August 25, 2009
We got market moving news today and it was all “better than expected” but the news was sold steadily after the initial burst of enthusiasm for the data.
Commodities were sold hard for the most part as traders speculated that a large fall in the Shanghai markets overnight indicates that demand for base metals is easing. Perhaps this is a correction base metals need or something more serious and that impacted the materials sector negatively today. Action like this in commodity markets usually spills over to other markets as traders scramble to even things up in a hurry since they’re leveraged.
Speaking of commodity markets, it was reported today that GLD (SPDR Gold Trust) now held 1,066.41 metric tons of gold as of Monday. If Commissar Gensler is hell bent on avoiding commodity market players from attempts to “corner the market”, then GLD and SLV should be a priority. Since most commodity tracking funds merely roll over contracts and don’t take delivery, they shouldn’t be considered as a hoarding threat whereas GLD and SLV for example are massive hoarders. There are many rumors circulating regarding GLD and people suggesting that you dump it and take physical delivery yourself. These are the true gold bugs talking their book. Gensler continues to amaze with his “break it first and fix it later” approach to current position limit issues from the exchange.
I’ve dealt with both institutions and individual investors over 35 years of investing and lost in the current controversy from Commissar Gensler’s CFTC is a voice for individual investors vs. firms like Gensler’s old firm Goldman Sachs (GS) who don’t give a rip about retail investors. Once you break something that was previously trusted, individuals will lose confidence and trust in the investment since “something’s wrong” and they’ll just avoid it. That’s a major mistake by the Commissar and a tremendous disservice to individual investors in particular. This is an ongoing and developing story that will continue to year's end.
Meanwhile, back at the ranch, the markets moved sharply higher early on the Bernanke reappointment, home sales and consumer confidence data. Then, as stated, a sell-off ensued as weak commodity markets and China news weighed in. Also factoring in to investor anxiety is a sense of unease about the deficit and competence of the current administration. (Commissar Gensler is taking a starring role for his part in my book.)
Let’s change things up and take a quick look at the Shanghai CSI 300 Index on the weekly chart with some internal annotations including a completed DeMark Sequential 9 Setup (which we view as an important exit point) for this index. You can see an early 9 count which would have theoretically taken you out toward the end of July. But, you’d clearly be in better shape than as things stand currently.
click to enlarge
Volume was higher on the selling, clearly making breadth a less reliable read today. While it was positive overall, one glance at SPY trading reveals something else altogether.
The McClellan Summation Index is about where we left it yesterday—overbought.
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August 25, 2009