David Fry's Market Outlook for Tuesday

 |  Includes: HYG, IEF, USO
by: David Fry

D Fry Market Outlook 17 07 2007

The day was a true distraction. While headlines had you focused on the DJIA's move toward 14,000, beneath that pump you've got a market that was under serious distribution as the following table clearly demonstrates. This was not a very good day.

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But it's Monday and volume is summertime light with most investors keeping an eye peeled for earnings, inflation news and this week's Bernanke testimony.

It hasn't been unusual for bonds to rally before Bernanke speaks, and they did so. But that aside, with tax receipts strong there are fewer bonds to sell. Combine that with a desire to buy higher-quality debt issues away from subprime debt, and a rally, or at least some stability, is inevitable.

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Goldman Sachs issued a research report suggesting oil prices could hit $95 by year end. Why didn't they just drag out the previous $100 call I wonder?

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Deals are still driving U.S. stocks higher. It may be there's a rush/panic to get deals done as debt financings may be more difficult as spreads from junk to treasury bonds widen. Several deals couldn't get done last week because of this.

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Looking around the U.S. or globe for that matter, most market ETFs were lower despite the hyped DJIA.

This post is deliberately brief until more news can be intelligently interpreted. The bears owned the day... sort of.

Disclaimer: Among other issues the ETF Digest maintains long or short positions in: United States Oil Fund ETF (NYSEARCA:USO), PowerShares DB US Dollar Index Bearish (NYSEARCA:UDN) and S&P 500 Index (NYSEARCA:SPY).