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D Fry Market Outlook 10 04 2007

And invest global. That's been the trend for the past few years. Monday was no exception. You'd think at some point this run would end, but no. With U.S. markets slightly higher to treading water, many overseas ETFs made new highs.

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It might be that the rise in base metals had a positive impact on resource rich markets like Latin America.

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Other Latin American markets are regaining strength led by Peru, Colombia, Chile and Argentina. These countries continue to benefit, while oddly enough oil-rich Venezuela struggles with out of control inflation, government spending and currency controls. But you wouldn't know that listening to el Jefe Chavez.

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Meanwhile back in the good ol' but boring U.S., rumors are buzzing about another private equity deal this time involving Dow Chemical (NYSE:DOW). Prior rumors included materials sector Alcoa, which will report earnings Tuesday. Those rumors combined with bullish base metals should give the materials sector some life.

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What else is interesting? How about the weird world of semis? Last week Micron (NASDAQ:MU) badly missed earnings and revenues estimates, but was up 4% in after-hours trading. Then the next morning the stock was down 4% after GS cut its rating. Monday heavyweight Advanced Micro Devices Inc. (NYSE:AMD) missed and warned and the stock rallied nearly 4%. Why? It may be a combination of the stock being "sold-out" and analysts liking their cost cutting efforts. It doesn't seem like a reason to buy to me, but then we just deal in ETFs thankfully.

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In other U.S. sectors small and mid-caps continue to do well in step by step fashion.

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The other big news was the decline in oil prices. According to some pundits that drop pushed gold prices down. I would disagree, since oil dropped more than 3% and gold fell less than half of one percent. When there's a geopolitical crisis, gold can move up dramatically, and then fall equally so. But the recent episode with Iran didn't reach the fever pitch as prior crises. Gold will more often than not follow economic conditions that may fuel inflation and the fate of the dollar. The dollar was modestly higher on the back of stronger employment numbers, causing gold to falter. At least that's my feeling... um, today.

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These are some of the markets to keep an eye on.

As or more important, earnings reports being in earnest Tuesday with Alcoa Inc. (NYSE:AA) leading things off.

There's still a lot of money for deal-making, which seems to be the major prop to the equity market at least in the U.S.

Overseas markets seem in a world of their own. Every time you think their bull move has run its course, up again they go. To have only a U.S. focus at this time seems so last century, right?

Disclaimer: Among other issues, the ETF Digest maintains long or short positions in: PowerShares DB Base Metals Fund (NYSEARCA:DBB), iShares S&P Latin America 40 Index Fund (NYSEARCA:ILF), iShares MSCI Mexico Index ETF (NYSEARCA:EWW), iShares MSCI Brazil Index ETF (NYSEARCA:EWZ), iShares MSCI Australia Index Fund (NYSEARCA:EWA), iShares MSCI Canada Index ETF (NYSEARCA:EWC), iShares MSCI Austria Index Fund (NYSEARCA:EWO), Turkish Investment Fund Inc. (NYSE:TKF), First Israel Fund Inc. (NYSEMKT:ISL), iShares MSCI South Korea Index Fund ETF (NYSEARCA:EWY), iShares Trust FTSE-Xinhua China 25 Index Fund (NYSEARCA:FXI), Rydex S&P Equal Weight Materials (NYSEARCA:RTM), MidCap SPDRs ETF (NYSEARCA:MDY), iShares Russell 2000 Index ETF (NYSEARCA:IWM), streetTRACKS KBW Bank (NYSEARCA:KBE), streetTRACKS SPDR Homebuilders ETF (NYSEARCA:XHB), PowerShares DB Energy Fund (NYSEARCA:DBE), streetTRACKS Gold Trust ETF (NYSEARCA:GLD) and PowerShares DB US Dollar Index Bearish (NYSEARCA:UDN).

Source: David Fry's Market Outlook for Tuesday