Friday Outlook: Commodities, Global Markets

<< Return to page 1 - The Oversold Rally, As Advertised

Let’s not give Superman a bad name but even he can’t predict the future. However, us mortals following the readings of the McClellan Oscillator knew a rally was imminent. Now, what we still don’t know is how durable this rally will be. It sure “feels” like “dip buyers” are in the driver’s seat, but you never know when that pattern will change. Further, these buyers can push things higher on lighter volume until they can’t anymore.

A string of lousy data this week from lower home sales and price data, below estimated Durable Goods Orders, and the killer, much lower Consumer Confidence all indicate worse conditions ahead. If markets are “forward looking” then investors can’t ignore poor data, but they did today with “old news” from GDP data. It seems ephemeral but this has been a strange market anyway.

Tomorrow we’ll post again but look at “monthly” data to get the longer-term perspective that’s always important to do occasionally. We’ll also get more data from Personal Income/Spending, Employment Cost Index, Chicago PMI and more Consumer Sentiment.

We’ve been carrying heavy (60-90%) cash positions for the past few weeks and some positions listed below may seem contradictory; however, different time period views and levels of aggressiveness dictate this with different portfolios.

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, SPXU, VTI, TYP, FAZ, SMN, SRS, EFA, EFU, EEM, EDZ, UDN, GLD, 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

[Fibozachi:]

Solid technical analysis as always Mr. Fry; thank you for sharing your thoughts. Just like any other issue, index or metric there are various technical methodologies that DO in fact help individual traders make informed decisions about market internal readings.

For an extensive read into volatility that includes comprehensive technical analysis of the $ADD, $TICK, $VIX and $VOLD alongside clearly detailed charts: fibozachi.com/technici...

".... on a fourth consecutive down day, Wednesday’s TICK plotted an enormous amount of negative readings while registering a stunt low of -1422; marking only the seventh time that a tick reading below -1400 has registered since the beginning of Primary wave 2 (circle) began with a single daily High Wave candlestick on March 6th. While 12 separate occasions of TICK readings that exceeded -1000 plotted over the course of Wednesday’s impulsive price action, VOLD also spiraled towards its lowest value since approximately 10/01/09 and 9/01/09; finding exact support at the trendline that connects the two ....
.... Wednesday’s impulsive price action across the board, which registered as a “90/90 day” according to a metric popularized over the past few years by Lowry’s Research, which occurs when NYSE stocks exhibit both cumulative breadth and cumulative volume ratios that are each greater than 90% of their total. Wednesday’s powerful downside breadth clocked in at over 9 stocks down for each 1 up and exhibited similarly impressive volume with 91.6% to the downside in the single strongest negative thrust for market breadth in at least six months. Moreover, as wave v of (iii) appears to have ended at Wednesday’s close at 1038.5 (ESZ09), in yet another sharp ending diagonal pattern, traders were abuzz about an extraordinary McClellan Oscillator reading of -381.49 at the close; which “normally” would all but ensure a relief rally from such unabated selling pressure even if only temporarily ....

Oct 30 06:31 AM

[boisterousbob:]

It's about time I added a thankyou thankyou thankyou for sharing your views with us - Brilliant!

Oct 30 06:39 AM

[Ergo:]

As always, thank you for your thoughts. I read your posts every day. Clearly for me, the best thing to do today is to work hard at my job and earn another paycheck. I'll be waiting to see what to do with it.

Oct 30 08:08 AM

[tunaman4u2:]

Note the downgrades across the board by GS, BAC, MS etc of the GDP causing an "oversold' condition prior to the GDP release...

How convenient.

Oct 30 08:15 AM

[Dr. O:]

If they ran

Oct 30 09:10 AM

[TradingHelp...:]

I wish the Chancellor of the Exchequer, Alistair Darling, knew half as much as you in relation to the economy.

The UK wouldn't be in nearly the economic mess it is in, to my great personal cost.

Oct 30 11:12 AM

[talld:]

David,

I think you are in a category of your own with such exceptional chart reading abilities.
I am working on a custom stock market charting program and I would be honored if when I am in beta and get it on the web (three or four months from now probably) if you would take a look at the charts from my program, and possibly give suggestions.

Oct 30 11:44 AM

[AndrewBaker:]

One thing that shows now when you look at a range of charts across geographies as well as sectors, industries and asset classes, is that any rise is now pretty much finished on the long side. There's a lot of resistance showing and growing whilst support is not so strong; so, time to get the shorts out maybe? (even though TAN is going down too regardless of presidential approval)

Oct 30 12:01 PM

[absolute re...:]

The 2 David's.......David Fry and David Brown are worth every visit to Seeking Alpha. Spot on guys. You both have warned not to buy into the optimism of yesterdays rally and it is why I always remain hedged on both sides. Thank you for keeping me focused. For those of you who don't read or follow David Brown as well check it out. His weekly article on what this market wants is an easy quick read. I didn't put on shorts but bought puts and am sleeping well. Thanks David.

Oct 30 01:49 PM

[Dr. O:]

What I meant to say this morning was....honestly, I forgot? I'm pretty sure it was bearish. Something about the price-volume action everyone has already noted. Distribution. Anyone else notice that the July "correction" bottomed at the 200 day SMA, which, at the time, was just underneath the 50 day SMA. However, since the market has gone up so much since then, the 200 day SMA for the indexes etc is way way lower than where we are now. Air pocket!

Oct 30 04:15 PM

[E Nuff Sed:]

I think the S&P 500 is now in the process of "rolling over" into correction territory (10 - 20% decline). Many guru like Grantham and Soros consider the market over valued and technicals support their bearishness. Consumer confidence (inspite of GDP numbers) is dicouraged.

The coming 2 - 4 of weeks are going to be quite bearish and it would be wise to hedge your bets.

Oct 31 09:20 PM