Friday Outlook: Commodities, Global Markets

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Below is a “daily” chart of the Shanghai CSI 300 and I note the DeMark sequential “9” reading on the 18^th indicating a pause or reversal in the downtrend. You’ll note so far that it’s just a pause.

click to enlarge


The CFTC story is one that will evolve over the next few months with hopefully some resolution by the turn of the year. I don’t think the CFTC wants to destroy market products like PIMCO’s $10 billion Total Return Fund which heavily trades futures, or the billions in PowerShares DB products, Barclays or others. They’ve just made the critical mistake of acting in a ham-handed populist fashion without regard for the outcome to innocent investors and sponsors worldwide. This is a political reaction to rising commodity prices and ETFs are the low hanging fruit for easy scalp pickings.

Everyone is worried that these funds will trade like closed-end funds and not track their respective indexes well. In fact, UNG is, roughly, at a 14% premium. If that’s so unattractive, why on earth would Societe Generale recommend investors buy UNG and short gas producers? That’s the story from this Bloomberg article whose headline should have read: “To boldly go where no analyst has gone before”. I’m just sayin…

Tomorrow we get Personal Income and Consumer Sentiment data plus the usual array of surprises.

Let’s see what happens.

Disclaimer: Among other issues the ETF Digest maintains positions in: SPY, VTI, MDY, RSP, IWM, QQQQ, SMH, IGN, IGV, FDN, XLB, XLY, XLF, XLI, RKH, IYR, XHB, UDN, FXA, GLD, DBC, USL, XLE, DBB, XME, MOO, EFA, EEM, EWJ, EWY, EWA, EWC, 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

[BullnBear:]

I was short out of the gate on Thursday and everything was looking good but the end of the day flip took me out in a couple of spots.

I’m planning on running the same set up in the morning but I’m going to watch for the afternoon roll and see if it actually materializes on this particular Friday.

I appreciate your data as always Mr. Fry.

Aug 28 02:21 AM

[Macro_Man:]

The dollar tested the "line in the sand" level of 77.75 yesterday and passed the test; at least so far. There are a number of spike days accumulating at the lower end; signs of at least an intermediate bottom. If that were to happen, target would be the 80/81 resistance levels.

So far, credit is still holding in, but could change in a hurry next month. If LIBOR and swap spreads start widening out, dollar may start to trend higher.

Not a time to be short U.S.dollar or U.S. Treasuries

Aug 28 04:32 AM

[manya05:]

Look at all the graphs, including those for currencies, and then look at CNY. It screams Manipulation !!! doesn't it? do you really want to be invested in that? Why? The only logical answer I see is that you are betting the Chinese Communist Party will not be able to manipulate forever and at some point they will have to let appreciate. I think there is a fat chance they will not be able to manipulate, only if you believe the Party will be toppled, and in that case CNY will not appreciate, it will be obliterated. Sorry, but I am not clear on the concept of owning CNY, it looks like you are better off just holding USD.

Aug 28 04:42 AM

[Joe Shareho...:]

Excellent graphs and technical data. Good to have some good logical, technical perspective rather than accepting media spin. Most world markets seem to be flattening out. What happened to nat gas? Yikes.

Aug 28 09:02 AM

[User 275872:]

David- how do you think about equity volumes in this envir/onment where such a large percentage is BAC, FRE, FNM, and C

Aug 28 09:44 AM

[boost:]

Dave, I'm curious if you would divulge on a daily basis, approx. what percentage of your portfolio is invested? It would help to see how much you have sitting on the sidelines in case we get the anticipated reversals.

Aug 28 09:54 AM

[the humble ...:]

It is not if ''we beleive the Party will be toppled'', it is that we beleive the fundamentals for the US dollars are the worse possible. In other words, its not CNY that will appreciate in value; it is that the US dollar will depreciate relative to all other currencies, unless, the Fed decides to start tightening sooner rather than later.


On Aug 28 04:42 AM manya05 wrote:

> Look at all the graphs, including those for currencies, and then
> look at CNY. It screams Manipulation !!! doesn't it? do you really
> want to be invested in that? Why? The only logical answer I see is
> that you are betting the Chinese Communist Party will not be able
> to manipulate forever and at some point they will have to let appreciate.
> I think there is a fat chance they will not be able to manipulate,
> only if you believe the Party will be toppled, and in that case CNY
> will not appreciate, it will be obliterated. Sorry, but I am not
> clear on the concept of owning CNY, it looks like you are better
> off just holding USD.

Aug 28 10:29 AM

[AndrewBaker:]

No-one knows where this market is going in the shorter term: it's up and down on rumour, spin and a little fear thrown in from time to time. Looking at the Russell 2000 and the Baltic Dry indices is one way to form a view without having to worry about manipulation. The Russell has to clear its gap and the Baltic Dry has to advance before we are going much or any higher. I'm keeping cash heavy right now and still maintaining my long gold and my natural gas, which latter I admit is a risky position.

Aug 28 10:31 AM

[sacking:]

Thanks for your insights and adding HYG. Seems like nothing can really move in any significant direction these days. Start down, end up, or start up and then trade down. I guess we're just waiting for after Labor Day.

Aug 28 11:25 AM

[Kinsman Red...:]

Dave, what DeMark indicator application do you use? I so appreciate your posts at www.etfdigest.com and use of the DeMark indicators, but, of course, I'd love to play with this signal myself...and nothing I know of supports this charting capability. Any leads?

Aug 28 12:58 PM