EYE OF THE STORM
Things were a little calmer today, but we should expect more volatile conditions ahead.
There was some good and bad news today. First the good news: The Fed's Beige Book noted economic weakness, which for equity bulls meant the Fed may cut interest rates sooner rather than later. Second, the bad news: The Fed's Beige Book noted some economic weakness, which for bears means potential pressure on corporate profits.
So as usual, there are two sides to the same story. Take your choice.
Yesterday's oversold rally is now in the rearview mirror and we're left with whatever's next. If you know, please pass it on. One thing is certain, the market is no longer "short-term oversold."
Market breadth wasn't that encouraging and reflected the stalemate today.
The other big news of the day was the sharp rise in energy prices following a larger than expected drop in inventories.
While some may attribute gold's rise today to rising energy prices, it's really the weak dollar stemming from economic weakness driving the price higher. But everyone's entitled to an opinion.
There was a very interesting story in Bloomberg discussing Moody's ratings of some bank debt. Perhaps it was unintended, but the note that caught my [and other people's attention] was a reference to the assumed role the government would play during any bank failure owing presumably to mortgage difficulties. It's the "too big to fail" deal again.
When I selected the image for the day, there was still some time left on the clock before the close. The smackdown into the close was reminiscent of Monday's close, and so perhaps today wasn't deserving of a tranquil image. But we'll just let it stand.
There was no follow-through to yesterday's explosive rally. The initial interpretation from my "weekly" focus is that one day doesn't a recovery make. We'll need to finish the week stronger over the next two days. Remember, Friday is the all important employment report. If the ADP jobs number reported today is reasonably representative of conditions, job growth reported Friday could add fuel to the budding economic weakness theme.
Have a pleasant evening.
Disclaimer: Among other issues, the ETF Digest maintains positions in: PowerShares DB Energy Fund (NYSEARCA:DBE), PowerShares DB Commodity Index Tracking Fund (NYSEARCA:DBC), streetTRACKS Gold Trust ETF (NYSEARCA:GLD), CurrencyShares Japanese Yen Trust (NYSEARCA:FXY), iShares Lehman 1-3 Year Treasury Bond ETF (NYSEARCA:SHY), iShares Lehman 7-10 Yr Treasury Bond ETF (NYSEARCA:IEF), iShares Lehman 20+ Year Treasury Bond ETF (NYSEARCA:TLT), iShares MSCI Japan Index ETF (NYSEARCA:EWJ) and iShares MSCI Australia Index Fund (NYSEARCA:EWA).