Tuesday Outlook: Commodities, Global Markets

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This has been one helluva ride! Whiplash is a common complaint and being systematic is the only way to deal with it. The average investor doesn’t want exposure to this kind of volatility in my opinion. One day you’re okay, the next in the poor house. That’s no way to sleep comfortably for most people. We have heavy cash positions and a mixed bag of light positions that vary widely depending on portfolio views and level of aggression.

I’m not kidding when I say it would be a good idea to just write this coming Friday since more, not less, volatility should be expected this week given the impending news announcements.

Buckle up!

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

Disclaimer: Among other issues the ETF Digest maintains positions in: SPXU, VTI, TYP, SMN, FAZ, SRS, EFA, EDZ, EEM, and EFU.

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

[Daniel Herkes]

Up and down. But the end result will be a flat market. Are there earnings, except Cash for Fords? The unemployment rate is is still around 10 percent. The trading appears to be machines hedging pennies.

2009 Nov 03 06:26 AM

[rick12345]

I don't think the boys on wall street like being told what to do somehow. It appears that they want to decide when the market should rally, and what's more, it will be on their own terms; not dictated by economic news.
Someone has been reading Plato's Republic, but I don't believe they quite understood it, or else didn't manage to get to the end of the story.

2009 Nov 03 06:46 AM

[Dr. O]

I've noticed the largest volume in SPY, IWM and QQQQ since March-April in the past couple of weeks. This volume surge coincides with good earnings and a highly extended and tired intermediate-term uptrend in the market. In short, "they're" selling the good news, the markets are under distribution, and heading lower.

The first index to go has been the Russell 2000. There's no catalyst other than profit taking to take the markets lower, it's not like last year with a near collapse of the financial system. But problems remain in the banking system, loans continue to go bad, the economy is weak, and trust in government is low.

Since all assets are so highly correlated, I'm not sure if there's anywhere to hide except Treasury Bonds and, ironically, the US Dollar (for a little while). This may go on a month or so, then I'd be a buyer again. Frankly, I'm concerned with the future of the US Dollar and the US Bond market. When you owe more than you're worth, aren't you bankrupt?

2009 Nov 03 07:15 AM

[unfaire]

We human being have been fighting against each other for territories, properties, powers, and sex all through down the history. We coerced, cheated, doublecrossed, murdered, whatever the ends that justified the means. It has been bloody. The stock market is the new fighting ground, only that it is bloodless on the surface. While the big boys are slugging out amongst each other making huge surges, us the little guys should try to ride the waves hopefully to make money on both the way up and the way down. You know the adage well: Only the pigs get slaughtered.

2009 Nov 03 07:33 AM

[Michael Clark]

Why are Ultrashort ETFs making bottoms in their charts?

seekingalpha.com/insta...

Looks like the rally is over -- unless Boom Boom Bernanke has more magic up his sleeve (and unless a higher federal deficit is the way one defeats involvency).

Boom Boom is walking a tightrope between deflation and inflation and the tight-rope is called Stagflation. We won't have the inflation we had in 1970's because Americans cannot afford to borrow all the money that's floating around today. In the 70's Americans were relatively solvent, and so they chased the bankers tail all around the block. In the 1930's and today, we have too much debt to participate in the game of 'be seduced by the banks and become a debt-slave'.

2009 Nov 03 07:37 AM

[prudentinvestor]

I must confess to being jealous of these courageous folks who fly as seen in the video. Ditto for the duantless who buy at today's levels!

IMHO, what we have begun is a multi-year return to fundamentals, in which investors will slowly relearn that the value of equities is really based on dividends, and the liklihood of their increase with time, not "accounting earnings" and their liklihood of increase; and not on the presumption of a greater fool down the line paying more for a stock that pays no dividend. As this realisation becomes mainstream, it may result in averages close to current levels ten years from now.

2009 Nov 03 08:06 AM

[predictorman1000]

For the first time since the beginning of the year I can't say whether the market will go up or down from here. Earlier in the year I have been wrong (as in, the market looked like it was going down but then magically went higher), but at least my head was telling me what should happen.

Right now I don't know, and like the author, am on the sidelines.

PS I haven't heard/seen anything from anyone that can convince me either way.

2009 Nov 03 08:30 AM

[RSAAKKS]

On too many of the charts, MACD is rolling over. Is that of any concern? Looks like dollar is making a bottom, and most indices making a top...at least for the near term. Do you agree?

2009 Nov 03 08:46 AM

[bluebare]

Still happily sidelined with futures looking very bad this morning but just for kicks I checked pre-market quotes on ultrashorts this morning. The ones I'm watching are up 2-3% "pre-market" on tens of thousands of shares of pre-transaction. WHO'S stealing the first play in these things before a little guy can even get at it? Duh. The manipulation of this market is SO transparent. Thanks for the continuing education, David.

2009 Nov 03 09:28 AM

[bluebare]

My mistake. Make that hundreds of thousands of shares. SRS over 700,000 bought pre-market. SKS over 900,000 bought pre-market. Both up 3% before I can make a trade. What a racket.

2009 Nov 03 09:32 AM

[David Fry]

bluebare, sometimes they do you a favor. I usually wait 15 minutes after the opening to make trades just to let things settle some. "Most" of the time that works out better.

2009 Nov 03 11:57 AM

[bluebare]

Thank you for the excellent advice, sir. I was laughing pretty hard as I watched
'em lose those three points right off the top this morning. "Stick saves" at the end of the day can sometimes shower favors on the wisened, too, n'est pas?

2009 Nov 03 01:35 PM