Friday Outlook: Commodities, Global Markets

<< Return to page 1 - Volume Remains Minimal

Let’s be honest: Giving the Fed more control over the economy is just handing our economic future to the Primary Dealers (aka, money center banks) and those countries we’re in debt to. It’s scary and upsetting.

There’s nothing wrong with the financial system that couldn’t be cured by putting Glass-Steagall back together again. This would take the banks out of the brokerage business and kick the fox out of the henhouse. But that won’t happen given the entrenched powers that run all things in DC.

I thought we’d have a more entertaining day given news releases and the start of quad witching but, aside from the initial ramp, there was little of interest. The selloff in bond markets was ignored by headline writers for some reason. Their decline may be the reason markets were so constrained today. Tomorrow is another day and that should create more volume if nothing else. And, it looks like bulls jumped on RIMM late driving the price nearly 6 points off the low. This type of action reflects more options expiration nonsense no doubt.

Let’s see what happens.

Disclaimer: Among other issues the ETF Digest maintains positions in: MDY, QQQQ, IWM, GLD, DBC, USL, DBA, DBB, 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

[doubleguns:]

Thank Dave!!!

You do have to wonder why Glass-Steagall which worked for sooo long was not reinstated. Obviously Washington remains firmly commited to the status quo. Continued corruption.

Jun 19 08:06 AM

[Brahm:]

You hit it right this time! Most of the maladies we have been encumbered with can go away with something like the old Glass-Steagle in place again. However, you are also right that this will never happen. We have the best set of politicians (and surprisingly this "people's" administration) and lobbyists on K Street that Wall Street money can corrupt.

Jun 19 08:25 AM

[jammur:]

Dave, please forgive a novice question.
If you think that EWZ may not hold at the initial resistance level you drew, would the move lower be a purely technical move or is there some other fundamental at work? Stronger dollar? Slower recovery dampening demand for Brazilian commodities? Something else (china/copper action)? I'm curious as what you thing would drive it down to the next support level. thx.

Jun 19 09:20 AM

[David Fry:]

Jammur: Too far too fast coupled with the queries you made.

Jun 19 10:06 AM

[Macro_Man:]

is there a way to short brazil, russia or india...what do you think of FXP re China...in terms of is it an efficient tool

Jun 19 10:23 AM

[AndrewBaker:]

Overall we're not going to see this rally going any higher, but it does seem to be taking a rest before it comes down the other side. The low volumes will help ramping but in time that will end, and the slide that is indicated will take place. Maybe we need the financials to start us off: I'm still holding FAZ and as long as we don't have any volatile up days, I'm happy to hold for a while more.

Jun 19 10:47 AM

[David Fry:]

Macro Man: If you can short the ETF then okay. If you're going to use FXP either as a day trader or strategically over a short period (one-three weeks) then use it.

Jun 19 11:12 AM

[David Fry:]

Oops! Forgot ProShares has a new Ultra Short Brazil ETF launched yesterday........BZQ which you should use as I described for FXP.

Jun 19 11:14 AM

[Abe Mishima:]

David, I can see why you are the #1 most followed writer on seekingalpha. Your analysis of each chart is succinct and to the point. As I try to understand what happened to the markets in the past year, I find Fareed Zakaria's article in the most recent issue of Newsweek magazine the most enlightening. We let a bunch of cowboys and speculators nearly destroy our banking system and economy. We had something that worked (or sort of worked) for decades, thanks to the Glass-Steagall act. Now we have to regulate risk. But we should go further than requiring "skin in the game." Anyone in a position of power, whether in government or finance, who makes a life wrecking decision has to pay in lost earnings, higher taxes, or reduced benefits. Examples: Congress should suffer a reduction in pension for the Iraq fiasco. Angelo Mozillo should be fined heavily for actively promoting/marketing subprime mortgages. The trouble with society is that there is no accountability.

Anyway, not to sound overly moral, I have skin in the UNG game, not because I believe that NG prices will go up, but because I sense that the price of UNG is being actively manipulated by hedge funds, and I feel I can piggyback on their moves. Known as trading what I see. The smartest members on Yahoo message boards have been trying to figure out the NG market for weeks. There is nothing divine or esoteric about natural gas. It is a commoditiy and as such it is and always will be subject to manipulation. UNG just throws in rollovers, swaps, and exchange traded volatility into the equation. Everyone and his uncle is in on the action.

Jun 19 05:11 PM

[David Fry:]

Abe, thanks for you kind words.

You make good points regarding Congress. Term limits would help greatly as most members of the senate for example seem to stay until they're carried out in a stretcher. Look at the money most make post their so-called service. Daschle was a good recent example although certainly not alone. With the election cycle for incumbents they want to deliver "quick fixes" consistently rather than long-term solutions. Perhaps term limits aren't the only answer, but it's sure a start.

The toothpaste is out of the tube regarding Glass-Steagall. We really have Sandy Weill to thank for its demise. I'm not against its repeal just that regulators weren't prepared and ready to monitor the consequences in the aftermath of the new order.

Good luck with UNG!

Jun 20 08:30 AM

[Macro_Man:]

I echo Abe's comments. I read your talks everytime and find it very useful.

Abe: You have to be careful with UNG. Natural gas is headed lower...and also is too big now and is inefficient. I am not sure how much it is hedge funds vs retail. There are better ways to play nat gas. On a risk adjusted basis, UNG is not a good vehicle.

Jun 20 10:34 AM

[Alan von Al...:]

Yep, a must-read. I very much appreciate your replies to comments, David. Sincere best wishes.

MM, I don't doubt you're right about UNG. The FT Alphaville posts make plain the negative feedback. I bought it on a bottom call, not enough to get hurt, but public notice that there is some supply destruction going on and shale wells decline quickly. The price to watch is Henry Hub.

Jun 20 11:33 AM