Friday Outlook: Commodities, Global Markets

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Those $1 Happy Meals are just what the doctor ordered for contemporary America, right? Sorry, I just couldn’t resist the image and metaphor.

I did promise in the financial comment a link to Philip Greenspun’s blog (must be a contrived name…if not, my apologies). Herein he describes just how our big banks make money with your money. It’s called fixed-income leverage. And did you happen to see that twice failed (LTCM) John Meriwether was launching a new hedge fund to trade bonds with leverage? You’ll no doubt be ringing him up.

We sheeple have no idea what yesterday’s big sell-off was all about but evidently no one else knows either so the dip buyers entered. It’s definitely a strange environment with valuations sky high as they were back in 1999-2000. But with cash yields this low and plenty of liquidity sloshing about combined with peer performance pressure, it’s a combustible situation.

Again, in after hours trading AMZN and others are doing quite well.

click to enlarge


Often, perhaps like you, just before sleeping I ponder what tomorrow will bring in the markets. All I have is the current news and seem to have a pretty good idea as to how things will open the next day. But then I’ll know the news cycle will continue while sleeping and perhaps things will be dramatically changed. They often are.

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, RSP, VTI, MDY, IWM, UDN, GLD, DBC, USL, XLE, EFA, EWC and EEM.

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

[MikeD71:]

Seems another glaring example of market delusion. First, UPS is a well liked gauge of economic performance. Survey said!...not good. Next up, job numbers. Survey said!...not good. Translation; +130 on the DJIA. Now we see the UK's GDP came in at contraction as opposed the expected growth. Translation; FTSE was 60+ the last time I saw it. I'm speechless...

Oct 23 08:01 AM

[Speedspirit:]

Wednesdays dip was a old fashioned take em out back and beat em party in the pit. It was explained first thing in the morning on the pit radio. Apparently a veteren of 30 years made a mistake and the wolves pounced.

Oct 23 08:24 AM

[Paul M. Frank:]

Dave: could you please add an IDX [Indonesia] chart someday, would love to know your thoughts.

Oct 23 08:47 AM

[AndrewBaker:]

I'm giving up and liquidating all my shorts as this market will buy anything, whether it moves or not. The cheap wall of cash that can't get decent interest is buying up everything on offer. In time prices will re-adjust (and downwards), but for now I'm either staying in cash or momentum trading.

Oct 23 09:26 AM

[Cherotree:]

Dave:

Could you also considering adding ILF (iShares S&P Latin America 40)? Although it does track closely to EWZ, I would appreciate your thoughts. Peace!

Charles

Oct 23 09:35 AM

[jmward22:]

Cherotree: The reason that ILF and EWZ track so close is that ILF is 40% Brazil.

Oct 23 10:39 AM

[cdur:]

Hi David...

there is one chart missing..... $SPX:$XEU

if not sure, try : $SPX:$XJY

or : $SPX:$HUI

not sure if bucky is sexy enough..??? cross your fingers..!!


and many thanks for your great job..!!

Regards

Oct 23 10:41 AM

[David Fry:]

One of the frustrations currently is how many market sectors are in the same trend separated only by beta or degree.

I suppose doing this is becoming somewhat boring since searching the globe for uncorrelated sectors is becoming impossible. This is due primarily to low yields driving more risk taking making for a global trend.

We could get away with posting three charts probably and achieve the same thing as we do with 30 or 40 believe it or not. It's just the way things are presently. Eventually this will change.

Oct 23 11:02 AM

[sacking:]

Dave
Love your comments and insights. I have been into ILF since last Dec, but added EWZ early this year as it was performing better. Brazil is a great place to invest, and you can choose ILF, EWZ or the new kid on the block BRF.
And Dave, you're right. Many markets are tracking the same. Though my two cents would be to add either JNK or HYG to your bond charts as they are the high-yield variety which could be interesting in relation to the security conscious Treasuries.
Thanks

Oct 23 11:13 AM

[robert.b.fe...:]

Excellent article Dave, thank you. Well I posted on Wednesday that I was expecting another Friday blood bath and it appears I may have been correct. Of course the day isn't over yet but for now go bargain hunting. Got cash?

Oct 23 11:34 AM

[cdur:]

thanks for your answer...

it's all about, for western countries, to support the $ (the USA) or not....!! there are not many ways to do it.... -0.25 or -0.5% on rates on €..?? Never Jean Claude will do it..!! To buy the tresuries the Fed won't buy anymore..??? western financial suicide..??!!

what a mess..!!

Oct 23 11:39 AM

[Diogenes of...:]

Correction underway. Big money selling into strength to take profits. Give it a week or two, then buy the dip. Most good stuff is over-bought. Check out the short-squeeze in AMZN.

Oct 23 11:52 AM

[chgooldtown:]

Is there an inverse etf for XME. There seems to be nothing.

If there is none, it would be interesting to know why, as most etfs have an inverse, or so it seems.


On Oct 23 11:02 AM David Fry wrote:

> One of the frustrations currently is how many market sectors are
> in the same trend separated only by beta or degree.
>
> I suppose doing this is becoming somewhat boring since searching
> the globe for uncorrelated sectors is becoming impossible. This is
> due primarily to low yields driving more risk taking making for a
> global trend.
>
> We could get away with posting three charts probably and achieve
> the same thing as we do with 30 or 40 believe it or not. It's just
> the way things are presently. Eventually this will change.

Oct 23 07:13 PM