Friday Outlook: Commodities, Emerging Markets

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Commodities had sold off hard and were oversold. Firms like Goldman Sachs (GS) know this and are anxious to take advantage and catch investors leaning the wrong way. So they’ll take big long positions for their proprietary accounts and release the accompanying bullish report. Doing this in late summer with markets stretched and with light volume can make the month for their trading desks. Bully for them!

Equities look quite sick and seem as if nothing will happen trend-wise until some of the major negatives overhanging the markets are resolved. That means FRE/FNM/LEH coming to some final result.

Tensions with the Soviets remain high and no doubt the latter is willing to use energy as a weapon to crush dissent and threats of any kind from the West. So, gold prices rise along with everything else starting with a 'C' while the emerging dollar rally may be snuffed-out.

One thing’s for sure, the week ends today. Enjoy your weekend.

Disclaimer: Among other issues the ETF Digest maintains long or short positions in IWM, IVE, XLY, XLV, UGE, IEF, DBC, DEE, GLD, DZZ, UUP, EFA, EFU, EEM, EEV, and FXI.

Comments

[justme2727:]

Ok, I know technical analysts focus on graphs and don't pay much attention to real world context, but seriously...Soviets!?

Decade check!

2008 Aug 22 06:44 AM

[calvino:]

Good stuff, as usual. The Soviets are in a bind as much as we are. They own lots of Fannie and Ferdie paper. Perhaps the SEcretary of the Central Treasury called them to hasten their exit from Georgia, or else, no taxpayer backstop of their bonds.

2008 Aug 22 07:05 AM

[David Fry:]

They're still Soviet thugs to me!

2008 Aug 22 08:14 AM

[Donald Johnson:]

Point and figure charts for DIA, SPY have been bearish throughout the "sucker rally." QQQQ, MDY, IWM have been and still are bullish. XLE has turned bullish. GLD, IYT, XLF are bearish. IYR is bullish but on the verge of going bearish.

stockcharts.com/charts...|E

2008 Aug 22 08:15 AM

[Donald Johnson:]

I don't know if this link will show pnf charts. If not, you can set the system to show pnf and click on "go." Click on any chart to see hourly, daily, weekly and pnf charts.

stockcharts.com/charts...|E

2008 Aug 22 08:17 AM

[thumb:]

Thanks for the charts!!

Russia's game of cat and mouse could go on for quite awhile.
If they withdraw the troops then NATO/Peacekeepers probably come in.
This most likely will keep the energy markets in hyper mode.
T

2008 Aug 22 09:00 AM

[David Martin:]

Just a prelude to a September or October crash.
The market is overvalued by 2/3rds.

2008 Aug 22 09:06 AM

[EUARTE:]

Yes, Soviets. Putin is a Soviet thug.

2008 Aug 22 09:27 AM

[PDL27:]

"Putin is lootin'" ... that's a classic! May I borrow that? And you're right: they really are Soviets in their mindset and objectives... and in their souls.

Nice job, David, as always. Other than oil and a few healthcare sectors, I don't see anything close to being positive. Good time to stay on the sidelines. JMHO.

2008 Aug 22 10:25 AM

[David White:]

It seems all the financials are up today on the speculation that KDB will try to buy Lehman. Lehman couldn't manage to raise money last time it tried (or at least Lehman has a hard time of it). It seems likely to me that this speculation may find its end in the dust heap. Perhaps Bernanke et al will engineer another buyout by a US bank. GS seem like they might be a good candidate? It does seem like the pain has to return soon, expecially with Putin and Iran making all kinds of trouble. I am amazed the market is up so much today. Anyone have any predictions for the near term. I still see a channel to the upside based on today's action. However, it looks like it might end soon.

2008 Aug 22 10:27 AM

[David White:]

Oh, did you see the SA news about the mortgage loan default rates in July. That looked awful. People must really be reaching if they think there's a big upside push soon.

2008 Aug 22 10:30 AM

[OldLimey:]

The Soviet Union was a Russian Empire. They want it back. The label doesn't matter.

2008 Aug 22 11:01 AM

[David White:]

The news says stocks are up on the prospect of no Fed interest rate increases in the near future (on Bernanke's comments). This may be good in that sense. However, it is very bad in the sense that the economy has to be in real trouble for the Fed not to be raising rates now. I agree the Fed should not raise rates. The banks need all the help they can get (as do homeowners). Further you need the low rates to make the homes more affordable at their current prices (or not too much lower). Still the infaltion numbers have been terrible, even counting on some let up later in the year. To ignore inflation at this time, the situation has to be dire. The sidelines are looking great at this point. I sure can't see the upside for most stocks, but apparently others can't see the downside. Don't you long for those nice days of an overall consistent uptrend?

2008 Aug 22 11:26 AM

[Emerald:]

The Russians remember when Reagan began an arms race spending binge that pushed them over the edge financially. After having Poland missles pushed in their face, they are reacting aggressively now that the coffers are full. I don't think telling them to get lout of georgia or we'll let the GSE's default will work. After all, when Treasury bails out the GSE's, our national debt will explode. Oops, shades of an overleveraged Soviet Union in the 1990's. Great nations are only "great" when they are financially strong.

2008 Aug 22 12:30 PM

[getplaning:]

Soviets? Russia is an authoritarian capitalist state, much like China. The United States is heading in the same direction. This is the new economic model, get used to it.

2008 Aug 24 10:24 PM