Friday Outlook: Commodities, Emerging Markets

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First, I’m engaged in a dialogue with ProShares regarding tracking efficiencies from our and a layman’s perspective. It’s fair to say that intraday and intraweek tracking errors can be significant. You have to give them time to work for you generally.  These issues become larger when viewing newer less liquid issues especially from overseas markets. When I receive answers that are substantial apart from this basic observation, I’ll pass them on. In the meantime, please email me [[e-mail]] your issues and I’ll present them on your behalf.

There is only a day in this week remaining. It’s apparent that should we break March lows today we could have a very nasty Monday. Officialdom is once again burning the midnight oil as they endeavor to stanch the bleeding. I wouldn’t be surprised by any intervention to affect markets today or Monday.

Let’s see what happens. Have a pleasant weekend.

Disclaimer: Among other issues the ETF Digest maintains long or short positions in SDS, SCC, SIJ, SRS, IYR, UUP, DBA, DAG, GLD, TLT, EFA, EFU, EEM, EEV, EWU, FXI and FXP.

Comments

[johnthebear]

David, Thank you for your detailed charts and analysis.

I follow FXP and SRS closely and now you have exposed me to some other possibilities.

Just one question: How do they work the system to do the 2:1 percent adjustment for FXP? I have made great profits on both, but never fully understood how they can keep as close mathematically as they do. Can you help me out here?

[David Fry]

I'll be interviewing some folks at ProShares Monday and report what I've learned.

[richrdinbellingham]

The daily chart of EUR/JPY, FXE:FXY, the barometer of the yen carry trade, shows that the yen carry trade is unwinding. The weekly chart of FXE:FXY shows that the yen carry trade has topped out.

Crown Forex writes "As for the Yen being the star in the forex market, risk aversion and investors risk appetite was able to help the yen gain against majors in the markets as investors were unwinding their carry trades taking the USD/JPY pair down to the 106.20s as the dollar continues to lose ground. Against the Euro, the yen gained from a record low at 169.45 to continue dragging the pair down to the current support level at 167.12 while the GBP/JPY is currently at 211.10s".

Risk aversion has come to the traditionally yen-carry-trade favored BRICs as your charts show: there is significant disinvestment from Brazil, EWZ, Russia, RSX, India, INP, and China, FXI.

And risk aversion will rise significantly as corporate profits turn down; investors who sell stocks will be looking to the financial safehaven of gold.

And a higher yen means a lower US dollar; in as much as gold trades inversely of the dollar; gold will be going up.

Your chart of DBB is helpful; and the comment "still a mess but trying" is totally appropriate as gold is performing better and more reliably than the industrial metals.

Your posting is most timely and helpful.