Wednesday Outlook: Commodities, Global Markets

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I’m impressed by the turnover of the Summation Index. Perhaps we’re due for something more than a correction. The data has yet to support bullish sentiments. After a move like we’ve had we’re in a “prove it” environment.

There are plenty of charts to chew on and I’ll leave it there. After all, it’s only Tuesday.

Let’s see what happens.

Disclaimer: Among other issues the ETF Digest maintains positions in MDY, QQQQ, DBC, DBA, USL, DBB, XLE, EFA, EEM, EWA, EWZ, EIS 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. More detailed information, including actionable alerts, are available to subscribers at www.etfdigest.com.

Comments

[Macro_Man:]

are you seeing an inverse head and shoulders starting to form in GLD? Looks like the near term direction is still down. But, once it forms a base there, if it breaks upward next few months, could go to 110 or so?

Jun 17 05:10 AM

[Schweizer:]

Few realize what just happened.

The INDU is in a serious down channel and this bear market rally went up and tagged the upper down channel line, the busted 200-month moving average, and the old 2003-2007 bull market up channel. A "Kiss Goodbye."

We are now heading down which will be fueled by larger Real Estate defaults (CRE, Alt-A, Option-ARM, Jumbo), and large bankruptcies, and maybe even defaults by States (like Calif).

Also, major Bear market bottoms are alway made with a GAAP PE under 10. As of June 2009, the SPX PE was 63. What does that tell ya?

The Big Picture chart which likely will play out, as the market drops to seek that necessary GAAP PE of under 10 floor: i40.tinypic.com/35m0ec...

Jun 17 06:02 AM

[MKW:]

It's actually gratifying to finally see Mr. Market get his head out of you-know-what; however my sense is that things are going to get interesting from here. My current thesis uses the market from 12/2/02 to 1/6/03 as the model. It was two months off what would eventually be recognized as the ultimate low of the tech bubble burst. S&P 500 hit an intraday high of 954 (sound familiar?) before retreating to roughly 870, then blasting back up to 930 again - and I mean blast, it took three trading days.

Let's not forget, it's JPM that's been almost solely responsible for the "emergency" large-block buy orders in SPY which have provided us almost daily stick-save entertainment for the last couple of months; and it's JPM which still has its secondary coming up at the end of June. I have a funny feeling that they've finally come to the conclusion that it would be too difficult to keep the market propped for that long and so are content to let it drop. Easier to make a repeat of 1/2/03 - 1/6/03 to elevate their share price.

Jun 17 07:01 AM

[tunaman4u2:]

Stick saves appear to be losing effect for sure... enjoy your summer & come back to the market not far from these levels in the fall

Jun 17 08:15 AM

[DDPearson:]

On Jun 17 07:01 AM MKW wrote:

> It's actually gratifying to finally see Mr. Market get his head out
> of you-know-what; however my sense is that things are going to get
> interesting from here. My current thesis uses the market from 12/2/02
> to 1/6/03 as the model. It was two months off what would eventually
> be recognized as the ultimate low of the tech bubble burst. S&amp;P
> 500 hit an intraday high of 954 (sound familiar?) before retreating
> to roughly 870, then blasting back up to 930 again - and I mean blast,
> it took three trading days.

I believe the fundamentals are different between today's events and the recession from the Tech bubble. I am not going to list all of them, but I will highlight one area. Today's over leverage society is paying the price of limited savings with expanding unemployment, which will result in greater foreclosures and bankruptcies. Even though the individual consumer is trying to build their savings back up (in a small way), the US government is expanding their leverage aggressively, one more than offsets the other. Whether you look at the individual, business or local, state governments, I don't see the foundation being laid for a muti-year bull market run.

Jun 17 08:44 AM

[MKW:]

Yes, I agree. Note what happened after the three day run from 870 to 930. The market went sideways for a couple of weeks then plunged to its March, 2003 low.


On Jun 17 08:44 AM DDPearson wrote:

> On Jun 17 07:01 AM MKW wrote:

Jun 17 09:28 AM

[squark62:]

the snoop doogy dawg animation was clever! fits the market tone perfectly.

Jun 17 09:30 AM

[TurtleTrader72:]

Fibonnacci studies applied to the S&P 500 indicate that this latest correction could pull the index down towards the low 800s and possibly lower. The first retracement level of 38.2% posted at 845, the second 50.0% level at 811, and the third 61.8% at 777. If you refer to the weekly charts, i believe that this correction could be the process in which we form the second shoulder of an inverse head and shoulder formation. If that is the case, i would look to be a buyer at around the 800 level on the S&P 500. From there (if my theory is correct) we could experience a rally that could take the index from about 800 all the way to 1100. I base the 1100 mark by using a 'gap trading' strategy where i would expect the 'down gap' (on the weekly bar charts) on SPY to get filled in at that level. Additionally, if we use a 'relative strength theory' it will be technology shares that will lead the next intermediate bull run. In the meantime, lets see if the latest weakness in the market will provide us with the second shoulder formation i am looking for.

Jun 17 10:16 AM

[cdur:]

Thank you for FAZ....

love graphics..??? have a look at : www.pro-at.com/

plenty of them from France..!!

best regards Dave

Jun 17 12:12 PM

[AndrewBaker:]

Mostly I agree that frenetic trading is needed with FAZ (and FAS): but, today I'm taking a different approach. I bought and sold FAZ in the recent past, taking a loss 'cos I felt my holding period had been too long and as such that there was little likelihood of it getting back square anytime soon. Yet in the last three days trading, it very nearly did. Looking at the longer term charts (and I allow for the leverage effect, and check out unleveraged financial charts too), I see that short financials are due a good run. In my view the trend has changed, and the shorts will perform well in the near to medium term. So, it was SKF or FAZ, and I've chosen FAZ, with the initial intention to hold for a number of trading days as I see a good return. Maybe I'll be whipsawed out, but This is the best opportunity I've seen since the slides of March!

Oh, I'm still in leveraged natural gas, too; but sold out of leveraged oil at a nice profit.

Jun 17 12:41 PM

[cdur:]

Hi Andrew..!!!

it's a pitty that we can't post any chart here....any idea where I can do it about FAZ..??

Cheers


On Jun 17 12:41 PM AndrewBaker wrote:

> Mostly I agree that frenetic trading is needed with FAZ (and FAS):
> but, today I'm taking a different approach. I bought and sold FAZ
> in the recent past, taking a loss 'cos I felt my holding period had
> been too long and as such that there was little likelihood of it
> getting back square anytime soon. Yet in the last three days trading,
> it very nearly did. Looking at the longer term charts (and I allow
> for the leverage effect, and check out unleveraged financial charts
> too), I see that short financials are due a good run. In my view
> the trend has changed, and the shorts will perform well in the near
> to medium term. So, it was SKF or FAZ, and I've chosen FAZ, with
> the initial intention to hold for a number of trading days as I see
> a good return. Maybe I'll be whipsawed out, but This is the best
> opportunity I've seen since the slides of March!
>
> Oh, I'm still in leveraged natural gas, too; but sold out of leveraged
> oil at a nice profit.

Jun 17 01:30 PM

[daniel3582:]

Curve fitting. Previous comparisons to the bottom of a (comparatively) fundamentally sound market are not useful in this environment.


On Jun 17 07:01 AM MKW wrote:

> It's actually gratifying to finally see Mr. Market get his head out
> of you-know-what; however my sense is that things are going to get
> interesting from here. My current thesis uses the market from 12/2/02
> to 1/6/03 as the model. It was two months off what would eventually
> be recognized as the ultimate low of the tech bubble burst. S&amp;P
> 500 hit an intraday high of 954 (sound familiar?) before retreating
> to roughly 870, then blasting back up to 930 again - and I mean blast,
> it took three trading days.
>
> Let's not forget, it's JPM that's been almost solely responsible
> for the "emergency" large-block buy orders in SPY which have provided
> us almost daily stick-save entertainment for the last couple of months;
> and it's JPM which still has its secondary coming up at the end of
> June. I have a funny feeling that they've finally come to the conclusion
> that it would be too difficult to keep the market propped for that
> long and so are content to let it drop. Easier to make a repeat
> of 1/2/03 - 1/6/03 to elevate their share price.

Jun 17 03:14 PM

[mr clark:]

great job with the charts, thank you!

it seems like a good time for a correction, we went as far as we could barring any substantially positive news... if you profited from the recent rally (bounce?), wait a week or so and see what prices you get... i for one will be glad to get a better shot at nat gas, solar, ag, infrastructure

then we will do it again, to even higher highs!

Jun 17 10:31 PM

[Stewart Woo...:]

I have noticed an awful lot of people seeing an inverted head and shoulders in the ETF, GLD. I see a resemblance of one, but, I still don't buy the idea about inflation, of that magnitude, just yet. I think Gold can head lower, and it could pick up momentum to the downside, pretty easily.

I also am still of the belief that the dollar can firm up from here, as my weekly chart is suggesting, it could produce a longer term rally, at the moment this is still evolving.

Personally I am still holding my UNG long positions and tracking Natural Gas, as it looks to be bottoming.

Jun 17 11:31 PM

[Sovestor:]

Charts after charts; they are all good. But why bet on sector-specific index if you can bet on country-specific index? Keep it simple folks.

Jun 18 03:58 AM

[Peter Cooper:]

The bulls are full of it. Just have a look at this set of charts comparing today with the 30s - you can see where we are heading:
arabianmoney.net/2009/.../

Jun 18 06:55 AM