Tuesday Outlook: Commodities, Global Markets

<< Return to page 1 - Weak Volume, Weak Dollar, Big Rally




























































Bernanke, Geithner, their global counterparts and the US government seem hell-bent on reflating all asset classes in an “inflate or die” mode. So we go back to rally mode on a sea of liquidity and the notion interest rates will never rise again. As for jobs, pish-posh, who cares! But, Wall Street pros must believe holiday shopping will be a big-time winner based on the action in XLY and that’s hard to figure with unemployment at 10.2%.

The ongoing mystery is light volume. We sell off on heavy volume and rise on ultra-light volume. This may just mean a market dominated by hedge funds and trading desks with Main Street just spectators. But the action on prices is impressive even if the gang of players is limited.

There’s another issue resurfacing which is fee income structure—the lifeblood of the financial services industry. Combined with short memories, not to mention greed and fear, firms want you to forget 2008 ever happened by resurrecting the “buy and hold” theme so dear to those dependent on a steady stream of evergreen fee income. This notion is being pushed hard—real hard. They may win, but to recapture 40-80% losses they’ll have to do a lot better by twice that level. They’ve a ways to go.

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

Disclaimer: Among other issues the ETF Digest maintains positions in: VTI, XLY, TBT, TIP, GLD, DGP, DBC, USL, EFA, EEM 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

[basehitz:]

Since early Sept, conspicuous high volume declines vs moderate volume advances. Yesterday’s % gain vs weak volume is typical. Ditto USO in spite of big drop in dollar, and it finished weak.

Imagine the crappy volume without the bots, which would also explain those precision bounces off moving averages.

I wonder if Da Boyz will try to keep it up thru year end for bonuses.

Nov 10 06:58 AM

[damienhaas:]

David Thanks again for the great effort!

Weak Dollars does not mean that US export is competitive. US goods that are technological normally price at a premium and not many competition except maybe Europe. US will always a big chunk of these type of businesses. However for consumer products and human intensive products, even if the dollars fall by another 20 percent, it will not competitive as they cannot match the low cost environment of the Asia, South America and Eastern Europe producers. Furthermore, a lot of US industry has been outsource to other countries and they are paying these employees in their local currencies. So having weak currency not necessary will help improved the business overall.

Nov 10 07:33 AM

[kfly:]

Thanks again David. Any chance we can see UNG commentaries in the near future?

Nov 10 08:11 AM

[bottoms-up:]

First of all I want to thank you for the great picture of Ben and Tim! Maybe they will come out with Ben and Tim's Ice Cream that is a frozen version of the Kool Aid used at Jonestown.

Ya! The volume on this stuff is a story by itself. If you look at the big movers its always Citi, BAC AKA: (US GOVT).

To me it is a bunch of pump and dump, mixed with a con game by using equities as a "poster child" for how well the economy is improving. If you take a poll on Main Street America, however, not too many people believe what they are being told. Maybe people are not as stupid as Ben and Tim thought they were.

Nov 10 08:40 AM

[JGL:]

I second kfly! Must say this is one of the most confusing ETF! Even after reading the many posts on this website.

Nov 10 08:50 AM

[Dr. O:]

The trend is your friend (unless the trend has pushed valuations to nutty levels, like 1999). With 0% interest rates, no immediate risk to total financial meltdown, and some recovery in global economies, the rally in all things continues. Except the US Dollar. It's weird but there it is. Heck, who knows who's giving equities a bid? Could be foreigners diversifying into cheapening US assets.

Disclosure: long QLD, GLD, GDX, SLV, AAPL, FXI

Nov 10 09:02 AM

[schlumpf:]

Low volumen because most dont want to sell.

Nov 10 09:02 AM

[robert.b.fe...:]

The folks are awake and savvy investors like those on this site are playing the market at hand and comparing notes. Da Boyz are playing their own game, manipulating on light volume, and selling off to lock in profit. Every one is watching Uncle Sugar and trying to figure out what game they are playing. Honestly, I don't think Ben, Tim and company really know what game they are playing them selves. That is what creates the uncertainty in the currency markets. They could change the game and the rules tomorrow. Thanks again Dave, good job as always.

Nov 10 09:11 AM

[mc2406:]

I agree that da boyz are trying everything they can to promote year end bonuses.

Longterm, I still don't see how there can be anything but inflation or huge tax increases (nationalization of 401(k)s?) unless all the drunken sailor spending by the professional pols stops.

Nov 10 09:33 AM

[David Fry:]

The low volume is because just a few are playing, then trades get crowded/overbought, and then some bad news stampedes everyone to the exits creating heavier volume. And repeat.......and repeat....and repeat..........

Nov 10 09:44 AM

[ebworthen:]

"Buy and hold" now "Shy and Gold"

Nov 11 01:06 AM

[StockMaster...:]

They have no choice but to devalue the dollar because our jobs have gone overseas in the past 10 years and we switched to a real estate/finance economy that is half busted as a result of the crash and this will cause people with money to put it to work and create jobs eventually (probably 2011, when they will raise rates) rather than lose an additional 30% of its value in the bank. Jobs are harder to make in the USA these days.

Nov 11 10:26 PM