Friday Outlook: Commodities, Global Markets

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On the one hand the rally today was impressive given the crummy news, but then, if you look at the volume action on the 5 minute charts, there has been heavier selling the past two days. The latter isn’t reflected in headline numbers and that’s what the average investor sees. It’s troubling and made more so by the heavy accumulation of insider selling data.

No matter what I think, the market is trudging along higher. If you wish to fight it, be my guest but many trying to fade the trend are losing money. That’s not a good game to play.

Disclaimer: Among other issues the ETF Digest maintains positions in: SPY, MDY, IWM, QQQQ, SMH, IGM, IGV, IGN, FDN, XLY, XLI, XLB, IYR, XHB, UDN, DBC, USL, DBB, BDD, XME, MOO, EFA, EEM, EWJ, EWY, EWA, EWC, EWT, EWZ, RSX, IFN 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:]

China down again today, double top neckline definitely broken. Perhaps it will rally to touch the neckline from below, but looks like a top is in place.

If thats the case, risky to short Treasuries or be short the dollar I think. Also, got to be more than the beginning of the end of this rally; got to be days or weeks left before everything - except govt bonds and the Yen/dollar complex - starts rolling over.

Like you wisely pointed out, cant fight the tape or fade the trend, but time to be cautious if long and time to start calculating entry points if playing from the other side

Aug 14 05:31 AM

[Ames Tiedeman:]

Many of the charts you presented look bullish. I think this will change come September and October.

Aug 14 07:30 AM

[basehitz:]

"They believe the Fed and powers that be will do anything and everything to reflate asset prices."

March 2008, after Bear Stearns' fire sale at $2, the bulls said "buy stocks cause the Fed has your back". The S&P recovered to near 1,400 and the bulls were confident.

But unlike then, consumer spending shows caution has prevailed since January ’09 thru today in spite of frequent predictions of recovery and the Fed discouraging savings. Consumers savings went from zero recently to 5% today. The norm was 8-10% until the mid-1980s. A return to this type of responsibility is a good thing long term, but short term it requires adjustment. I think savers should be encouraged not punished with Japan-style interest rates.

So sure the bulls have the tape, but they can't bring the volume. And consumers aren’t buying it (literally), at least thru today.

Aug 14 07:53 AM

[fatcat:]

Thanks for a look at those other tech ETFs....in all the excitement of the market lately,I'd forgotten about them....Oh,well...

Aug 14 07:59 AM

[enigmaman:]

IMO-Until emotions (fear and greed) return to the market this market will behave just the way the big institutional traders have programmed them to, the game changer will be the return of the retail investor, because they are what is missing from the equation, they bring to the table what the market is currently lacking " emotions" until then program trading will rule this market, but when the retail investor does return the big institutional houses will rejigger their programs to start lightening up because the return of the retail investor in mass will be their sell trigger,

Aug 14 08:27 AM

[AndrewBaker:]

Gold will beat $1000 and keep going, but not until the present market peak has started its descent, which could be very soon or not until after the holiday season. China will start the action, then we'll all follow. For now I'm happy with my long banks and financials, though the leveraged ones I may well close for the weekend: no need for unnecessary risk. Sugar, grains, coffee, and industrial metals are staying in, and I'm still holding the natural gas waiting for my reward (pleeease). Oh, and I forgot my Aussie ETF which is doing well for several reasons. But nothing is forever.

Aug 14 09:09 AM

[speeddaimon:]

David (or anyone else for that matter),

I am currently long DBC and EWA, and yesterday decided to put relatively tight stop-loss orders on both of them (2 standard deviations). Here's my line of thinking, and please correct me if I am mistaken.

1. I feel that stocks are due for a correction
2. If stocks do correct, especially in the US, that means a flight to "safety" (basically UST and USD) which drives the dollar higher.
3. A strong dollar is bad for commodity prices because commodities are best used as an inflation hedge.
4. Obviously the main driver of the Australian market is commodities (being sold to China).

Does this make sense?

Aug 14 09:58 AM

[David Fry:]

It seems to today Speeddaimon.........

Aug 14 10:06 AM

[JGL:]

Can you comment a bit more on UNG? You write wait, but for what? How should the current wrangling with CFTC and SEC impact this ETF? What is your view on UNG over the next 6 to 12 months?

Aug 14 10:10 AM

[David Fry:]

Wait means wait if you wish to bottom pick. Perhaps a breakout above the 22 period moving average would be "a" sign to buy. In the meantime, unless you wish to short, stay out.

I once had a CTA trading for my clients several decades ago and he was short sugar. He got short at 9. It went down consistently and when it got to 5 a friend asked, "where's it going....to zero?" The meaning was it was foolish to trade it short from this level. Well, it went to 2 before we got out at 3. That's my bottom picking lesson.


On Aug 14 10:10 AM JGL wrote:

> Can you comment a bit more on UNG? You write wait, but for what?
> How should the current wrangling with CFTC and SEC impact this ETF?
> What is your view on UNG over the next 6 to 12 months?

Aug 14 10:57 AM

[JGL:]

Thanks!

Aug 14 11:21 AM

[coloneldebu...:]

these end of the day spikes, as a wise man once said, are getting to be ri-goddammed-diculous

Aug 14 04:06 PM

[Mayascribe:]

David: Upon reading your column, I feel a little better about my decision to take profits, sell off and go to a 75% cash postion. I was in margin (only a little) during this bull run. My rash, bearish decision was based on the Wells Fargo Mid Year report I recieved in the mail yesterday.

You can, and any others here if they like, go to my comment stream to read a brief summary of the report. It's not far down. I'd take the time to rewrite it here, but it's the weekend, and I'm going to skip the 10 to 15 hours of research I normally do each weekend, now that I'm committed to the sideline for a while.

Always love your charts and keen comments about the technicals. Proves invaluable to me in making investing descisions. Thanks!

Aug 14 06:20 PM

[thechaser:]

with you colonel and speedy;

mr. fry, i posted the dates of mar 30, apr 20, may 11, jun 15, 23, jul 6 in another comment, do you think its possible we may add aug 17 to the list

Aug 15 07:55 AM

[Master Che:]

8/14/09
CLOSING COMMENTS:
S.P. minis (ESU9): Quite Strange price action today.
94% of all market price movement occurred in 120 minutes.
In 2 separate intervals;
This morning we headed down 17.50 points with 522,900 contracts traded in 60 minutes.
We then headed back up 12.00 points with 360,600 contracts in 60 minutes although he last 30 minutes traded 73% of all the upside volume. From a volume counter point of view the downside is the direction, although I don’t believe that ONLY volume determines direction. Today’s trading volume was near average, although less than the last 3 days. The highest volume day the last 10 trading days was the high at 1016.00, which from a volume counter point of view confirmations the upward direction.
Today’s price action strongly indicates a top or a bottom. They trade exactly the same way. Therefore you never know a top can be a bottom if a significant breakout occurs. According to the candlesticks (Daily charts) this closing spike up is the largest we’ve had since 3/6/09, at 662.00, which was a major reversal.

Monday (Including Sunday night) is the 13 day price cycle high.

Aug 15 09:44 AM