Tuesday Outlook: Commodities, Global Markets

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So what kind of games are we playing here? The tape is reality but what if it’s created artificially or by some outside mechanism? Well, it’s still reality but it makes you question the integrity of markets and the people running the show. But then they were always thought of as manipulative SOBs, eh?

Consumer spending is a key to economic recovery and must demonstrate renewed demand for housing, autos and consumer credit. That is missing and the government is supporting the consumer (who is saving more than spending) and the financial sector (who are trading more than lending). How long can they do this before they take away the punchbowl? Good question but I don’t have the answer.

Disclaimer: Among other issues the ETF Digest maintains positions in: IEF, TLT, TBT, UDN, DBV, GLD, DBC, DBA, EFA, and EEM.

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

[Internet2k4:]

Actually, this is looking something like last spring and summer, seeing, hearing and speaking no evil about the road we were on, until we went single file over the cliff.

While I used to track IFN because the iPath INP was erratic during some sort of national foreign investment embargo a while ago. But I've given it up for the Wisdom Tree EPI, which is now tracking perfectly with the INP and has the edge in volume. By comparison, IFN is on its own CEF planet.

Jun 02 12:00 AM

[doubleguns:]

Unfortunately we may not go single file over the cliff this time. It could be the whole herd at once. The Native Americans did that to the buffalo.

Wonder if the PPT, Geithner, Ben and BO all have Indian costumes?

Jun 02 01:25 AM

[phewtures:]

Nice charts. Good article, too. Karl Denninger's post on last Friday's close is also worth the read, as the author suggests.

Market participants do have the right to place whatever orders they choose. If some huge player wants to test resistance in the close with a 1000 ES contracts (5000 ES mini's) 'at the market' then so be it. Of course, that's the big boy MO: test resistance, and if it breaks then your already long. If not, then reverse. It's that simple.

Furthermore, there were plenty of signals to go long into the close last Friday, beginning as early as 3pm eastern. It started with a little bounce off of Thursdays' close (905) going into 3pm, signaled by a break above 906 on the ten minute chart shortly thereafter. From there, intra day swing levels and the previous day's high all got busted, one right after the other, in a perfectly normal manner. Finally, as 4pm was closing in on everyone the intra day high at 913.50 was re-visited. By then, the various intra day moving averages, momentums, and stochastics were are showing long. So, at 3:57 pm on the 3 minute chart the big hole got punched, like an NFL fullback running through a group of 7th graders ... and off we went. Then, and only then, according to Karl's post, the market order for 1000 ES contracts (5000 e-mini's) got triggered.

Convinced, yet? Maybe so. At the very least, perhaps we can all dispense with the conspiracy theories. Price is always right, and the market can do anything it wants to do, at any anytime. Period. End of story.

Jun 02 07:22 AM

[Maxe Paul:]

Now that a technical level has been hit (200 MA) the hoards will rush in pushing the market higher. I love the way we had green shoots last week and this week it's bamboo shoots LOL.

Next week it will be full grown forrest. When this occurrs the truly dumb money and speculators will pile in in droves. Thats when we will short this baby, but it's not there yet. Patience is required, as usual.

Jun 02 07:35 AM

[twotraps:]

Considering the larger move down in the S&P Cash mkt from 1576...that mkt bounced up to 943 before putting in the low of 667. So, we are back at the top of that range. We can continue higher, or fail back across the range. Making declarations about the health of the economy based off a price in the DOW or S&P doesn't matter. There is very little to go on here historically, at no time has there been this much govt. intervention in business or so much debt to deal with. I look forward to great opptys coming up as new business replace old ones (GM) and that brutal process is what will sustain the mkt longer term. Also, I think for the most part, the public has completely lost track of the bank situation...are they broke or not, who should still fail or not? The govt must either raise taxes or cut spending and benefits. They have little expertise handling their own check book every month let alone running a bank or GM! But the economy is back on track because we traded above the 200 day??

Jun 02 09:01 AM

[Alex Strash...:]

Stocks have been risky until relatively recently. But an uptrend is beginning to be seen. And some stocks are doing better than others. I've recommended the materials sector (XLB), which is continuing to do well.

Jun 02 09:06 AM

[basehitz:]

David Said
"Rumors swirled that it was JPM in the pits buying tens of thousands of S&P futures contracts with some leftover TARP money."

Karl Denninger said
"This sort of market order was guaranteed to dislocate the market - so the buyer had to simply not give a damn what sort of price they got." and later "Someone" who didn't give a damn if they lost a sizable amount of money intentionally wanted to shove the cash market up through the 200DMA, a critical technical level. "
I strongly suggest readers take the time to read this analysis.
market-ticker.denninge...

So Friday's shenanigans set the stage for Monday's massive rally.

And today we have WHY:
"Morgan Stanley to raise $2.2 billion to repay TARP"
"Morgan Stanley will serve as the bookrunner for the offering"
finance.yahoo.com/news...=

Payback for whoever goosed the market to ensure a premium price for the new shares was repaid instantly. If the Govt wasn't in on the fix via bought politicians, somebody might actually give a damn about prosecuting.

How many times to the sheeple have to get sucked into this scam before they get it? Please be very careful.

Jun 02 09:31 AM

[speeddaimon:]

David,

I notice no UNG today. Because of reading your posts here on SA, I've started trying to learn more about technical analysis. I believe I read somewhere that if a price bounces off resistance twice, we should expect a serious move down. Looking at UNG, its about to bounce off its 200 DMA for the second time. Thoughts? (or corrections if I am mistaken in what I read)

As a side note, basehitz, I really hate the use of the word sheeple. Everything else in your comment was spot on, well thought out and convincing, but the use of that word just kills credibility with me.

Jun 02 10:04 AM

[David Fry:]

Basehit, I believe you hit a home run with your "why" comment.

Jun 02 10:05 AM

[TurtleTrader72:]

Great charts here..Makes it easy to see all the unfilled 'up gaps' created by many stocks, ETFs and indexes.. Mark my words, these 'up gaps' will get filled in. It is only a matter of time so be careful at these levels. However, after conducting some fibonacci retracements analysis, i did notice that the S&P 500 managed to blow through the first major resistance level (38.2%) of around the 910 level. The next major level (50%) sit around 985. I would speculate that the 50% level will pose some strong resistance and could be a good exit point on long positions or even a good point to go short..Additionally, the S&P making a new high this morning but the VIX still not making a new low..Very interesting.. :) Investors may not be as confident as the market is making us think..

Jun 02 10:06 AM

[lex:]

obvious this mkt is rigged...who raised money today? let me guess...........

Jun 02 10:59 AM

[Artistes:]

David:

Curious ... at what price of UNG do you have the 200 day moving average? My 90 day moving average is at 16.15.

IMHO, UNG is about to make a double bottom thereby propelling this EST to $20 on a near term basis. Could be wrong, but look at the volume statistics.

Jun 02 11:43 AM

[MKW:]

I think it's safe to assume that once the last of the banks have their recapitalization funds, the thumb will come off the scale. Three months ago, if someone had imagined this rally, I would have said they need psychiatric help. At this point, the Fed's got to be telling the banks to hurry it up, given the damage the rise in interest rates is doing.

And it looks like someone's setting up early for the anticipated 2:00 Rally. It's only 1:30 and someone just jammed the Dow up 20 points (and back to a positive number) in about two ticks. The Powers That Be really just don't give a crud what kind of damage they're doing to the market's credibility as a valid valuation discovery mechanism, do they?

Jun 02 01:35 PM

[mrresponsible:]

I'm wondering if PHEWTURES purchased the last hour last Friday/

Jun 02 08:52 PM

[scooby_voo:]

Anyone watch fast $$$?
It's the Jeff Macke purple crayon market. As long as the purple crayon trendline is in tact, stay with the trend...when it breaks get out. The economists and amateur traders all feel that Mr Market has come back too far, too fast. So we're all anxiety ridden. Even with the recent 3-month run-up, we still have a wall of worry which we can continue to climb. However, I can't imagine that we don't get at least a 10-20% correction in very sharp fashion before the end of theyear.

Jun 03 01:01 AM

[DonFurio:]

It's been so great seeing the shorts been severely busted the last few months. Why make it hard on yourself, the long term trend of the market is up..

Jun 03 02:41 AM