Wednesday Outlook: Commodities, Global Markets

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The Shadow? Well, this just shows how old I am. It just occurred to me as many are still coming to grips with malfeasance and insider deals on Wall Street and with the government. So then, “what evil does lurk in the hearts of men”? It’s in the news every day it seems.

The McClellan Oscillator argues for a bounce-back rally now. It could come tomorrow or the next day. The worst I’ve seen the reading is -100 so we’re just about there.

Tonight Visa (V) reported and the stock, which was down 5% early, came back in after hours trading to trade higher. I guess all that interest on unpaid balances is kicking-in rather than new charges. Below is the current summary courtesy of MarketWatch:

click to enlarge


Tomorrow we get Durable Goods orders and New Home sales plus more bond auctions.

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, TZA, XLY, UDN, GLD, DBC, USL, XLE, BDD, EFA, EEM, EWC 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

[Crudeman:]

Actually Dave the McClellan was -130 a year ago and -120 last March so we still have a little room on the downside.

Oct 28 05:24 AM

[rick12345:]

I stopped trading large caps a couple of weeks ago. Even I, as a bull, could see they were overbought.

Oct 28 05:49 AM

[Dr. O:]

A sea of red across the globe last night and this morning. Nothing scary, but noteworthy. Many good stocks and ETFs are still short and intermediate term overbought (AAPL, EWZ) while the market, as a whole, is short term oversold. Interesting dynamic. With end of month should see a meaningful rally attempt today. If the market gaps down, it will be bought, and sold, and bought again. Probably a flat to up day.

Oct 28 08:02 AM

[fjpenney:]

The McClellan Oscillator peaked on July 23 and hit a low on September 02. As I understand David's discussion of the oscillator, the market should have peaked on July 23 and hit a low around September 02. In fact, the S&P 500 rose 4.2% from July 23 to September 02.

The again, the oscillator hit a high on September 17 and a low on October 02. Over the same time period, the S&P500 fell 3.9%.

I haven't studied the value of the McClellan Oscillator in depth and I do not use it in my own timer. Does anyone find the MO to be of much value?

Oct 28 08:10 AM

[enigmaman:]

The information of were certain indexes, industries, etc are today is great but what is to be done with this information in the near term as well as the future? Play out some scenarios, what is the opportunity? How to react? What is the reality? We have all these technical charts, with short quips (interpretations) but never any discussions of what this information actually means going forward and that is where you separate the wheat from the chaff, what is the plan?

Oct 28 08:48 AM

[David Fry:]

The McClellan Oscillator is an "ultra" short-term indicator. It's useful in timing entries for example or just a picture of "current" current conditions.

No one should use it in isolation.

Oct 28 09:38 AM

[robert.b.fe...:]

Can you say dip buying?

Oct 28 09:43 AM

[mc2406:]

Reading Seeking Alpha's Wall Street Must Knows today (and for most of the week), you'd think the market could only be going down fast and soon. Also anyone missing earnings is being crushed versus selective upsides for earnings winners. I think the large volume on down days is a big tell of what will happen after the October year ends.

Oct 28 09:55 AM

[Bob'29:]

According to Tradingmarkets.com's expert at back-testing and quantifying market move's: Of the 58 times the market has been this oversold; it has rallied strongly within a few days 89.9% of the time. Also stated; There is a likely small cap liquidation by a large or several large hedge or mutual fund companies as determined by the number os unrelated small cap stocks that are getting trounced. When this has happened in the past small caps have rallied 20-30% within a few days. Position for the oversold bounce from these extremes!

Oct 28 10:35 AM

[AndrewBaker:]

There's still a lot of overhead supply from last year left out there, and the reversal that's threatening is likely to bring a lot of it out with holders deciding they're not going to get out at the price they got in at and they're not prepared to risk more loss nor wait so much longer for the reversal back north again, which could be a long time coming.

Oct 28 11:05 AM

[bottoms-up:]

This is a big bad news day...

That said, the typical patter is that equities see a late day "rally" that bumps the Dow to maybe 30 or 40 on the plus side.

What you don't see is that the bump is usually shill-buying through various firms and thanks to Ben and Tim's hot printing presses.

We have a typical Bloomberg "pump" story:

"U.S. Durable-Goods Orders Rise Fourth Time in Six Months in Recovery Sign" (If you look closely at the report, this is an absolute fabrication...)

Then the most active, as is almost typical (one would have thought some of these firms are involved in finding the cure for cancer):

CITIGROUP INC
SPDR TRUST SER 1
BANK OF AMERICA
E*TRADE FINANCIA
ISHARES-EMG MKT

To top all of this off we have GMAC wanting more government money...

The governments of the world better have some deep pockets with resources to back it up as this appears to be a slow, but calculated, decent into the abyss.

Oct 28 12:28 PM

[Alex Trias:]

Alas, what a difference a day makes. The big excitement today is how many ETFs sliced through their 50 day moving averages. I expect Dave will have something to say about that in his next article, which I await with great interest.

Some would argue that a failure to observe a 50 day moving average, at a time when short term momentum indicators like the NYMO are already at oversold extremes, suggests we are at the front end of an intermediate downward trend (or worse). If so, then we will be in the most heavily and widely anticipated market correction in recent history. Yes, we are all conditioned to believe that the market rarely rewards the majority-held view, but perhaps this truly is The New Normal - to borrow a phrase from Bill Gross. In the New Normal, the majority actually get it right, and are richly rewarded by the market.

Which reminds me, anyone notice Abby Joseph Cohen stepped down this year at Goldman? Ahhhh, at the highs of the market bubble back in the late 1990s, Abby Joseph Cohen was practically a household name, offering up her widely accepted views that the stock market had nowhere left to go but up, thanks to the miraculous and new dynamics of the tech industry. In the late 1990s, we all knew we were in a fundamentally new era, that markets would absolutely go higher and higher, perhaps forever, and Abby Cohen was quite the spokesperson.
But no longer. Bill Gross is rapidly becoming today what Abby Joseph Cohen was to the financial media in the late 1990s. Like her, he points to a New Normal, a fundamentally new era that supports a continued slide in equities (and other risky asset) prices.
Have we come full circle, then? Do we all have a high degree of conviction that asset prices must drop, that the economy is fundamentally different this time, and have we finally settled on financial celebrity spokespeople who will articulate this belief on our behalf? If so, with history as any guide, we are wrong. Unless, of course, we are all collectively smarter than we were in 1999.

Oct 28 05:57 PM

[apirri:]

David, UNG has only $10 to go before it is zero. What do you think?

Oct 28 07:28 PM

[chris coonan:]

no bounce, just fall

Oct 29 12:53 AM

[Hmm?!:]

IMHO.......just speak to fundamentals and ignore the prognostiticators...who do not speak to fundamentals. Then your issues are timing and the spin doctors as you mention below.....that is still more than enough to worry about.


On Oct 28 05:57 PM Alex Trias wrote:

> Alas, what a difference a day makes. The big excitement today is
> how many ETFs sliced through their 50 day moving averages. I expect
> Dave will have something to say about that in his next article, which
> I await with great interest.
>
> Some would argue that a failure to observe a 50 day moving average,
> at a time when short term momentum indicators like the NYMO are already
> at oversold extremes, suggests we are at the front end of an intermediate
> downward trend (or worse). If so, then we will be in the most heavily
> and widely anticipated market correction in recent history. Yes,
> we are all conditioned to believe that the market rarely rewards
> the majority-held view, but perhaps this truly is The New Normal
> - to borrow a phrase from Bill Gross. In the New Normal, the majority
> actually get it right, and are richly rewarded by the market. <br/>
>
> Which reminds me, anyone notice Abby Joseph Cohen stepped down this
> year at Goldman? Ahhhh, at the highs of the market bubble back in
> the late 1990s, Abby Joseph Cohen was practically a household name,
> offering up her widely accepted views that the stock market had nowhere
> left to go but up, thanks to the miraculous and new dynamics of the
> tech industry. In the late 1990s, we all knew we were in a fundamentally
> new era, that markets would absolutely go higher and higher, perhaps
> forever, and Abby Cohen was quite the spokesperson.
> But no longer. Bill Gross is rapidly becoming today what Abby Joseph
> Cohen was to the financial media in the late 1990s. Like her, he
> points to a New Normal, a fundamentally new era that supports a continued
> slide in equities (and other risky asset) prices.
> Have we come full circle, then? Do we all have a high degree of conviction
> that asset prices must drop, that the economy is fundamentally different
> this time, and have we finally settled on financial celebrity spokespeople
> who will articulate this belief on our behalf? If so, with history
> as any guide, we are wrong. Unless, of course, we are all collectively
> smarter than we were in 1999.

Oct 29 01:02 AM

[Hmm?!:]

apirri,

Good Question. I was not sure about David's gap comment.

As a general rule.....most gaps usually fill within a few days. However gaps are also indicators of strong directional movement.

Hmmmm???


On Oct 28 07:28 PM apirri wrote:

> David, UNG has only $10 to go before it is zero. What do you think?

Oct 29 01:21 AM

[Anon.:]

Just a comment from the trenches:

This time of year, (open-end) mutual funds declare and get ready to pay out their year end cap gains. The folks who hung in there through the melt down will get a rude awakening. In spite of this year

Oct 29 06:13 AM

[Anon.:]

Just a comment from the trenches:

This time of year, (open-end) mutual funds declare and get ready to pay out their year end cap gains. The folks who hung in there through the melt down will get a rude awakening. In spite of this year's market rally, many of the well-known funds will not be declaring/paying a cent in cap gains! My five cent's worth: folks will not be happy....

Oct 29 06:16 AM