David Fry's Market Outlook for Thursday

Includes: DBC, IEF, SPY, XLY
by: David Fry

D Fry Market Outlook 14 06 2007

We live in interesting times if you like volatility. Theoretically strong retail sales and the Fed Beige Book should continue to drive bond prices lower, but program trading kicked-in heavily around 2 PM pushing stocks higher -- while bonds rallied just because they were oversold. Add to the latter some rumors of a large purchase of 30-year treasury bonds by an Asian investor... and away we went. [Even Asian buyers, already long a ton of U.S. bonds, need to defend their positions.]

D Fry Market Outlook 14 06 2007_001

D Fry Market Outlook 14 06 2007_002

D Fry Market Outlook 14 06 2007_003

D Fry Market Outlook 14 06 2007_004

D Fry Market Outlook 14 06 2007_005

D Fry Market Outlook 14 06 2007_006

Now, just where did all this buying firepower come from? According to the latest data, mutual funds are fully invested and "cash" poor. Greenspan? Well, he is getting some hefty fees and making market moving calls but... No, I think our friend robo-trader is still in charge led by Da Boyz and the trillions in hedge funds, illustrated in yesterday's post.

D Fry Market Outlook 14 06 2007_007

D Fry Market Outlook 14 06 2007_008

D Fry Market Outlook 14 06 2007_009

D Fry Market Outlook 14 06 2007_010

D Fry Market Outlook 14 06 2007_011

D Fry Market Outlook 14 06 2007_012

I could post a bunch more equity charts, but frankly folks most stock market sectors look the same. I said over the weekend that a successful week for bulls would be sideways. And this is exactly what we're getting so far -- just in a most volatile way. Just remember, "weekly" charts require some fortitude and patience, but given the intra-week volatility, sometimes it's best to take a long-term technical view.

Remember, Bernanke speaks Friday [by then anything he says might be anti-climatic]. We also have options expiry beginning late Thursday and ending Friday. Hold your collective breaths, because robo-trader loves these conditions.

Machines are in control of markets -- there can be no argument. It's a condition that has no prospect of changing for the foreseeable future.

Disclaimer: Among other issues the ETF Digest maintains long or short positions in: S&P 500 Index (NYSEARCA:SPY), streetTRACKS Gold Trust ETF (NYSEARCA:GLD), PowerShares DB Energy Fund (NYSEARCA:DBE), PowerShares DB Agriculture Fund (NYSEARCA:DBA), PowerShares DB Commodity Index Tracking Fund (NYSEARCA:DBC), iShares Trust FTSE-Xinhua China 25 Index Fund (NYSEARCA:FXI).