Tuesday Outlook: Commodities, Emerging Markets

<< Go to Page 1: The Light Volume Rally Has Legs

Thomson-Reuters stated today that earnings were lower by 22% for those companies reporting thus far which compares to 24% lower for the previous period. That’s not that great is it?

The bottom line is stocks globally continue higher, the dollar continues to fall, commodities rise and bonds remain in some altered universe.

Apple beat by a mile and Texas Instruments beat marginally. So stocks are higher in after hours trading and should rise tomorrow. What can stop this from happening? I don’t know, but that’s why they play the game.

We’ve got more earnings tomorrow and more economic data.

Let’s see what happens and you can follow our pithy comments on twitter.

Disclaimer: Among other issues the ETF Digest maintains positions in: SPY, UPRO, VTI, MDY, IWM, TYH, XLB, UYM, XLY, UDN, GLD, DBC, USL, EFA, EEM, and EWC.

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

[sacking:]

Thanks Dave for your insights. Any insights into the announcement from Brazil? EWZ is down in after-hours over 3%. It's been running up on resources and I've been in since May. Every time it seems like the market is ready to correct, HAL appears and we're off to the races again. It will be an interesting week, with the Four Houseman running with Apple leading the way. Alway apprecaite your perspective.

Oct 20 01:51 AM

[manya05:]

sacking, can you expand? what announcement from Brazil? couldn't be the Olympics, that is old news. that they will do something about the favelas in Rio? (fat chance) that Lula got an ingrown toenail? what announcement? Thanks!

Oct 20 05:21 AM

[AndrewBaker:]

No-one wants the dollar so they're putting their money into something they believe to be more valuable: anything else.

Oct 20 08:18 AM

[Dr. O:]

Future Shock: the US Dollar continues sliding over the next couple years and makes all time lows, finding only temporary support at previous levels. Gold rallies to 2000 to 5000 per ounce. Oil soars. Commodities soar. Things go up in price in spite of economic weakness (stagflation). Some stocks do well (AAPL), some vaporize (LEH) , and some just tread water (INTC). Think 1966-1982. Maybe its 1975, just out of the great '73-74 bear market. A great long-side trade, but, its still years until Volcker, Reagan, and the great bull market of 1982.

Oct 20 08:25 AM

[JGL:]

Still confused why UNG does not move up when US Natural gas does??
Any "hope" that b the winter UNG will go back up or a lost cause and ...sell?

Oct 20 09:07 AM

[robert.b.fe...:]

Nothing is really going up. Buckey is falling so fast that everything else seems to be going up. Once the world government is established from Oslo all our worries will be over and we will sign away our sovereignty. Oh wait some of the neighbors might not want to play. Sort of like the impending knee cap our trade tax initiative. Watch Al Gore. If there is a way to make money from this, that snake oil sales man will show the way.

Oct 20 09:22 AM

[David Fry:]

today's a strange day with selling on PPI which is really weird.

Oct 20 11:10 AM

[sacking:]

Here's the article from bloomberg about new tax in Brazil

www.bloomberg.com/apps...

Personally, I love Brazil and have been buying EWZ and BRF on a regular basis. I do hope this is a temporary blip in an otherwise nice Brazilian recovery.

Any insights would be appreciated.

Oct 20 11:12 AM

[Macro_Man:]

I think the safest course is to sell now and wait a while. You may or may not miss the last 5% or 10% of gain. But, if you go into cash and wait for a few months. You will be able to get back in at a much lower cost basis and you would have cashed in your gains.


On Oct 20 11:12 AM sacking wrote:

> Here's the article from bloomberg about new tax in Brazil
>
> www.bloomberg.com/apps...;sid=aex4NXE25Y0E
>
>
> Personally, I love Brazil and have been buying EWZ and BRF on a regular
> basis. I do hope this is a temporary blip in an otherwise nice Brazilian
> recovery.
>
> Any insights would be appreciated.

Oct 20 11:27 AM

[Macro_Man:]

Deflation mate, or at least the lack of inflation....lower revenues, lower costs (which is another man's revenues or wages), lower margins, lower labor cost, lower wages.

It is a very nice, flashy bear market rally....I am slightly long...but something that will come to a horrible or inevitable end sooner or later

Think of the amount of global fiscal stimulus and the easy money...and still we have lack of inflation, slow revenues...this is the quarter with a lot of inventory build up. Perhaps 4th quarter will have some inventory build also. After that..what?

Not a single non-financial corporate has had revenue growth yoy


On Oct 20 11:10 AM David Fry wrote:

> today's a strange day with selling on PPI which is really weird.

Oct 20 11:31 AM

[Dr. O:]

>>Not a single non-financial corporate has had revenue growth yoy<<

AAPL

Oct 20 11:38 AM

[sacking:]

Interesting how Brazil Bovespa is currently down over 4.5% and I can't find any comments on MW or CNBC correlately it to the weakness of the market today.

www.cnbc.com/id/30032887/

Oct 20 11:51 AM

[Philippe Smedt:]

Brazil just instated a 2% tax on investments by foreigners, to reduce the amount of short term speculative money flowing into Brazil and pushing the real up too fast.


On Oct 20 11:51 AM sacking wrote:

> Interesting how Brazil Bovespa is currently down over 4.5% and I
> can't find any comments on MW or CNBC correlately it to the weakness
> of the market today.
>
> www.cnbc.com/id/30032887/

Oct 20 12:28 PM

[manya05:]

Think about it folks, 2% tax in Brazil on capital coming into the country. That means Brazilians just got a tax decrease, the economy (consumer side) will grow even faster. When a economy has to impose a tax to stop foreign capital from entering the country you know that something really good must be going on. I say the market goes a bit down and sideways, in 2-3 months is rocketing again. Time to go in.

Oct 20 12:46 PM

[sacking:]

Thanks Manya. I hope you're right. Personally, I think the downturn in Brazil is influencing the US market today. But nobody seems to be commenting on that possibility.
Positive news in US isn't producing positive results. And Brazil has been up sharply this summer. EWZ and BRF can be real winners with World Cup and Olympics bringing positive impact to their economy.
I guess we'll see what the rest of the week brings.


On Oct 20 12:46 PM manya05 wrote:

> Think about it folks, 2% tax in Brazil on capital coming into the
> country. That means Brazilians just got a tax decrease, the economy
> (consumer side) will grow even faster. When a economy has to impose
> a tax to stop foreign capital from entering the country you know
> that something really good must be going on. I say the market goes
> a bit down and sideways, in 2-3 months is rocketing again. Time to
> go in.

Oct 20 01:08 PM

[David Fry:]

We forget sometimes that we're dealing with a socialist government when it comes to Brazil. Yeah, yeah, I know...then there's the US.

Oct 20 02:16 PM

[Philippe Smedt:]

As a developer living and investing in Brazil, I can confirm the real economy is strong here. But then again, recent IPO's have generated overwhelming cash inflows from foreign institutions (driving both Bovespa and the real higher).

I think it is quite smart of them to prevent short-term volatility (which could undermine credibility) by taxing the "low quality" speculative money that would leave the country again as easily as it comes.

Some companies raised more cash than they immediately will be able to invest productively; and I think there will be a better entry point in a few months (possibly around election time in 2010).


On Oct 20 02:16 PM David Fry wrote:

> We forget sometimes that we're dealing with a socialist government
> when it comes to Brazil. Yeah, yeah, I know...then there's the US.

Oct 20 04:11 PM

[Dr. O:]

Brazil was also concerned that their currency was appreciating too rapidly vs the US dollar, impairing their exports. Others are likewise concerned particularly the Europeans and Japanese. Given how "over-sold" the dollar is, this could trigger a quick short-covering rally like today.

I went to all cash today concerned that indeed the US dollar is over-sold, and stocks and commodities are over-bought. Seems like a good time for money managers up nicely on the year to take some profits. I'd be a buyer of a nice dip in GLD or FXA or EEM, etc.

Don't laugh, but I maintain a small position in AAPL DEC 220 calls taken today. For 2 bucks I'm long the best big cap growth story in the stock market. AAPL trades like it hit a wall at 200 (I know, it's technical). But in this market there are only so many good stories to buy and long-only managers are paid to be invested. So I speculate they'll still be biting at the AAPL.

Oct 20 04:58 PM

[surfgeezer:]

Wow. Brazil, Norway, and even to some extent Canada and Australia seem to not be imploding from "socialist" agenda to support the middle class theory??? How can that be????? Regulate your banks??? Discourage excessive CEO pay???

Brazil still has a huge income gap between very rich and poor but the difference is theirs is decreasing and the middle class(consumers) is expanding, while ours is going the other way.


On Oct 20 02:16 PM David Fry wrote:

> We forget sometimes that we're dealing with a socialist government
> when it comes to Brazil. Yeah, yeah, I know...then there's the US.

Oct 20 10:53 PM

[Dr. O:]

Cramer had a conniption about AAPL as his lead segment on Mad Money. Disturbingly, he saw what I saw, and said what I said. Best big cap growth company by far. Slapped a "conservative" price target of 300 on it, although his math gets him to 390. Hopefully, with the market soft and technical resistance for AAPL still at 200, it won't take off before I can build a larger call position.

Oct 20 11:15 PM