Thursday Outlook: Sectors and International

by: David Fry

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Meanwhile back at reform school, the problem children remain a hard case:

Commodity markets tell one story -- inflation:

Finally, in the “fame is fleeting” department, the Fryguy took some lumps today but we’re still doing okay on the week. Why anyone would buy INP with a 20% premium is beyond me.

Things are getting strange. Are stocks cheap? No, since PEs are above historical averages. Can the major averages rally significantly with sectors like financials, real estate and the consumer in the dumps? It doesn’t seem likely. Can the consumer feel good about things with the dollar being trashed, living costs soaring and the value of their homes taking a haircut? Nope.

On the other side of the coin officialdom, SWFs, trading desks and even some hedge funds all have their shoulders to the wheel trying to pump markets higher and improve psychology. Taken together they’re a powerful force. Add-in Santa and we could just churn about until the New Year.

No one is very happy with the manner in which the Fed and others are communicating with the investing public. It gives rise to conspiracy theories alleging market manipulation and other nefarious practices.

Make no mistake about it; this is a day-traders market. Position traders are lucky to keep their positions and not get ripped apart while buy and hold investors are doing just fine as they hang tough thru stormy seas. Should conditions get worse even the latter group will feel pain.

We get some inflation data today and then next week is options and futures expiry. Then, as we witnessed Wednesday, there’s that pesky and unpredictable news cycle -- these factors should keep everyone on their toes.

Disclaimer: Among other issues the ETF Digest maintains positions in: IEF, DBC, DBA, UDN, GLD and [ahem] IFN.