Thursday Outlook: Commodities, Global Markets

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I thought this was a US holiday but I guess this didn’t apply to Fed and Treasury officials who were out jawboning markets. Investors gave them what they wanted with the exception of Turbo-Tim who amuses us with his faux table pounding wanting “a strong dollar”.

So the liquidity bubble continues to expand and investors are lovin’ it. It is what it is folks, enjoy it while you can. Tomorrow we get those pesky Jobless Claims again which are estimated to remain unchanged. Is that a good thing? Bulls will spin it that way if they can.

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

Disclaimer: Among other issues the ETF Digest maintains positions in: VTI, UPRO, UYM, TYH, UCC, UXI, ULE, 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

[RSAAKKS:]

Can you include Korean market ETF occasionally, with Korean Won appreciating, and one of the best Asian economies, it seems like an interesting one from my view. Thanks for all your posts

Nov 12 08:42 AM

[Seeking Advice:]

Dave,
I think you said it pretty succinctly, "So the liquidity bubble continues to expand and investors are lovin’ it. It is what it is folks, enjoy it while you can." I've kept invested in the market (albeit at lower levels than 2006 or 2007) against my better judgment and feelings but that has proved prudent so far. I remain watchful for signs that either the government is removing liquidity or that investors are getting tired of little signs of real recovery - if that ultimately comes to pass.

Right now, I get the feeling that the only things that matter are that the government says they intend to continue to provide stimulus (1st time home buyer credits and the like) and the Fed indicates that they will keep rates near zero. And for now, maybe that's most of the market...

Nov 12 09:09 AM

[mc2406:]

I think the government will do everything possible to keep the market rosy for the next week or so while the big O is in China, kowtowing to our biggest creditor.

Nov 12 09:23 AM

[robert.b.fe...:]

Thank you David great job as always. About UNG I think we can put a fork in it. They some how ran afoul of the friends of Barak.

Nov 12 09:46 AM

[Alex Trias:]

Cannot help but notice that IWM closed pretty much smack on top of its 50 day simple moving average yesterday. Stopped dead in its' tracks. Today, it is down, seemingly observing the 50 day simple moving average as resistance. That would trouble any market bull, but what is more troubling in my view is that the large cap stocks are technically poised far, far higher. DIA, for instance, observed its 50 day exponential moving average as support on the last pullback, and yesterday set a higher high. In other words, risky stocks are performing pourly, technically speaking, relative to less risky stocks. That is typically what you would expect to see at the top of a bull market.
So, is this yet another one of a veritable flock of canaries in a very dark, dark, dark coal mine that has almost no bottom to it? Probably, but that said, the relative underperformance of small cap stocks can persist for some time before a full scale bear market errupts. Also, the relative technical underperformance of IWM verses DIA is a fairly recent thing. And a fairly domestic thing. Looking abroad, it appears risky stocks (using VWO or EEM as an indicator) are more than keeping pace with less risky stocks (using EFA as an indicator). SO, is the US equity market just a fluke?
Maybe, but the US market is a big fluke, and has a way of dragging other markets along with it.

Nov 12 10:03 AM

[Dr. O:]

Been wondering for a while why small stocks are outperforming in spite of small companies poor access to capital and reliance on the domestic economy. Indeed, big multi-national companies either don't need capital, or have access to it, and, sell into the stronger foreign markets, where a declining dollar is good for profits. Wouldn't surprise me to see large stocks outperform now that our big bounce off the bottom has run its course.

Nov 12 10:14 AM

[JGL:]

UNG: Sell at a (big) loss or wait??

Nov 12 12:58 PM

[Alex Trias:]

Another reason some of the larger cap stuff might outperform in the near term is that a typical benchmark for fundmanagers is the S&P 500. If you've been running your fund on heavy risk and have beaten the S&P 500 this year, now's a great time to lock in that relative performance, and lock in carried interest, and if you're a trader, lock up that bonus. One way to lock it up is to dump your risky stocks and plow your equity into large cap indexes, like the S&P 500. Maybe we're seeing a little bit of that now? Probably, right? If that explains the underperformance of IWM verses SPY, then it's tough to draw a firm conclusion based on that evidence alone that the March rally is done. However, if IWM continues to underperform SPY into next year, then I would add that fact to evidence pile that this rally is done. Obviously, by then, we may already have plenty of other more compelling reasons to conclude the March rally is over.


On Nov 12 10:14 AM Dr. O wrote:

> Been wondering for a while why small stocks are outperforming in
> spite of small companies poor access to capital and reliance on the
> domestic economy. Indeed, big multi-national companies either don't
> need capital, or have access to it, and, sell into the stronger foreign
> markets, where a declining dollar is good for profits. Wouldn't surprise
> me to see large stocks outperform now that our big bounce off the
> bottom has run its course.

Nov 12 02:13 PM

[robert.b.fe...:]

JGL: Greetings. What is your event horizon? If you are at a very large loss you may want to sit on it because it may come back or at least pare the losses. If you really really need that money quickly you may be forced out at a substantial loss.


On Nov 12 12:58 PM JGL wrote:

> UNG: Sell at a (big) loss or wait??

Nov 12 04:38 PM