Tuesday Outlook: Commodities, Global Markets

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We should get some dip buying with the McClellan Oscillator this “short-term” oversold. But it would be temporary perhaps. The daily SPY chart near the top shows clearly previous dip buying during this last leg higher from July. So why should anything change?

Perhaps we should watch more closely the massive Treasury auction results this week which began today and end Thursday. A poorly received auction will have negative consequences on other markets certainly.

Earnings are just about over so investors can only follow ongoing economic data. The Four Horsemen continue to move in their own world but are much overbought. Many portfolio managers want to show them as long positions. Ever present at this time are tape painters wishing to prop prices into the monthly close. Pumping stocks to peg month-end values and fees is illegal but rarely prosecuted.

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, VTI, RSP, TZA, XLY, UDN, GLD, DBC, USL, XLE, BDD, DAG, EFA, EEM, EWC, FXI and XPP.

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

[AndrewBaker:]

Well, the S&P has been ever-so-slightly rolling over since mid-July, and even if there is another lift left in it, the reversal is starting to look closer (says he who had said this more than once before!) The VIX is turning back up, financials are showing more weakness despite the ramping, and people are realizing that not only is the economy still down, but the dollar is still heading in that direction too.

Vested interests are holding things up, with their performance and bonuses uppermost in their minds and safe in the knowledge that its not their money on the line. However private investors are taking profits, and it is their money.

So I know which direction for the markets my money is on, and it's not north.

Oct 27 06:30 AM

[Daniel Herkes:]

The cat had one heck of a bounce this time.

Oct 27 06:41 AM

[rick12345:]

Overbought? Gimme a break. Crunch the numbers based on an 8000 bottom and see if we're overbought. With so few buyers in the market computer programs are now running the show - " Good morning HAL. Will we continue to ignore earnings results today, or can you just surprise me? "
Financials are heavily oversold at the moment, so I suspect the fear mongering has had the desired effect. Could this sector lift the market today? I'll let someone else make that call.

Oct 27 06:54 AM

[TradingHelp...:]

Wise words. We are not going to revisit SPY 900 but I wouldn't bet against us getting very close to 1,000 before the next wave of government / fed liquidity pushes us up again.

Notice the absence of fundamental analysis. That's because there's an absence of fundamentals in the move. Just liquidity trying to find a home.


On Oct 27 06:30 AM AndrewBaker wrote:

> Well, the S&amp;P has been ever-so-slightly rolling over since mid-July,
> and even if there is another lift left in it, the reversal is starting
> to look closer (says he who had said this more than once before!)
> The VIX is turning back up, financials are showing more weakness
> despite the ramping, and people are realizing that not only is the
> economy still down, but the dollar is still heading in that direction
> too.
>
> Vested interests are holding things up, with their performance and
> bonuses uppermost in their minds and safe in the knowledge that its
> not their money on the line. However private investors are taking
> profits, and it is their money.
>
> So I know which direction for the markets my money is on, and it's
> not north.

Oct 27 07:43 AM

[User 348758:]

Everybody is asking about exit strategy. Market cap pushed up from March dips of $6 trillion up to $12 trillion with this speed. Obama is going to increase capital gain tax around say 50% of this wealth creation out of thin air again. Simple $12TRL-$6TRL=$6TRL*50%... Here we go FED's balance sheet is balanced.:-)

Oct 27 08:15 AM

[User 440888:]

DeMark indicators on the weekly basis suggest a correction only (bottoming not lower than 950 for the S&P) with true downturn (based on the monthly DeMark) starting in January/February (perhaps ultimately surpassing the March

Oct 27 08:46 AM

[robert.b.fe...:]

Another great job Dave, Thank you. However we can't just burn down excess housing inventory. It would cause the insurance industry to collapse again. The big big really big debt sale should go well as any left overs or maybe all of it will be purchased by Helicopter Ben. He's Terrible Tim's hero you know. I'm putting money into (SEA) this week. While not doing well this minute recovery will come to the emerging markets and shipping will be one of the first to benefit.

Oct 27 09:28 AM

[David Fry:]

DeMark weekly counts are at a 7 count. We need two more weeks to get a 9 count if in fact it occurs.

And, all you arsonists out there, I was just kidding about burning down the excess housing inventory. Well...maybe the mortgage holders would consider it--then the taxpayers would bail them and the insurance companies out. Then we could lend money to the homebuilders to rebuild them.

It's what we do!

Oct 27 09:41 AM

[User 440888:]

David, thank your for your response. I appreciate your insights and your daily posts much. With respect to DeMark, on the weekly counts, the 13 week sequential countdown (after a 9 week set up completion, counting from March 27, the first bullish flip week) was completed the week of October 16. The ensuing bear flip (the confirmation of the new trend) is yet to occur. Unlikely this week (the SPY weekly close would have to be below 102.49); most likely next week (the close next week below 107.26). Interestingly enough, there is some tension between the expected correction (to be confirmed by the bearish flip) and the intervening 9 week set up, which was completed the week of 9/11. DeMark suggests that an intervening 9 week set up completion may result in the recycle of the 13 week countdown. If so, the expected weekly downturn may actually coincide with the expected monthly set up (due January/February next year).

Happy trading and cudos to your public service!

On Oct 27 09:41 AM David Fry wrote:

> DeMark weekly counts are at a 7 count. We need two more weeks to
> get a 9 count if in fact it occurs.
>
> And, all you arsonists out there, I was just kidding about burning
> down the excess housing inventory. Well...maybe the mortgage holders
> would consider it--then the taxpayers would bail them and the insurance
> companies out. Then we could lend money to the homebuilders to rebuild
> them.
>
> It's what we do!

Oct 27 10:09 AM

[User 402143:]

Re XHB excess inventory: Why not national lottery, adjusting ticket price and area choices for large cost tickets ($1K-5K)? Builders get their money out, banks get their money out, one of a bunch of risktakers gets a $250K house or better for 5K. Stipulation property can be sold only after 5 yr holding period. Limited cap gains tax. Voila: smokeless inventory reduction, sorta

Oct 27 10:47 AM

[dc1:]

Hi Dave,

Stuck in the middle with "Moo." Now that

Oct 27 11:04 AM

[dc1:]

Hi Dave Again,

It should say," Stuck in the middle with "Moo." Now that's FUNNY. :-))

Oct 27 11:05 AM

[Bull Run:]

Dave; has GS replaced blackberry as a 4 horesman. I personally think Monday was the turning point in the market and we'll see some downward pressure on both equities and US treasurues. The US dollar may see a upward bounce on this, but even that cannot last. I guess the question is where to bet your money? I'm not big on gold at this juncture, so maybe staying on the sidelines is good. I cannot see anyone buying equities at this point, particualry after this HUGE run up, so taking a break, and taking your money, is sound reasonong. I was a big fan of Estrata, Mergers, sell-offs, but now that it has sold a big chunk, it not so pressed for refinancing in a couple years, so I am also a seller..

Oct 27 11:58 AM

[robert.b.fe...:]

SEA reached it's target and a position was opened @ $12.90. I wonder how long it will take to bench mark? Oh well it yields 4%.

Oct 27 02:21 PM

[Dr. O:]

Distribution continues. Looks like our rally takes a breather. Rally into earnings and sell into them. The "blip" in the US Dollar provides a better entry point into precious metals, and a few of the truly great companies like AAPL. Just watching....

Oct 27 02:42 PM