Friday Outlook: Commodities, Global Markets

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Games? Sure, there’s a lot of that going on, especially over the past few months. Trading desks and hedge funds dominate markets. Short sellers get squeezed mercilessly. Those that are long the markets with tight stops get ripped. Trend followers who are long get their patience and disciplines tested. Those with heavy cash positions feel smart one day and stupid the next. We’re in the latter two categories. It’s been that kind of market.

What can change this?

We could have honest data from authorities and honest reporting from the financial media (thank God for the blogosphere!). But, we will also have real earnings coming next month and earnings still drive stock prices ultimately. Continued light volume through the summer will only continue games being played since the Street and trading desks are awash in liquidity. Insiders need to stop selling and start buying. Consumers need to buy more than new pillow cases and soap. Home prices need to start rising instead of dropping. These are the “game changers”.

I’m back in the turret and don’t see any further travels until August. The tape painters will be out in force the next few days propping things up. To see the real action we’ll have to wait for July’s earnings which are “real news”.

Disclaimer: Among other issues the ETF Digest maintains positions in: MDY, IWM, QQQQ, QLD, UDN, GLD, DBC, DBA, DBB, USL, EFA, EEM, EWA, EIS, EWZ, 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

[Daniel Herkes:]

Thank you for the concise summary and analysis. The volume is too light to predict the futures of most of these markets. I suppose this could mean that there are a lot of companies approaching the end of the crisis with a "wait and see" attitude. It could also just be the new paradigm - there is just less business activity due to the lack of capital.

The markets are still oversold, in my opinion.

Jun 26 06:10 AM

[paultheprofit:]

perhaps a a little clarity on the the disclaimer would help....ie...long or short on which?

""Disclaimer: Among other issues the ETF Digest maintains positions in: MDY, IWM, QQQQ, QLD, UDN, GLD, DBC, DBA, DBB, USL, EFA, EEM, EWA, EIS, EWZ, and FXI""

Jun 26 07:27 AM

[David Fry:]

Ok Paul.........they're long.

Jun 26 07:50 AM

[Gerry Sullivan:]

The real support on the SPY was around 89 which can be clearly seen on a 50 day daily chart. When SPY hit that on Wednesday and the market was short term oversold, the rally followed.

You can see a possible "head and shoulders" forming on the same 50 day chart.

Jun 26 08:27 AM

[JGL:]

MOO: Isn't the circle at 32 rather than 22?

Jun 26 08:32 AM

[David Fry:]

It's the 22 period moving average in the circle.

Jun 26 08:34 AM

[DDPearson:]

Is that an inverse head and shoulders (two points on each shoulder) forming with the GOLD?

Jun 26 08:43 AM

[Alex Trias:]

Dull day yesterday? Yes and no, David. A couple of pretty interesting scores were scored. Bulls: 65 day simple moving average comes within a small fraction of hitting the 200 day simple moving average on the S&P500. Whoooo hooo!!! And S&P 500 convincingly demonstrates the 50 day exponential moving average as support. Yay! Looking even better on the super broad, Vanguard total world stock ETF (ticker VT). Observes it's 50 day EMA as support, closing right smack at it's 200 day EMA. Oh yeah, buddy! And check out the simple moving averages for VT. THe 50 day simple moving average has never been breached by the bears, establishing a pretty convincing area of support that is significantly above the 200 day simple moving average. Yesterday, VT charged back above it's very short term 30 day simple moving average. I mean, this is looking anything but dull if you're a bull. But by no means conclusive. Why? Because this is indeed a game, the closest analogy to which is boxing. And the big question I have is, are we seeing a classic, Mohammed Ali "rope a dope" move going on here? Maybe.
There has come a moment when Ali whispers into George's ear that he hits like a girl (not my quote). George is pounding Ali with punches - just like Ali wants. Ali wants to get George tired out so he can whoop him, but the problem is, George is a bigger, better fighter. It became obvious Ali was winning the Rumble in the Jungle when Ali actually started throwing the big punches, not just reeling back on the ropes keeping his head protected. Yesterday, Ali threw one heck of a punch. Let's see a few more like it before we call the fight:
(1) VT bursts above 200 day exponential moving average.
(2) 30 day exponential moving average slips above the 200 day exponential moving average for VT, and hey, why the S&P 500.
(3) 65 day simple moving average heads above the 200 day simple moving average for every major equity index on the Earth.
(4) 30 day simple moving average established as firm support for all major equities indexes on the planet.
(5) All major US indexes get back above the 200 day exponential moving average.

This can happen in day or so. I think the assault is on. At the moment, looks like Ali is going to win the fight.

For George the big bear to win, he's got a longer row to hoe at this point. He breaks the equities indexes in the US down below their 50 day exponential moving averages, yanks the 30 day exponential moving averages below the 50 day exponential moving averages, he's probably going to get this fight done.

In full and fair disclosure, I remain mainly in cash and bonds at this point, having sold out of most everything last week and the week before. I was calling it a 50/50 bull verses bear fight earlier this week, but the thing is, those moving averages continue to move even as the market remains relatively flat. Depending on where things go down today, Ali might just win this fight on Sunday, while the markets are closed. Wouldn't that be sneaky? You gotta love this stuff. I have a bias, which is that I would love getting back into the market again, and I wouldn't even consider a short position at this point.

Jun 26 08:55 AM

[rscor2an:]

With regard to posting dates on the Summation Index, I believe you can get that chart on Stock charts symbol: $NYSI

Jun 26 09:04 AM

[AndrewBaker:]

I agree entirely that trading of late has been very tough, whether long or short, and especially getting squeezed when short. I'm looking long gold and certain other commodiites inc. agricultural and natural gas, and ignoring shorter term corrections. I'm holding my FAZ position whereas in the past I've bought and sold quickly and alternated with FAS, where taking (stop) losses and trading costs have cost me, I'm now holding for the break upwards. In short, I'm now looking longer term. It eases the pressure due to frequent trading, reduces the costs of the same, and with good fortune and a correct view of what lies aghead, will hopefully produce the profits that this is all about.

Jun 26 10:30 AM

[HaavBline:]

"Okay, sometimes it’s good to miss a couple of days. Everything and nothing has happened."

No secret randevu in Argentina? How disappointing.

Seriously, great works as always.

Jun 26 12:38 PM

[Mad Hedge F...:]

Great work as usual. For those who missed the 70% move in the TBT this year, the double short Treasury bond ETF, another window is setting up for you to get in. After running up from $35 to a meteoric $60, we have backed off to $50. Similarly, the bond futures, which plunged from 142 to 112, have bounced back up to 118.5. I think the prospect of a retest of this year’s stock market lows triggered a lot of flight to safety buying of government paper in the last few weeks. If we don’t get that retest, which I think is unlikely, then it’s back to the races for the TBT. Things certainly aren’t getting any better on the fiscal front. According to the Congressional Budget Office, the national debt is now growing so fast, that it will reach 100% of GDP by 2023, seven years earlier than was predicted only 18 months ago. Some 90% of the increase came from burgeoning Medicare and Medicaid spending. It seems that hardly a week goes by without Congress passing another humongously expensive package that has wonderful long term benefits for the economy and society, but has to be paid for with hard cash dollars up front. Watch the TBT.

Jun 26 01:24 PM

[Twitcher:]

David;

Many thanks for helping an old (83) market lover and participator (52 years in various capacities) grope his way through today's mazes.

Jun 26 05:47 PM

[David Fry:]

No problem Twitcher and I thought I was the oldest guy here!

Jun 27 02:09 PM

[Macro_Man:]

Long bond will hit 4.20%...so makes sense to wait to see what happens then before buying TBT. Still a little early to reload on TBT

Jun 27 07:27 PM

[dcb:]

this isn't about short or long. it is about manipulation that is e being allowed. will being in the long term investors, but then when the big boys want t to go down it will. clearly the market does not represent anything like current fundemantals or reality. it represents the government allowing the banks to make profits via manipulation in order to get rid of their zombie status.

Jun 27 07:55 PM

[Maxe Paul:]

The Australian market needs another "Aussie Aussie Aussie, Oi Oi Oi" and a Leyton Hewitt "C"MON" to get moving again.

Oh, and some more loose Chinese money thrown at the mining sector!

Jun 28 06:17 AM