Thursday Outlook: Commodities, Global Markets

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The aforementioned are a lot of charts all going in the same direction. You span the world looking for non-correlated assets but find little other than the old standbys of stocks-to-bonds or perhaps currency. Most portfolio managers are searching to find assets that will offer diversified growth. It has been impossible lately.

The combination of Intel and Goldman Sachs (GS) earnings has bulls excited without question. As we’ve been saying for some time, the lethal combination of peer pressure, performance anxiety and a long-only mission can put the herd in stampede mode. All this is taking place against a backdrop of terrible economic data and poor earnings from other companies being ignored.

It is what it is. That’s all a person can say.

Disclaimer: Among other issues the ETF Digest maintains positions in: IEF and IYR.

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

[Moon Kil Woong:]

Even VIX and the S&P both moved up together. The real loser was 10 year treasury bond yields and the dollar. So on low volume, I would tend to assume it's still more bond money running for the door into commodities and liquid stock market equities yesterday and it is liable to continue today.

Market strength through bond market and dollar weakness doesn't reflect a strong economic recovery, although the pundits always play it off that way. Of course, what do they know? As long as they have a story to print they are happy. I suppose I expect too much from the press.

Jul 16 02:55 AM

[manya05:]

Thank you David, as always ! I did notice the drop in Uncle Buck as you mention, but what are you warning us about not ignoring? The steep decline? or the way it fought back?

Any reason to believe coordinated actions to keep the dollar index pegged at 80? It has been too flat for too long to be real.

Jul 16 03:18 AM

[basehitz:]

Dave, your charts continue the same message to the bulls - Prove it. The bulls got what they wanted from multiple key players, but we’re still at the top of many trading ranges. A few comments:

1) INTC results was most noted in commentary as catalyst. Yet DELL warned 7/14 noting “Dell executives said Tuesday that many of the conditions that hurt the PC industry over the last several quarters aren't easing”. It is possible Dell is underperforming. It is also possible this is INTC inventory restocking. The latter is suggested by other indications, but it is an assumption on my part.

2) Bazooka Ben’s in FOMC statement: “revised up its projection for the increase in real GDP in 2010, to a pace above the growth rate of potential GDP”
www.calculatedriskblog...
Oh really? With the STILL overleveraged consumer coupled with rising unemployment in an economy overly dependent on consumer discretionary spending, I interpret BB’s comments as wishful thinking at best, desperation at worst as he is backed into a corner with his QE and low rate approach, which has consequences on USD and inflation. Damned if he does, . . .

3) Ongoing housing debacle. Another cheery story this morning on still mounting foreclosures. A few highlights:
- “the nation's housing woes continue to spread. Experts don't expect foreclosures to peak until the middle of next year.”
- “More than 336,000 households received at least one foreclosure-related notice in June”.
- “It was the fourth-straight month in which more than 300,000 households receiving a foreclosure filing”
finance.yahoo.com/news...

4) Last night Barron’s Michael Kahn notes modest volume suggests lack of conviction on bulls.
online.barrons.com/art...


My conclusion is everyone was watching SPX technical levels for an imminent break. The market has a way of not complying with what everyone is watching. The bulls will no doubt try to break out higher if earnings cooperate, but they will need to show convincing volume on an upside breakout. So far, they haven’t.

Regardless of market near term action, I remain unconvinced that the overleveraged consumer can increase spending in the face of mounting job losses and home foreclosures.

Jul 16 07:20 AM

[Ungaro:]

Trillions of dollars of global stimulus flowing into tradable assets: first into Treasurys and now into stocks and commodities. Bucky might be a basket case but still the sanest in the looney bin.

David, could it be that the next bubble is ETFs? They are multiplying faster than rabbits. Appetite for leverage? We are trading options on 3x leveraged funds, many of them called dementia or some such.

Jul 16 07:20 AM

[Berkeley Sq...:]

You have & analyze a chart for INTC & every other sector, but why no analysis of the bigger picture $SOX/SMH ??

Jul 16 07:53 AM

[Archman Inv...:]

One thing I notice on a lot of the charts:
The MACD is topping out and in some cases "almost" looks like they want to rollover. I know they can trend sideways for awhile but I think it merits watching.
Though I use both fundamental and technical analysis when it comes to stocks in my portfolio, the technical analysis, is vital for perhaps getting ahead of a stock's major move. You have to feel for the average person on the street who has no idea, none, how their stocks move as they sit there wondering how all the gains they made suddenly vanish.

compdivplan.com

Jul 16 07:55 AM

[Stockpickin...:]

wow, thanks for taking the time with those charts! That is alot of info to take in! :)

Jul 16 08:25 AM

[robert.b.fe...:]

Great job as always David.

Jul 16 09:07 AM

[The Economi...:]

propped up by a veil of thin air.

Jul 16 09:20 AM

[Maxe Paul:]

Expect a pull back folks to fill the gap, and retest the 900 S&P area. This is your last chance to load up on oil, gold and commodities for the final leg up finale. Targeting 1050 in the S&P.

Jul 16 09:27 AM

[daniel3582:]

Projected daily ranges for Thursday, July 16, 2009. This data would be useful for day traders and swing traders looking to call tops in multi-week trades. This data is based on DeMark’s TD Range Projection:

SPY
Expected High 94.80
Expected Low 91.97

USO
Expected High 34.01
Expected Low 33.02

UNG
Expected High 12.45
Expected Low 12.01

QQQQ
Expected High 37.32
Expected Low 36.53

AAPL
Expected High 148.28
Expected Low 145.60

NLY
Expected High 15.99
Expected Low 15.7

Jul 16 09:30 AM

[Alex Biggs:]

Daniel3582: Thanks for the post- but from a reader's point of view, perhaps you should consider posting your own column at SA and not piggyback on the author's column? I am interested in intelligent comments and points of view rather than blatant marketing submissions or trolling posts.

Jul 16 09:42 AM

[AndrewBaker:]

The only things I'm sure of right now are long gold and silver, and, more speculatively, natural gas. Just about everything else seems to move on a coin flip.

Oh, and I stayed overlong in FAZ, not anticipating the ramping efforts on banks before results come out. I should have remembered buy the rumour and sell the fact works opposite on shorts! I'm still in though, and expect to get out at a profit soon [pleeeease] ...

Jul 16 09:54 AM

[appone:]

FAZ 1 for 10 reverse split set it up for continued failure. IMO, FAZ could see the teens before too long. Many ETFs are turning out to only be good for very short trading

Jul 16 10:24 AM

[Dr. O:]

Seems worth considering whether the character of the stock market has changed, now being upwardly biased. Following the tremendous over-sold bounce from SPX 666 the market has traded sideways around the 900 level for months, biding its time, in spite of all the gloom and doom.

We've had plenty of negative catalysts for another leg down in the market, yet, the market held in. Now the market is rallying on "not so bad news." That would seem to argue for a leg up in stocks for a bit, just based on market action alone.

Using our correlated trades, an upwardly trending market should feature renewed weakness in the dollar and renewed strength in commodities.

Long: SSO, XLF, FXI, EWZ, GS, FXA, FXF, FXC and FXE

Jul 16 10:44 AM

[Dr. O:]

FWIW also long QLD.

Jul 16 03:20 PM

[Cliff Wachtel:]

Good article, will be interesting to see if stocks can surmount 2009 resistance levels. Flat Thursday trading in risk assets aka currencies and commodities suggests many were taking profits, since these have been tracking stocks. Not a bad idea ahead of a summer options Friday with stocks near their highs on, as you correctly note, less than stellar justification. I get into this a bit in my most recent SA post. Keep up the good work, champ. Cliff

Jul 17 06:30 AM

[MCXTipsindia:]

Get latest articles and information about commodities markets and trade in indian commodities markets with our Free MCX Commodity Tips

Jul 17 12:59 PM

[jambo:]

On Jul 16 09:20 AM The EconomicJoker wrote:

> propped up by a veil of thin air.

Make that a veil of HOT air... I'm waiting for the market watch intro on CNBC to begin with "Happy days are here again..."

Jul 20 10:40 AM

[gabe borens...:]

I have listened to this implied perpetual nonsense about the bearish stock market (from David Fry) for quite some time .I won't waste my time repeating his predicted lows .
It suffices to say that the stimuli in place are impressive .They will trigger a more visible rebound shortly .
An average investor needs to understand that it had taken years to create the current economic turbulance (I have discussed the current risks as early as June 3,2005 in an interview with Mark Gilbert (Bloomberg)-another three months or so of waiting for the recovery is insignificant at this point in time.
Major,noninflationary recovery is on the way .
The stock market indices will attain unprecedented highs.
The increase in the tax revenue due to the economic boom on the way ,will reduce projected deficit to acceptable level.
Major economic surprise lies ahead.
...

Jul 22 10:57 PM