Thursday Outlook: Commodities, Emerging Markets

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We’re heading down the stretch to the end of May. There are plenty of bullish forces who will be painting the tape and defending their positions. You saw one of those players on the tape [see 5-minute SPY chart] yesterday and today.

Bulls have more cash than bears and they don’t like the negative yields from current cash positions so they’re anxious to get going. They’re cheered on by the financial media that know who pays the bills. This is in essence the battle that’s taking place now. Armed with a lot of cash bulls can cherry-pick the news they like and turn a blind eye to what they don’t. [You saw them cheer lower oil prices in the A.M. and then ignore a higher close later.] A torrent of bad news can overwhelm even the most aggressive bull but you have to respect the bullish bias and the current action despite anemic volume and breadth.

To my mind it’s difficult to imagine that investors can take the large financial sector, put it in a dumpster, and expect the overall market to rally. But, one could make the opposite argument that if these beaten down financials ever rally we could really be off to the races.

Have a pleasant day.

Disclaimer: Among other issues the ETF Digest maintains positions in TLT, TBT and XLB.

Comments

[karchad:]

All in all, the market isnt exactly down since, say late January. Pretty long time for the doomsdayers to keep hoping it tumbles again. With all this bad news: oil, banks, housing,"inflation", the market still doesn't tumble. That tells me more than all this phony technical analysis

2008 May 29 06:22 AM

[zenalgorithm:]

karchad,
After you've been trading a while, you'll start to think more like David Fry. The market just doesn't follow fundamentals. TA helps you see where things are being magically forced to. There's too much manipulation going on in the US markets, open your eyes to that possibility.

2008 May 29 07:42 AM

[Crudeman:]

Has anybody else had probs downloading the charts?? Blank yesterday and today on both Mozilla and Int Exp.

2008 May 29 08:16 AM

[A von Alten...:]

David's commentary is a favorite, highly informative.

2008 May 29 08:19 AM

[Donald Johnson:]

Charts download fine on Mac Safari.

This is a great series of charts that should be part of your daily review. I'm going to create the same list in stockcharts.com.

2008 May 29 08:41 AM

[User 150045:]

David reduces the noise. Much appreciated

Greg UK

2008 May 29 08:45 AM

[Archman Inv...:]

As always good analysis.

For those like Karchad, from the above comment i would say, technical analysis is just a portion, of an overall scheme, for looking at stocks or an index.

The fact that the market has not "tumbled" means nothing. The US stock market is now the most manipulated and corrupt market in the free world. Our own government and Fed admits as much that they buy cash futures, and stocks thru their partners as all the major banks (who actually own the FED), as well as their own treasuries to prop up phony demand when foreign governments don't want our treasuries.

The market has been walked up, on not even average volume, since the so called "low" in march. For all the talk of the "bear market" we never actually were in one, and the market went down for only a few short months. The corporate owned media (CNBC, et al) would have you believe the market was awful, etc, yet by any measure the market hardly went down at all.

We are now in a "1984" George Orwell time where people are dumbed down and bombarded with information regarding the market, in order to confused them, and just keep the average american "in the market".

Why? Because most americans hold mutual funds.
You have to keep the average american in mutual funds so the asset gatherers can keep collecting their fees regardless of where the market goes.

2008 May 29 08:59 AM

[Thomas Victor:]

EWZ (Just Brazil) versus EEB (BRIC with 50% Brazil) - any ideas? Short Term and Longer Term?

I'm holding RSX and EEB right now, wondering if I should put some of that into EWZ.

Thanks!

2008 May 29 09:53 AM

[User 86999:]

David tends to come out as cynical but more often than not, his humor is well balanced with information. I think there is room for a little more emphasis on TA than the fundamentals and the market reactions to the fundamentals. Overall, I'm very happy with this column - my favorite for every morning. As for the TA skeptics, nothing can be said to convince them; people have written books upon books on the subject but still no awakening.

2008 May 29 10:39 AM

[cartecay1:]

You see a lot of fundamental analysts becoming technical analysts, but you NEVER see a technical analyst switching to the fundamental side. That should tell us all something.

2008 May 29 12:32 PM