Thursday Outlook: Commodities, Global Markets

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Tomorrow’s Treasury auctions will be closely watched. Clearly the government activities are confusing average investors since Money & Banking is a boring and confusing topic. Most people just know there’s a Federal Reserve Board but don’t really understand why it exists or what it does. Even experts that study its activities get confused. Having a central bank with strong (and proposed strengthened) powers has been praised and derided throughout history:

“If the American People allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the People of all their Property until their Children will wake up homeless on the continent their Fathers conquered.” - Thomas Jefferson

The Summation Index is rolling over, volume remains weak, there isn’t a catalyst in view to drive markets higher and etc. Therefore markets will fade as they’re now doing. The Treasury auctions tomorrow coupled with quad witching on Friday should provide entertainment if nothing else.

Let’s see what happens.

Disclosure: Among other issues the ETF Digest maintains positions in: MDY, IWM, QQQQ, UDN, GLD, DBC, DBB, DBA, USL, EFA, EEM, 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

[Schweizer:]

In simple turns, we've topped and bounced off the bear market trendlines. Now we head to the other side of the channel:
i42.tinypic.com/30cq0s...
i44.tinypic.com/21l8n6...

Jun 18 06:03 AM

[MKW:]

I have to disagree with you, Dave... There is one potential stimulus to move the market higher - a certain large bank's secondary. Said bank has been so active with the late afternoon explosions in SPY that I think they have a lot of chits to call in. It might only be a ferocious, three-day rocket flight (like 1/2/02 to 1/6/02), but I think people discount the risk of a super-quick jam up back to S&P 950 at their own peril. After that, I don't know were the floor is.

Jun 18 07:13 AM

[Speedspirit:]

Mr. Thomas Jefferson was a smart man. Where oh where are the real American fathers of today?

Jun 18 07:35 AM

[doubleguns:]

You need to find another web site buddy.


On Jun 18 06:57 AM JEWS KILLED USA ECONOMY wrote:

> .

Jun 18 07:44 AM

[prudentinve...:]

Fully agree with the ".. certain banks .." theory. The manipulators may well engineer several sharp drops (like this week's) followed quickly by sharp recoveries, to set the stage that allows them to exit at the top after traders become conditioned not to sell into weakness.


On Jun 18 07:13 AM MKW wrote:

> I have to disagree with you, Dave... There is one potential stimulus
> to move the market higher - a certain large bank's secondary. Said
> bank has been so active with the late afternoon explosions in SPY
> that I think they have a lot of chits to call in. It might only be
> a ferocious, three-day rocket flight (like 1/2/02 to 1/6/02), but
> I think people discount the risk of a super-quick jam up back to
> S&amp;P 950 at their own peril. After that, I don't know were the
> floor is.

Jun 18 08:25 AM

[conceptwizard:]

While contrarians are screaming “hyperinflation!”, the money supply is actually shrinking. This is because most money today comes into existence as bank loans, and lending has shrunk substantially. That means the Fed needs to “monetize” debt just to fill the breach.

On June 3, 2009, Federal Reserve Chairman Ben Bernanke assured Congress, “The Federal Reserve will not monetize the debt.” Bill Bonner, writing in The Daily Reckoning, said it had a ring to it, like President Nixon’s “I am not a crook” and President Clinton’s “I did not have sex with that woman.” Monetizing the debt is precisely what the Fed will do, says Bonner, because it has no other choice. The Chinese are growing reluctant to lend, the taxpayers are tapped out, and the deficit is at unprecedented levels. “Even good people do bad things when they get in a jam. The Feds are already in pretty deep . . . and they’re going a lot deeper.”

But Mr. Bernanke denied it. “Either cuts in spending or increases in taxes will be necessary to stabilize the fiscal situation,” he said

Who can you believe these days?

Jun 18 08:36 AM

[doubleguns:]

Just to make a point clear my previous post was against a Nazi post that has since been removed. I am not the Nazi post. I am assuming since I have all of the thumbs down people are thinking this was my post. IT WAS NOT MY POST.

I TOLD HIM TO FIND ANOTHER WEBSITE.

Jun 18 09:10 AM

[TurtleTrader72:]

When it comes to large cap stocks, indexes and ETFs, 'up Gaps' almost always get filled. It is only a matter of time. With all the ETFs, stocks, and indexes that have left unfilled 'up gaps' in this lastest rally, it is hard to believe that this up trend will continue without (at least) retracing back to those gap levels. To be more specific, NASDAQ has an unfilled 'up gap' at around 1550, S&P 500 has a small one at 813, XLF (Financial SPDR) has one near its low at $6.50, and OIH (oil service holders) has one at around $76. 'Up gaps' are very powerful indicators of excessive and emotional trading and indicate that there is a high probability of a retracement back to those levels at some point in time.

Jun 18 09:19 AM

[User 387628:]

What is the summation index? Volume or breath?

Jun 18 09:19 AM

[robert.b.fe...:]

doubleguns: Greetings and bravo I'm glad it's gone. Hat tip. Why all the doom and gloom? Haven't we been expecting a pull back? In fact I think it's a little late it should have started a couple of weeks ago. I guess that is why timing the market is challenging at best and a fools errand at worst. Just like the limbo, how low will it go? If it breaches the March low hold on to your hat. If not we may be getting to the real not as bad as we thought area. Happy hunting all.

Jun 18 09:30 AM

[mangy cat:]

great two hand gestures in lead photos
tim pushes
ben grabs

Jun 18 09:33 AM

[AndrewBaker:]

Well, my reading of XLF is that there is a 20% downside due, like now; which is why I bought FAZ yesterday. Even with the decay cost of holding over several days and more, I'm anticipating a good upside move. Note that the VIXhad turned up recently too, which helps in this case. I'm contrarian here at 9:37 am as the BKW and S&P 500 have opened up.

I'm long on gold as with a weakening dollar, this will benefit, and if true that some banks are shorting the yellow metal, their covering, when it comes, will accellerate the price move up.

... and I'm still with natural gas.

Jun 18 09:38 AM

[Anwar Bhamla:]

David:

Follow your post regularly. One of the best analysis I have seen.

Can you please explain the Summation index? You seem to think it has critical long term significance. I want to be sure I understand it...Thanks

Jun 18 09:38 AM

[David Fry:]

The Summation Index accumulates breadth statistics (advance/decline).

No worries doubleguns, I had the Nazi removed/banned. Sad people do this stuff.

Jun 18 09:50 AM

[Emerald:]

Dave, I continue to believe there is no decoupling. TheU.S. is the main consumer market and China needs to export to us. Many U.S.companies are effectively engaged in re-exporting goods that are manufactured in China for them. Without a vibrant U.S. consumer, China slows down.

Jun 18 11:15 AM

[mountain view:]

The summation index, I assure you, has nothing to do with "breath."


On Jun 18 09:19 AM User 387628 wrote:

> What is the summation index? Volume or breath?

Jun 18 11:16 AM

[Larry House:]

I certainly think a correction in the market is probably in the cards and is needed. My question is what is there about the economy that will propel us higher? I think we we have reached a plateau that may be with us for months. Equities do not look compelling at this time. I don't think they are a bad place to be; I just don't see much upside for a while--maybe a long while.

Jun 18 11:36 AM

[pjfortier3:]

Dave I have a fair position in UNG @ 14.32 based on the theisis that Nat Gas is too cheap. The other night I hear Jum Creamer say UNG is not the way to play it. What are your thoughts.

Jun 18 01:34 PM

[H Nguyen:]

I agree to the fact that markets are breaking down, but there is a chance of a rally in the range of 200 - 350 points in the Dow before this month ends, then we might see a correction of about 10% (maybe a slight chance of 12%) in the Dow as early as 2nd week of July. The FED's target 10 yr yield is about 2.375% - 2.75%. Then we will have 2Q earnings.

Jun 18 01:58 PM

[376602:]

Hold. Water temperatures in the Gulf are still rising. UNG monthly contracts and swaps rolled over the last 5 days. Wiildcard........
HR 1835 in the House Committe will implement features in the Pickens' Plan. -alternatives? the gas big onshore producers. It will be a few years before the Alaska Gas Pipeline is completed.

" I hear Jum Creamer say UNG is not the way to play it. What are your thoughts?"

On Jun 18 01:34 PM pjfortier3 wrote:

> Dave I have a fair position in UNG @ 14.32 based on the theisis that
> Nat Gas is too cheap. The other night I hear Jum Creamer say UNG
> is not the way to play it. What are your thoughts.

Jun 18 03:00 PM

[Spartacuss:]

Right on the button sir. I am happy to see that someone else shares my view on this. I posit that the next major move is slated for fall of this year and I also posit that it is not going to be pretty vis-a-vis Alt-A and Option mortgage resets plus baby boomer problems adding to benefits burdens. I also agree that the trillions created are going to be sucked up by continuing deleveraging phonnomena. My depth finder is showing no bottom.

However, when times get deserate the desperado's show up, so look for explosive political development in the coming months.





On Jun 18 11:36 AM Larry House wrote:

> I certainly think a correction in the market is probably in the cards
> and is needed. My question is what is there about the economy that
> will propel us higher? I think we we have reached a plateau that
> may be with us for months. Equities do not look compelling at this
> time. I don't think they are a bad place to be; I just don't see
> much upside for a while--maybe a long while.

Jun 18 03:12 PM

[capt Brian:]

I am afraid of the future of many things, especially our way of life, but I am a nut, all is okay..


Capt Brian
The Lost Navigator

Jun 18 08:58 PM

[Ames Tiedeman:]

I believe we are at the beginning stages of a correction. The second half of 2009 will not materialize as a great growth period. Stocks are priced for growth, not a protracted down cycle. And what happens in 2011-2013 when the Alt A mortgage re-sets hit? These resets will be greater than the sub-prime resets. I call this the " Difficult Decade." We are in deep trouble to at least 2016. Throw in massive trouble with Government debt that will hit around 2020 and one wonders if we are in for multi-decade difficulties.

Jun 28 11:01 AM