Tuesday Outlook: Commodities, Global Markets

Return to page 1 >> Where's the Volume?

So many markets, so little time. Plus the movers have taken my PC with multiple monitors which make this task so much easier. I’m willing as always to post other markets as long as the primary markets of importance, from my view, aren't sacrificed. So again, if you have markets you want featured let the Fryguy know at: [e-mail].

Do I like this market as folks wonder? No I don’t. This Geithner fellow can get me pretty mad. It still seems like a setup by Da Boyz to suck us in and sell us their accumulated shares. But, here’s the bottom line: if you’re systematic and disciplined you must follow your system or you’re lost. The only “tell” I have that this is a sucker play is light volume. Now I did read that volume was “comparatively heavy” today, but I don’t see that in the ETFs despite the run up in prices.

Like I mentioned to subscribers over the weekend, it’s no coincidence that everyday this week Fed officials will be speaking. They’ve no doubt rehearsed their talking points and will jawbone markets.

Let’s see what happens.

Disclaimer: Among other issues the ETF Digest maintains positions in: SPY, MDY, MVV, IWM, UWM, QQQQ, IGM, FDN, XLB, XLY, XLI, IYR, NLR, XLU, IEF, TLT, TBT, FXA, DBC, USL, XLE, DBA, MOO, DBB, XME, EFA, EEM, ILF, IEV, EWJ, EWY, EWM, EWH, EWA, FXI, IFN and EWZ.


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. More detailed information, including actionable alerts, are available to subscribers at www.etfdigest.com.

Comments

[bthomas:]

Volume is truly key here because this action is so easily manipulated by "Da Boys." The grating thing is they're doing it with our (taxpayer) money. Does Timmy really want to release the Stress test results? Please. We shall see. It' still too early but, this may be the beginning of the new Epic Inflation Machine. The dollar index is sliding, prices are rising across the board. Commodities anyone?

May 05 07:46 AM

[dirty_dirty:]

great article as always...and thanks so much for the extended blurbs (summaries) at the end!

May 05 08:01 AM

[Archman Inv...:]

Here is a repost of a comment I left on another thread. The comment I feel applies to many articles we see on the internet.

As always Dave, great job analyzing the current market. I never miss an EFT Digest recap.

I wrote elsewhere:

At DOW 14,000 the pros say:
"Keep on buying"
"Buy for the long term"
"Buy and hold"
"Everything is great"
"Goldilocks economy"
"Never been stronger"

At DOW 6500 the pros say:
"Buy and hold is dead"
"Give your money to the pros and let them trade the market for that is the only way to make money now"
"Time to take money off the table"
"It is the end of the world"
"Cut your stock exposure by 50%"

However, at DOW 6500, the pros, the institutions, the hedge funds are buying hand over fist while mom and pop are shell shocked and on the side lines.

Now, 35% to the upside later, mom and pop are getting back in, the pros are putting their "super strong buys" on everything, and apparently, everything is right with the world again.

No wonder the average American's portfolio, as of today, is back where it was in 1999.

Goldman ups the coal sector to super strong buy AFTER it has a 200% move up.

Yeah. Ok.

Wall street tells you what you want to hear, I tell you what you need to hear.

May 05 08:33 AM

[History Buf...:]

This has all the trademarks of a "traders" market, not an "investors" market. If you have long positions it's a good idea to have stop limit orders in (hopefully above what you paid) and beware of sudden violent downdrafts in the market.

May 05 09:09 AM

[JGL:]

Talk about decoupling! All markets (countries) are moving together!!
Buy or not buy...This is the question!

May 05 09:21 AM

[corley10:]

Sucker's rally? That what some seeking alpha authors have been writing since the market was up 10% off the bottom. I don't feel like a sucker given that I bought TNA and FAS in march and have made all the money that I lost in the last 1.5 years. As long as people believe this is a sucker's rally, we continuje to go higher. Your charts show a possible resting period at the gaps, if we hit those I will probably sell and buy back if we get a substantial pullback. Thanks for the help!

May 05 09:25 AM

[Seeking Advice:]

So what's driving the market? Still missing an "engine" to drive the economy forward, IMHO. The last several years, it was home prices and home equity loans that drove consumer buying while incomes remained flat. Another normally key piece to drive the economy is rising employment or incomes. Neither of these is present or appears to be coming soon. The government of the past and present administrations has looked to fill the "gap" with government money. Are we seeing some results of that?

I continue to hold equities (though less than 1 or 2 years ago) and am enjoying the upturn. But I still have trouble making the case for a return to a sustainable bull market when I can't make a case for sustainable economic growth, I can only make a case for this slow down to ease somewhat. How long can the market seperate itself from the apparent underlying economic fundamentals? I admit I don't know. I just don't want to get caught too severely on the wrong side - whichever way it's going to go next.

May 05 09:39 AM

[ed233:]

As usual Mr. Fry you're disclosures are enlightening and I for one am appreciative of your remarks. Aside from your article and data I wrote a commentary yesterday concerning stress tests. In that comment I might have given the impression that one should down play the stress tests as nonsense and not take to much concern over their results. By that I ment that if the Obama administration is trying to use stress tests as a tool to say "Oh the situation is not good but it's better than what we had expected" From that approach I suggested that they should be considered nonsense. However, thinking over night and listening to the blurbs reported in the press over the week I have to conclude that must be something important underlining the stress tests. First, we heard there was a rift between Ken Lewis at Bank of America and the Obama administration about coercion. The next thing we heard another banker stating that no bank should be too big to fail. Now from another a statement suggesting that there are too many banks. The question I posed in my last comment yesterday was, "Is there some meaning to be derived from these statements? I think there is something somebody is trying to tell us. Are those statements ment to prepare us for some notification that one or more of the 19 banks are close to imminent peril? Is Bank of America in really bigger trouble more so than most had originally thought?
The stress tests I think are here to stay for the banks. It is a means whereby the Fed can monitor the health of the banking industry going forward. There will be greater calls for more transparency. This approach will give President Obama a chance to further distance himself from the growing concerns over the alleged wrongdoings of wall street. Stress tests would eventually fortify a base and counter the allegations of uncertainty and provide a credible source for transparency. LOL Looking after your money.

May 05 09:54 AM

[The Geoffster:]

As an avid market follower, I'm keenly focused on trends and trade them accordingly. Longer term, I look at the macro economy and invest accordingly, mostly ETFs. It seems that a certain amount of complacency has set in as we enter the eighth month post crash. The world has not ended, maybe it's safe to get back in the water? This recent run up may well be nothing more than hedge funds and Tarp bank trading desks lending credence to the Fed and Treasury and when politicians go on CNBC talking about "green shoots" and extolling the first "Hundred Days," well maybe it's time to pause. The rate of economic decline may have slowed but its still trending downward and there is much unwinding left to do.

May 05 09:57 AM

[Sober Realist:]

Well, as TraderMark has said, when the herd is doing you, you can profit. Simple as that. We have much further to climb.

May 05 10:04 AM

[basehitz:]

archman82011 posted my thoughts. . . except one. This morning I sold everything else I had (only energy) after yesterday's orgy. I do not have Dave's discipline to hold what is to me a hyped situation by Washington, Government Sachs, and CNBC (the Baghdad Bob of financial journalism). Fundamentals back moderating decline, not a normal recovery. I am aware the pump monkeys will continue what they do until they can't find enough suckers to entice. I sell now cause I am concerned once the manipulators (e.g., GS) start selling, it will be an avalanche.

May 05 10:08 AM

[Windwood Tr...:]

The real question is whether or not the institutions are yet in the game. The ones I have talked to are still formulating a, ahem revised investment position. Their clients will accept the 30-50% drop.....once. After all we all drank the Koolaide.
A repeat performance, however would not bode well.
The little folks may be showing the way but same are pretty skittish right now.

May 05 10:11 AM

[conceptwizard:]

Nice information. Until the Toxic assets are off the banks balance sheets we are not going to have a recovery. Simple as that. Charts are a good source of information to try and make common sense of the whole thing. The Fed has pumped so much money into the system that it has trickled over in the equity markets, driving a rally. Which is the same ingredient to charts of all countries.
The US banking system is insolvent and everyone knows it, no one wants to admit it, and deal with it.
The results of the stress test – even before they are published – are not worth the paper they are written on as they make assumptions on the economy that are much more optimistic –even in the worst scenarios that the FDIC has designed - than the actual figures for Q1 of 2009.
Paul Krugman said that the stress tests are merely a "self-esteem class" for the banks.
FDIC chief Sheila Bair has said the tests are a sham.
Former senior S&L regulator William Black previously called the stress tests a sham and a hoax.
The chair of the Congressional Oversight Panel, Elizabeth Warren, is highly sckeptical of the stress tests.
Indeed, the Federal Reserve itself has more or less admitted that the stress tests do not really measure solvency, saying:
"Even if the tests showed a bank needs more capital, that "is not a measure of the current solvency or viability of the firm".

How do you negotiate a stress test by the way? Either you have the cash or not, its not negotiable.

Anyone risking the fires of hades with 2 trillion or more of losses still to come is a brave soul.

May 05 11:06 AM

[User 371158:]

Please, someone explain to me why we keep hearing about the low volume of this recovery...I just don't see it.

Take a look at the S&P 500 volume for the last few months on this chart: the volume range is from about a billion to a billion and a half shares per day.
www.bloomberg.com/apps...

The volume during the big run-up in 2007: about a billion to maybe 2 billion shares per day.
The volume during the massive sell-off: about a billion to maybe 2 billion shares per day.

Maybe there are other cases where the volume has been massively impacted, but for the S&P specifically I just do not see it. There are good opinions on both sides of the valuation debate, but for trading volume things look about normal to me- at least for this one specific and important index.

May 05 11:06 AM

[chleoku:]

Nice insights. Looking at the UNRECOVERED market fundatmentals, it's not hard to tell this is a sucker rally:

www.wealthalchemist.co.../

May we see a drop in May? Definitely. Market is far from bottom.

May 05 11:34 AM

[Franklin Bird:]

Question - over the last three or four years, hedge funds & prop desks accounted for 40-70% of daily volume. Volumes remained high during the 4th quarter sell-off as those leveraged specs were forced to close out all positions.

Now their risk appetite and access to liquidity is severly reduced. So it's no surprise volume is down. But given this, what does it really tell us in technical terms? It's not likely the leveraged specs will be coming back any time soon. So maybe what is considered high volume will need to be reassessed.

The market is starting to return to normalcy.Imagine that! Real investors taking the market back from highly-leveraged specs.

May 05 11:40 AM

[aarc:]

The bigger question is when the trading volume does come back or goes higher - where is the price going into, UP or Down?

Target for SnP is still 982 before the next 6 months of stair-step type of sell-off should follow into the Nov/Dec 2009 time frame. Q1-2009 if things turned from worse to worst.

A tall call considering the massive confusion that is prevalent at this stage; but this is how this type of pattern (a C-wave) usually resolves. See my previous posts on how a C-wave pattern usually resolves. There are many other ways it can be resolved. I'm betting on the highest probability rather than the 2nd or 3rd higher probabilities.

C-wave is not a complex pattern to a trained eye, there are far more complex patterns that can happen (for example, the Tech Meltdown of 2000 to 2002 is a complex A-wave pattern, the bear rally from 2002 to 2007 is a complex B-wave pattern. That is how an A-B-C pattern forms; from complex to (more) complex to simple. Likewise, look at the Australian dollar of early 2004 to early 2006 on the monthly chart. It is an A-B-C with a simple A-wave down, a complex B-wave up, and an extremely complex C-wave down pattern before the rally was able to start in March 2006.

A-B-C patterns can follow the sequence of complex to more complex to simple. Then there is that pattern that goes from simple to complex to more complex such as the A$. It happens much less often than the other patterns.

The most common A-B-C pattern is a simple A-wave to a very complex B-wave then a simple C-wave. Dow Jones and SnP did not follow the most common pattern but rather the second most common pattern.

Dow Jones, SnP and Compq are still following the usual pattern by which a simple C-wave resolves itself. The C-wave pattern has revealed itself since Oct 2008 and has not deviated from all the expected ensuing reactive bear rallies and fake sell-offs that follow the sustained panic sell-off of Sept-Oct 2008.

Massive confusions usually follow the series of bear rallies and fake sell-offs before the final capitulation sell-off cappes the end of the C-wave. We are now at the confusion stage where hope starts to re-assert itself despite grim fundamentals.

Taiwan went into over-extended rally. A very risky situation, the ensuing correction might end up as a punitive sell-off if their expectations of trade easing with China turned out to be nothing but false speculation.

Likewise, the "green shoots" speculation in the US can easily produce a spike rally to SnP 982 and above but the sell-off after the rally can become punitive rather than corrective if things turned out too far away from what was expected. So things can still go awry.

We will see - and we will see how this thing will pan out into the near future.

May 05 01:41 PM

[Just Say Whoa!:]

>The quote of the day comes from the tax cheat in chief, and man, does this take some hubris!

Hey--that's nothing compared to the hubris when El Rushbo tries to spin why the average NASCAR mullet head should care about The Chosen One cracking down on El Rushbo's offshore account(s) to cheat the IRS out of revenue!

May 05 02:38 PM

[HerrHansa:]

Volume has been looking as selective as LA nightclub crowds for a while. Compare Switzerland iShares (EWL) to Japan iShares (EWJ), and it looks like there is not just one dog. I have noticed what I would call selective volume, which relates to my LA nightclub comment. Some volume jumps at certain times, in certain places, but then the crowd moves on to the next great thing (they hope), or they simply leave the scene.

The emerging markets are still emerging, but at a slower pace. I like what you have shown in your charts, but there is no optimism from me. I agree with sticking to a game plan, or good nightclubs, rather than simply joining the herd. Here's to the next drop (raising a virtual Guiness), may it bring more buying opportunities.

May 06 02:19 AM

[bartpr:]

ok now we all know that volume is less in the upswing than in the down. maybe its because there are less sellers now than before.
why should there be more buyers to make an upmove than a downmove. it appears to be a function of how many sellers are left at the table. the fewer that remain, the fewer buyer are needed to move stks up. volume may pick up as a move get older when profit takers from eariler purchases begin to dump. as always a buyer must match sellers for the market to work. if there are excess sellers at the table markets will move down.

a true measure of volume and its meaning must look at potential
sellers and buyers. this infor is not available, so pat anseers come out like volume must greater at an upmove . this conclusion is just finding an answer and not really addressing the reason.

May 06 06:49 AM