

<< Return to page 1 - Cheerleading the Bull






















































Tomorrow is the all important employment report. Will bulls care? They’ve blown-off just about every negative economic data point during this recent rally discarding what didn’t suit them and embracing what did.

The bulls have control of the tape and their cheerleaders own the BS. It’s pretty shameful that the FASB would cave in but the political pressure was intense. It was generally common for financial institutions to carry mortgages at their maturity value. For many years with conventional mortgages, this made sense. But toxic waste composed of worthless derivatives isn’t in the same category. This is like cancer being deliberately put in remission knowing it will resurface at a later date for a different set of politicians and taxpayers. It’s dishonest at best.

These comments aren’t sour grapes since the ETF Digest, as you’ve noticed, is involved in many long positions since that’s our job. Sometimes doing your job is distasteful even as it is rewarding.

Have a great weekend.

Disclaimer: Among other issues the ETF Digest maintains positions in SPY, MDY, IWM, QQQQ, IGM, FDN, XLF, XLI, XLY, GLD, DBB, DBC, USL, MOO, EFA, EEM, EWY and FXI.

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

[Seeking Advice:]

Great analysis again. I'm also somewhat long and holding my nose. I see no changes (improvements) on the horizon, economically (wish I did). Housing prices still going down, home sales still way down year over year (What's that? Feb home sales were up 4.7% from Jan... and that was... a 'surprise'?). The mark-to-fantasy rule change concerns me as well. But, I guess the banks will be O.K. now that we've suddenly raised the value of their assets. Right? Hmm... I'd like the power to do that with some of my assets, too, just don't tax me on it.

Apr 03 09:33 AM

[ETFtrader:]

Brilliant analysis, and fun to read. Thank you.

Apr 03 09:43 AM

[prudentinve...:]

Like the above posters, I too am holding long equities, but have been incrementally cashing in gains on a portion of the stocks I bought near the recent market lows. With each incremental move up, I sell off an increment and book some gains. I expect the fundamentals will dictate another big leg down regardless of cheerleading, possibly by summer; but prudence dictates maintaining a solid core of good dividend stocks just in case I am wrong.

Apr 03 09:47 AM

[AndrewBaker:]

Good again, David: you do get thanked, often and by many, though doubleguns may not have noticed 'cos he's studying the charts. Anyway, the trend is your friend, so I'm long right now. If you can't beat 'em, join em.

Apr 03 09:48 AM

[Professiona...:]

Yes, thanks for efforts Mr. Fry.

I have decided that my Forex account is " too big to fail " and have applied for 2 billion in TARP funds. I just can't afford to care about moral hazard anymore.

And with the new MtM rules, my house is worth well north of fifty million. This is magnificent and I can't believe my luck. I will buy you all beer after the funds roll in.

Now if I could just find a good bank.

Apr 03 10:08 AM

[Mad Hedge F...:]

The sucker money is coming off the sidelines. Once thought an extinct species, the retail stock investor is back with a vengeance. It only took a 23% rally, the best since 1938, to do it. Trading volumes are up 15%-20%. It’s time to take a look at the online brokerage stocks, which have been on a tear. These are pure brokerage firms, not de facto mega hedge funds like the big boys. So there are no hidden trading losses, mark to market issues, compensation scandals, or TARP money. These boys are poised to pick up the pieces left behind by the implosion of Lehman Brothers, Bear Stearns, and Merrill Lynch. Look at Charles Schwab (SCHW) with a mutual fund family that makes it a more sensitive to a rising market, or TD Ameritrade (AMTD) which is a better volume play.

Apr 03 10:12 AM

[smilingpilgrim:]

David, do you see gold forming a H&S with the neckline around 888? what would be your take on this?

thanks

Apr 03 11:27 AM

[smilingpilgrim:]

My chicago cousin told me yesterday, "if only the newspapers started to write positive things about the crisis all would be good" GOSH !

you see, it works with American menality - prudent non-Americans just do not get it with our logic, skepticism, and calculator in hand. Americans are different - "resilient, optimistic ... " and all the other "positive" emotions. And you see, my cousin's not stupid either, she's all-round American.

So do we want to be right of make money?

Apr 03 11:37 AM

[smilingpilgrim:]

jobs are a lagging indicator, so that might be right. but no-one knows how deep they will go.


On Apr 03 11:13 AM schlumpf wrote:

> good work David thanks,
>
> in cnbc the bulls wrote, its a good sign that the job losses are
> higher. The recession is over because the job losses are higher.
>
> I know everybody is long now. but this is crazy

Apr 03 11:40 AM

[venividivici:]

David you summed it up perfectly towards the end of your article.
Archman you are dead right.

Apr 03 11:41 AM

[Franklin Bird:]

"This rally has been 50% short covering, 40% hedge funds moving it up, 9% PPT, and 1% mom and pop, average americans."

Who ARE the shorts you refer to if not hedge funds? People don't pay hedge funds big fees to be long.

In fact, I'd suggest that you are seeing the end of the era when hedge funds ran the markets. That "happy" era started when the tech bubble burst and kicked into high gear in the weeks following the 9/11 attacks when the hedge funds piled in to drive the markets and economy lower. They preyed on and drove out mom & pop America who were simply trying to put aside some retirement savings. When the average save gave up on stocks, the funds had to fight among themselves - performance fell and withdrawals began.

Apr 03 11:46 AM

[carey_jim:]

Newspapers and other Town Criers report statistics such as the unemployment rate as if they were absolute numbers and unambiguous.

"Unemployment highest since 1982!!!"
"Oil prices highest ever!!!"
"Gold reaches all time high!"

But the price of everything is relative to inflation and comparing unemployment rates of different historical periods isn't always helpful.

It's rare for the popular press to analyze economic statistics in detail.

In the old Soviet Union there wasn't any unemployment because anyone who didn't work was considered a shirker and put into a forced labor camp.

But the United States press, rightly, never even bothered to report the official Russian 'unemployment rate' except to add a little humor now and then.

A challenge for the Town Criers:

What does it 'mean' to say that 8.5% of the American workforce is unemployed?

Apr 03 01:15 PM

[Winston Smi...:]

Thanks Dave, while this may not be the place it bears being said. Death has a funny way of bringing a new outlook; the smiles from friends and strangers look bigger, flowers smell better and look brighter, sounds of birds, are more recognizable, and the awareness that smells are really more than just breathing. I am guilty and mad for living my life on this earth as if I was going to live forever. Why wait until we receive some bad news to really start appreciating the life we have today? Hopefully we all can start to live a more intentional life today. Ask yourself, what really matters? Greg's insight and humor will be missed. Sorry to hear of the loss.

Apr 03 01:58 PM

[David Fry:]

Greg and I were polar opposites politically but we agreed on one thing all the time........"no BS, no lying".

We were great friends and he was great confidant.

We'll all miss his humor, wit, straight talk, wisdom and honesty.

Apr 03 02:09 PM

[User 388654:]

A sad loss...

2009 Trends, Techniques and Outlook :)'

Market: Bad news = go long Good news = go short
Wall Street = Let them eat cake. While they look for the cake, let's finish off the ETF's "Eat This F's".

Well it will be getting warmer soon, a good beer, maybe a Oburger to ram down my throat while I kick back in the garden watching my growing compost pile of cash.

Happy days.

Apr 04 08:24 AM

[Roowns:]

With the market being 50% down from peak, I think it's safe to say the 40 in volatility it's the new 20 as you were implying.
The volatility indicator should be somehow weighted with market level for a better view.

Let's face it. After the disaster of news that we were targeted in recent months, the few good economic indicators from last weeks made some difference in the market.
We all know this is not enough for a bottom and those who hurry to enter now are more risk takers.
From my point of view, this it was the way to go, I am not shocked. But I think it's a small chance that the streak of good news will continue.

Keep the good work David.

Apr 04 03:46 PM

[User 306198:]

As always, appreciate the fine work you do, Dave. My condolences on the loss of your friend and Friday podcast co-host, Greg Newton.

Apr 04 04:09 PM

[Shortstick:]

I've been doing the same - Incrementally selling longs. Do not beleive this recent run-up although the commodities appear to be going along. A big surprise to me is the action in the REITs - Thet were on fire Friday in the face of falling prices, increased vacancies and lower rental rates. Took a pounding on my short position.


On Apr 03 09:47 AM prudentinvestor wrote:

> Like the above posters, I too am holding long equities, but have
> been incrementally cashing in gains on a portion of the stocks I
> bought near the recent market lows. With each incremental move up,
> I sell off an increment and book some gains. I expect the fundamentals
> will dictate another big leg down regardless of cheerleading, possibly
> by summer; but prudence dictates maintaining a solid core of good
> dividend stocks just in case I am wrong.

Apr 04 05:15 PM

[Shortstick:]

Dave - What is your take on UNG? I've had one successful trade in the past two weeks and am now again long. I think it goes up from here (As you say, it must have some value) Nat Gas at 6 year lows, enviros, rising oil, offline production due to low proces?

Apr 04 07:26 PM

[Carousel:]

The San Francisco Chronicle had an article on Sunday about the lack of prosecutions and an assertion that this credit crisis is not real. The writer said that it's a deep recession from too much debt and too much debt-financed consumption but that the idea that it's because consumers and businesses can't borrow more is a lie devised by the banks to justify handing them a lot of money that they aren't going to lend to consumers and businesses anyway.

Check it out: www.sfgate.com/cgi-bin...

Apr 06 02:39 PM