David Fry's Daily Market Outlook

Unless you care about GM, and we don't, the markets that impressed us today were energy, currencies and precious metals.

Phony rumors about a possible platinum ETF issue proved costly to those sucked into this mess. There will be some ugly falling action stories as a $130 two-way move in two days will cause some serious margin calls no doubt. A "guilt by association" effect held back prices of other precious metals today. In fact, don't be surprised to hear of some forced selling of silver and gold to cover trading losses in platinum.

When stocks are on a run higher it's because investors are looking for "earnings" growth. Here are two casualties [iShares Dow Jones Select Dividend ETF (DVY) and iShares NASDAQ Biotechnology Index ETF (IBB)] where earnings are only a secondary factor.

Everyone's talking about the low VIX [Volatility Indicator] which historically when this low means investors are "complacent" and there's little "fear." With a brief exception last summer for example the VIX has been in a steady decline. Usually a reading below 20 indicates complacency and above fear. Many market technicians have been scrambling to redefine the indicator's relevance. To date no one has discovered anything very meaningful that makes sense of readings over the past few years.

Elsewhere other sectors we're pumping featuring include:

Okay, well that's enough pumping coverage for one day. Enjoy your Thanksgiving Holiday and please be safe.

Disclaimer: The ETF Digest maintains positions in: streetTRACKS Gold Trust ETF (GLD), iShares Silver Trust (SLV), Central Fund of Canada (CEF), First Trust DJ Internet Index ETF (FDN), Internet HOLDRS (HHH), iShares NASDAQ Biotechnology Index ETF (IBB), iShares Dow Jones Select Dividend ETF (DVY), PowerShares Zacks Micro Cap (PZI), PowerShares Value Line Timeliness Select (PIV), PowerShares WilderHill Clean Energy ETF (PBW), iShares MSCI Spain Index ETF (EWP), iShares S&P Latin America 40 Index (ILF), iShares MSCI Australia Index (EWA), India Fund Inc. (IFN), Templeton Russia & Eastern Europe Fund CEF (TRF) and iShares FTSE/Xinhua China 25 Index (FXI).

Comments

[Tom Kasperski:]

Re > "Many market technicians have been scrambling to redefine the indicator's (VIX) relevance. To date no one has discovered anything very meaningful that makes sense of readings over the past few years.

I think you overstate your case. VIX should be viewed relative to it's recent levels, not absolute level. Most technicians use VIX in this way. Here's a chart that shows VIX relative to it's 75 day moving average. stockcharts.com/h-sc/u...=$VIX&p=D&...

2006 Nov 25 04:55 PM

[David Fry:]

Didn't even think I "made a case" one way or another.

2006 Nov 27 12:53 PM

[Greg Pinelli:]

This is both a comment and a question..asked with respect! Why would anyone hold CEF??? Especially when...the last time I checked..there were Silver and Gold ETFs that sold at virtually no real premium. CEF is great (was great) when it sold at a discount...but why???? would any sane CEF/ETF investor pay a multi percent premium for an equity they can get for no premium?? Please enlighten me Mr. Fry.......since this one of your holdings....
As a reminder...CEF prides itself on holding PHYSICAL metal..so it offers NO leverage as a bonus.

2006 Dec 07 08:24 PM

[David Fry:]

I understand your views. We're involved with SLV and GLD in addition to CEF. CEF is more attractive to retail based on low individual share price. While this seems obtuse it's just more convenient for smaller investors to own both metals and control more shares. It's difficult for many to buy SLV @ $140 or GLD @ $64 hence the appeal. The premium can reach silly levels when enthusiasm is high. Note that IFN [India Fund] reached premiums of 35% [currently 5%] in the spring and TRF [Russia Fund] 45% during the same period. Rather than scoff at those, our role is to know when to be in them or not.

As I said, I fully understand and respect your views.

2006 Dec 08 09:53 AM