Wednesday, August 27, 2008
Global Market Monitor Moved
The Global Market Monitor is now located on the Dightman Capital Group website. You can access it here: http://dightmancapital.com/blogs/globalmarketmonitor/default.aspx
Friday, May 2, 2008
Temporarily Conflicted
As an investment manager, I am constantly monitoring multiple data points in my decision making process. There is no such thing as a perfect investment environment. When risk management is a good part of your job, there is always some piece of information to sway your decision. I remember when Operation Iraqi Freedom launched in the middle of March, 2003. U.S. markets had seen 3 years of bear market declines and many investors were in no mood to talk about stocks, still suffering from brutal declines in their wealth. The stock market, however, had been rallying for months and combined with other economic develops underway at the time, I encouraged clients to get into stocks. 2003 turned out to be a great year for stock investors.
I believe in highly diversified portfolios. There’s a never ending set of variables to consider when managing portfolios and diversification helps you maintain exposure in an often conflicting environment. Investors can't afford to go completely to cash when the environment gets ugly. But I do think you can over and underweight different asset classes to create a more offensive and defensive position to accommodate market conditions. At present, I have incorporated a defensive bias in many portfolios, which has worked well in the most recent market downturn.
Since mid-March the markets have rallied and I must now re-evaluate my exposure to U.S. stocks. After yesterdays big run I considered adding the NASDAQ 100 to some portfolios. Compared to the S&P 500 and DJ 30, the NASDAQ 100 has seen more trading above its average volume on up days and very little increased selling on down days since the rally started over a month ago. It includes many global companies, (Apple, Microsoft, Google, Cisco, Intel, and Oracle). Outside of information technology, which represents around 64% of the index, it includes health care (14%), consumer discretionary (13%), Industrials (5%), and a small allocation to a few other industries. The NASDAQ 100 has also performed on par with emerging market stocks since the rally kicked off in March.
The challenge is determining if the current rally is sustainable or simply a rally within a market headed for more declines. To finalize my decision I reviewed the current climate and what do you know, the Fed came out with a brand new liquidity program to help banks (you mean they need more help? Isn't everything all rosy now that they have written down some debt and raised liquidity with new financing?). The Fed is now willing to take credit card and auto loans as collateral for Treasuries in an effort to expand liquidity. The Fed even convinced the European Central Bank and the Swiss National Bank to joint in. Sounds like a party, but it points to a very serious problem facing world markets. For more details see the following MarketWatch article. Banks are still holding troubled debt and as a result they are unwilling to make loans to each other. I have posted on the trouble with the TED Spread previously and the latest action by world monetary authorities is targeted at that specific problem. A low interest rate environment by itself does little to stimulate the economy. The economy needs a vibrant loan market so businesses and consumers (mostly consumers) can spend money (isn’t that what got us into this problem to begin with?) which helps drive corporate profits. Which brings me to another important concern: corporate profits (as measured by Y/Y % change) have been very strong over the last 5 years and are considered by many analysts to be at unsustainable levels. Q1 '08 earnings were far from a disaster and international strength helped many companies turn in reasonably good numbers, but profit growth remains in negative territory, a trend started in Q3 ’07. At current valuations, the expectations for profit growth are considered by some to be lofty. If the current profit slowdown in financials spreads to other industries, it is going to be hard for stocks to maintain current valuations. Of course, globalization may help U.S. corporations deliver positive profit growth later in ’08, as many expect. Even so, it is not uncommon for stock prices to lag profit increases, as we saw 2002-2003 for 5 straight quarters. In 2006-2007, we saw the exact opposite: growth in stock prices exceed profit growth for 5 straight quarters.
It is hard to watch the NASDAQ 100 move over 18% (since March 10th through today’s close) and not feel like better days are right around the corner for U.S. stocks. After my review, however, I feel as through there are more obstacles to over come then sustainable drivers that can push stocks higher. I would not be surprised if short covering has helped facilitate the current rally and I continue to remain cautious on U.S. stocks.
I believe in highly diversified portfolios. There’s a never ending set of variables to consider when managing portfolios and diversification helps you maintain exposure in an often conflicting environment. Investors can't afford to go completely to cash when the environment gets ugly. But I do think you can over and underweight different asset classes to create a more offensive and defensive position to accommodate market conditions. At present, I have incorporated a defensive bias in many portfolios, which has worked well in the most recent market downturn.
Since mid-March the markets have rallied and I must now re-evaluate my exposure to U.S. stocks. After yesterdays big run I considered adding the NASDAQ 100 to some portfolios. Compared to the S&P 500 and DJ 30, the NASDAQ 100 has seen more trading above its average volume on up days and very little increased selling on down days since the rally started over a month ago. It includes many global companies, (Apple, Microsoft, Google, Cisco, Intel, and Oracle). Outside of information technology, which represents around 64% of the index, it includes health care (14%), consumer discretionary (13%), Industrials (5%), and a small allocation to a few other industries. The NASDAQ 100 has also performed on par with emerging market stocks since the rally kicked off in March.
The challenge is determining if the current rally is sustainable or simply a rally within a market headed for more declines. To finalize my decision I reviewed the current climate and what do you know, the Fed came out with a brand new liquidity program to help banks (you mean they need more help? Isn't everything all rosy now that they have written down some debt and raised liquidity with new financing?). The Fed is now willing to take credit card and auto loans as collateral for Treasuries in an effort to expand liquidity. The Fed even convinced the European Central Bank and the Swiss National Bank to joint in. Sounds like a party, but it points to a very serious problem facing world markets. For more details see the following MarketWatch article. Banks are still holding troubled debt and as a result they are unwilling to make loans to each other. I have posted on the trouble with the TED Spread previously and the latest action by world monetary authorities is targeted at that specific problem. A low interest rate environment by itself does little to stimulate the economy. The economy needs a vibrant loan market so businesses and consumers (mostly consumers) can spend money (isn’t that what got us into this problem to begin with?) which helps drive corporate profits. Which brings me to another important concern: corporate profits (as measured by Y/Y % change) have been very strong over the last 5 years and are considered by many analysts to be at unsustainable levels. Q1 '08 earnings were far from a disaster and international strength helped many companies turn in reasonably good numbers, but profit growth remains in negative territory, a trend started in Q3 ’07. At current valuations, the expectations for profit growth are considered by some to be lofty. If the current profit slowdown in financials spreads to other industries, it is going to be hard for stocks to maintain current valuations. Of course, globalization may help U.S. corporations deliver positive profit growth later in ’08, as many expect. Even so, it is not uncommon for stock prices to lag profit increases, as we saw 2002-2003 for 5 straight quarters. In 2006-2007, we saw the exact opposite: growth in stock prices exceed profit growth for 5 straight quarters.
It is hard to watch the NASDAQ 100 move over 18% (since March 10th through today’s close) and not feel like better days are right around the corner for U.S. stocks. After my review, however, I feel as through there are more obstacles to over come then sustainable drivers that can push stocks higher. I would not be surprised if short covering has helped facilitate the current rally and I continue to remain cautious on U.S. stocks.
Tuesday, April 29, 2008
Q1 Earnings
By the end of last week just over half of the companies in the S&P 500 reported earnings and so far Q1 profits are expected to fall around 14%. Not good, but better than the 24% decline we saw in Q4 ‘07. On a positive note, companies from the energy, technology, and industrial sectors are reporting the biggest profit increase for Q1, and if you take out the financial sector, profits are actually expected to be up around 8.6%. Firms with a strong international presence are also benefiting from overseas growth and a weak dollar.
Some in the media are proclaiming the worst in the credit crisis induced market sell-off is behind us, but with only $250 billion of an expected $1 trillion (courtesy of the IMF) in sub-prime write-offs behind us, more bad news form the credit market is likely. We may never hear about many of the write-downs held at pension funds and sovereign wealth funds but more debt downgrades from the rating agencies are likely to hit the banking sector. More telling, there is little evidence banks have started lending to each other again as LIBOR rates jumped up around 20 basis points in the last week moving the TED SPREAD further into negative territory.
On top of credit market issues, a deflating residential real estate market and higher energy and food prices have the U.S. consumer in a foul mood. Confidenced readings are very very low.
It is hard to imagine stocks advancing much from this level but there may be a few pockets of opportunity.
Ongoing globalization may be able to help deliver some positive returns in 2008. Raw material demands from emerging markets have put pressure on commodity prices and some of the industries closely associated with commodities (agriculture, mining, energy) are experiencing a favorable business climate as a result. But the commodity price link between these investments can introduce an additional element of risk and a global economic slowdown would likely reduce demand for raw materials. Also, the pricing pressure for food and energy cost are likely to send inflation numbers higher globally, eroding real returns.
One commodity that is under pressure is gold. It continues to decline from its March sell-off, on a strengthening dollar and increased risk appetites by investors.
When comparing international stocks with U.S. stocks in the short term, the Vanguard Total Market Index (VTI) for the U.S. has declined 10.19% from the October 2007 highs while the Vanguard All World Ex-US (VEU) is down only 8.18% during the same period. Interestingly, since the March ’08 bottom the VTI is up 9.52% while the VEU is up 11.41%. Below is a one year chart of the two indexes.
With emerging countries strengthening their economies and instituting improved financial systems, it is possible a U.S. slowdown will have a smaller effect on other parts of the world.
As is usually the case, there is conflicting data to contend with in terms of investment opportunities. Given uncertainty in credit markets, the real estate and economic slowdown in the U.S., and the grumpy U.S. consumer, I believe a defensive bias in portfolios has merit.
Some in the media are proclaiming the worst in the credit crisis induced market sell-off is behind us, but with only $250 billion of an expected $1 trillion (courtesy of the IMF) in sub-prime write-offs behind us, more bad news form the credit market is likely. We may never hear about many of the write-downs held at pension funds and sovereign wealth funds but more debt downgrades from the rating agencies are likely to hit the banking sector. More telling, there is little evidence banks have started lending to each other again as LIBOR rates jumped up around 20 basis points in the last week moving the TED SPREAD further into negative territory.
On top of credit market issues, a deflating residential real estate market and higher energy and food prices have the U.S. consumer in a foul mood. Confidenced readings are very very low.
It is hard to imagine stocks advancing much from this level but there may be a few pockets of opportunity.
Ongoing globalization may be able to help deliver some positive returns in 2008. Raw material demands from emerging markets have put pressure on commodity prices and some of the industries closely associated with commodities (agriculture, mining, energy) are experiencing a favorable business climate as a result. But the commodity price link between these investments can introduce an additional element of risk and a global economic slowdown would likely reduce demand for raw materials. Also, the pricing pressure for food and energy cost are likely to send inflation numbers higher globally, eroding real returns.
One commodity that is under pressure is gold. It continues to decline from its March sell-off, on a strengthening dollar and increased risk appetites by investors.
When comparing international stocks with U.S. stocks in the short term, the Vanguard Total Market Index (VTI) for the U.S. has declined 10.19% from the October 2007 highs while the Vanguard All World Ex-US (VEU) is down only 8.18% during the same period. Interestingly, since the March ’08 bottom the VTI is up 9.52% while the VEU is up 11.41%. Below is a one year chart of the two indexes.
With emerging countries strengthening their economies and instituting improved financial systems, it is possible a U.S. slowdown will have a smaller effect on other parts of the world.
As is usually the case, there is conflicting data to contend with in terms of investment opportunities. Given uncertainty in credit markets, the real estate and economic slowdown in the U.S., and the grumpy U.S. consumer, I believe a defensive bias in portfolios has merit.
Saturday, April 19, 2008
Stocks Take The Lead
World Markets
Stocks asserted their leadership over other asset classes during the past week gaining just over 4%, as measured by the S&P 500. Last week also saw the DJ-30 and NASDAQ break through resistance levels; the S&P 500 and NYSE have yet to do so. U.S. stocks saw several market leaders emerge, a positive development. Volume did pick up but still came in below average.
U.S. REITs turned in a strong performance followed by stocks in emerging and other developed countries. IBD reported the Shanghai Index is down 41% so far in '08 and 49% since October '07 highs, possibly presenting an opportunity for patient investors. Commodities also saw small gains, bonds fell for the week.
This coming week a broader representation and larger number of companies will report earnings. MarketWatch reported the overall earnings outlook has only weakened slightly from a 14.1% decline to a 14.6% with 157 companies from the S&P 500 having reported. Companies with a larger percentage of business overseas are benefiting, as expected, from a weak dollar and stronger economies internationally.
World Economy
A slightly better than expected report from U.S. retailers was followed by weak reports from manufacturers and the housing market. Industrial production in the Euro Zone appears to be holding but the ECB warned a slowdown could be coming. The WTO expects world trade growth will slow to a 6-year low of 4.5% in ’08, versus 5.5% in ’07 and 8.5% in ’06. LIBOR rates spiked mid-week causing the spread between LIBOR and Treasuries to widen, a sign of continued tight lending conditions between banks.
Inflation Data
Higher wages in the Euro Zone has the ECB on inflation alert. In the U.S. producer prices jumped 1.1% in March, double forecast. Core inflation hit 2.7%, its highest level in nearly 3 years. Still, the Economic Cycle Research Institute reading on future inflation continues to signal we are in an inflationary cycle downturn.
Summary
At this point we have an intermediate term rally underway. It remains to be seen whether it can mature into the start of a new bull market for U.S. stocks. For a nice combined market/economic summary, check out this story on MarketWatch, Five signs the market has bottomed.
Stocks asserted their leadership over other asset classes during the past week gaining just over 4%, as measured by the S&P 500. Last week also saw the DJ-30 and NASDAQ break through resistance levels; the S&P 500 and NYSE have yet to do so. U.S. stocks saw several market leaders emerge, a positive development. Volume did pick up but still came in below average.
U.S. REITs turned in a strong performance followed by stocks in emerging and other developed countries. IBD reported the Shanghai Index is down 41% so far in '08 and 49% since October '07 highs, possibly presenting an opportunity for patient investors. Commodities also saw small gains, bonds fell for the week.
This coming week a broader representation and larger number of companies will report earnings. MarketWatch reported the overall earnings outlook has only weakened slightly from a 14.1% decline to a 14.6% with 157 companies from the S&P 500 having reported. Companies with a larger percentage of business overseas are benefiting, as expected, from a weak dollar and stronger economies internationally.
World Economy
A slightly better than expected report from U.S. retailers was followed by weak reports from manufacturers and the housing market. Industrial production in the Euro Zone appears to be holding but the ECB warned a slowdown could be coming. The WTO expects world trade growth will slow to a 6-year low of 4.5% in ’08, versus 5.5% in ’07 and 8.5% in ’06. LIBOR rates spiked mid-week causing the spread between LIBOR and Treasuries to widen, a sign of continued tight lending conditions between banks.
Inflation Data
Higher wages in the Euro Zone has the ECB on inflation alert. In the U.S. producer prices jumped 1.1% in March, double forecast. Core inflation hit 2.7%, its highest level in nearly 3 years. Still, the Economic Cycle Research Institute reading on future inflation continues to signal we are in an inflationary cycle downturn.
Summary
At this point we have an intermediate term rally underway. It remains to be seen whether it can mature into the start of a new bull market for U.S. stocks. For a nice combined market/economic summary, check out this story on MarketWatch, Five signs the market has bottomed.
Monday, April 7, 2008
Without Conviction
I mentioned that last week's divergent development may represent a positive tone for stocks, which by chance, played out. Stocks surged on Tuesday and held higher ground for the balance of the week. Some stock investors appear to believe the worst of the credit mess is behind us and any U.S. recession will be mild.
World Market Summary
U.S. stocks turned in a good performance for the week with the S&P 500 delivering a 4.2% gain. The NASDAQ 100 was the big winner for broad indexes, up 5.56%. REITs also performed well adding 6.99%. Emerging country stocks added 5.37% and international developed country stocks were up 4.41%.
Top sectors included current leaders Metals & Mining and Steel. Home builders also topped the list up 57% (that not a typo, check out ITB) since early January 2008 but is still down 50% from January 2007 highs. International sectors were led by finance, up 6.82% and materials, up 5.67%.
Asian and Latin America countries continue to represent the top performing emerging markets and Australia followed by Italy and U.K. topped developed countries.
Price action for stocks was constructive during the week. Stock leadership broaden and more successful breakouts materialized, both positive developments. However, volume has been lighter than average over the last two weeks. By comparison, the early 2003 market recovery shows a much higher level of market activity. The market is trying to tell us we have heard the worst from big banks and any U.S. recession will be shallow; but not convincingly.
World Economy Summary
U.S. manufacturing continues to be weak, unemployment is up, and retail sales are down. We are hearing more frequently from international monetary authorities regarding their concerns about inflation. Big banks continue to work through credit related issues and Lehman Brothers did successfully raised $4 billion in new capital but the TED SPREAD (3-month T-Bill – LIBOR) only narrowed a bit during the week as banks continue to be hold their cash.
Is The Worst Over?
During the next couple of weeks we are going to have a much better picture of how the current credit conditions, slowing economy, and rising commodity prices are impacting corporate earnings. Earnings season officially kicks off today and by the end of next week a good portion of the warnings should be issued. By some P/E estimates stocks are no bargain, even at current prices.
By most accounts we can expect more large credit-write downs from banks in the coming quarters.
It is entirely possible the worst of the market decline is behind us but mini-rallies in correcting markets are part of the process.
World Market Summary
U.S. stocks turned in a good performance for the week with the S&P 500 delivering a 4.2% gain. The NASDAQ 100 was the big winner for broad indexes, up 5.56%. REITs also performed well adding 6.99%. Emerging country stocks added 5.37% and international developed country stocks were up 4.41%.
Top sectors included current leaders Metals & Mining and Steel. Home builders also topped the list up 57% (that not a typo, check out ITB) since early January 2008 but is still down 50% from January 2007 highs. International sectors were led by finance, up 6.82% and materials, up 5.67%.
Asian and Latin America countries continue to represent the top performing emerging markets and Australia followed by Italy and U.K. topped developed countries.
Price action for stocks was constructive during the week. Stock leadership broaden and more successful breakouts materialized, both positive developments. However, volume has been lighter than average over the last two weeks. By comparison, the early 2003 market recovery shows a much higher level of market activity. The market is trying to tell us we have heard the worst from big banks and any U.S. recession will be shallow; but not convincingly.
World Economy Summary
U.S. manufacturing continues to be weak, unemployment is up, and retail sales are down. We are hearing more frequently from international monetary authorities regarding their concerns about inflation. Big banks continue to work through credit related issues and Lehman Brothers did successfully raised $4 billion in new capital but the TED SPREAD (3-month T-Bill – LIBOR) only narrowed a bit during the week as banks continue to be hold their cash.
Is The Worst Over?
During the next couple of weeks we are going to have a much better picture of how the current credit conditions, slowing economy, and rising commodity prices are impacting corporate earnings. Earnings season officially kicks off today and by the end of next week a good portion of the warnings should be issued. By some P/E estimates stocks are no bargain, even at current prices.
By most accounts we can expect more large credit-write downs from banks in the coming quarters.
It is entirely possible the worst of the market decline is behind us but mini-rallies in correcting markets are part of the process.
Monday, March 31, 2008
Divergent Developments
In the current market environment you would not expect growth oriented companies to lead the market, but that is exactly what happened last week. And there we other divergences as well. It will take more time for this development to offer a clearer picture of what future direction the market may take, but along with other underlying characteristics, I chalk it up to a positive development.
Let’s start off with growth oriented stocks which outperformed broad US indexes. I first noted in IBD's Big Picture the IBD 100 turned in a weekly performance of 2.7% while the S&P 500 was down -1.07%. Looking into the situation further, all of the following growth oriented ETFs outperformed the S&P 500 last week.
Powershares DWA Technical Leaders
Powershares Value Line Timelines Select
Powershares Aggressive Growth Portfolio
First Trust IPOX-100
Several small-cap growth indexes also led the market.
In general volume was heavier early in the week where most of the gains were made and then tapered off as the gains were consolidated on Thursday and Friday. Overall, however, in terms of price action most U.S. broad indexes have not been able to break resistance levels on the upside.
There was even more of a divergence globally with several European countries turning in strong performances for the week followed by Japan. In addition, International Small Cap was up 4.77% for the week and has trended higher since hitting lows in January (unlike the S&P 500 which hit lows in March). Compared with the U.S., trading action in leading countries has exhibited more of a slightly upward bias since the bottom in January.
In terms of individual countries, China turned in a strong performance with the Powershares Golden Dragon Halter index up 9.93% for the week. India followed closely behind. If the price levels hold, China may have found a bottom.
In terms of regional performance, Asia was the strongest followed by Europe and Latin America.
In the fixed income market we saw a bit of a rally in the Powershares High Yield Corporate Bond Portfolio up 1.24% for the week followed by the SPDR Lehman International Treasury Bond Fund, up 1.13%.
We saw a broad recovery in commodities during the week with the Market Vectors Coal taking the top prize, up 10.92% followed by gains in base metals, natural gas, silver and metals & mining. Broad commodities as represented by the Powershares DB Commodity Index were up 4.56%. If you don't understand the role commodities can play in a portfolio, it is worth understanding. Besides what commodities can do for your IRA, owning a commodity index has the potential to make going to the gas station or grocery store a less painful pocketbook experience.
In terms of domestic industry performance, Oil & Gas related industries turned in 7 of the 10 top spots for the week. The other top three were represented by the metal & miners as well as Agribusiness.
The market experienced some positive developments during the week which may turn out to help confirm strength in the rally started on March 11th but so far we seem to be stuck in a trading range.
At present, portfolios at Dightman Capital are underweight stocks, overweight cash and inflation protected securities, and moving to an overweight in alterntive investments including commodities.
Let’s start off with growth oriented stocks which outperformed broad US indexes. I first noted in IBD's Big Picture the IBD 100 turned in a weekly performance of 2.7% while the S&P 500 was down -1.07%. Looking into the situation further, all of the following growth oriented ETFs outperformed the S&P 500 last week.
Powershares DWA Technical Leaders
Powershares Value Line Timelines Select
Powershares Aggressive Growth Portfolio
First Trust IPOX-100
Several small-cap growth indexes also led the market.
In general volume was heavier early in the week where most of the gains were made and then tapered off as the gains were consolidated on Thursday and Friday. Overall, however, in terms of price action most U.S. broad indexes have not been able to break resistance levels on the upside.
There was even more of a divergence globally with several European countries turning in strong performances for the week followed by Japan. In addition, International Small Cap was up 4.77% for the week and has trended higher since hitting lows in January (unlike the S&P 500 which hit lows in March). Compared with the U.S., trading action in leading countries has exhibited more of a slightly upward bias since the bottom in January.
In terms of individual countries, China turned in a strong performance with the Powershares Golden Dragon Halter index up 9.93% for the week. India followed closely behind. If the price levels hold, China may have found a bottom.
In terms of regional performance, Asia was the strongest followed by Europe and Latin America.
In the fixed income market we saw a bit of a rally in the Powershares High Yield Corporate Bond Portfolio up 1.24% for the week followed by the SPDR Lehman International Treasury Bond Fund, up 1.13%.
We saw a broad recovery in commodities during the week with the Market Vectors Coal taking the top prize, up 10.92% followed by gains in base metals, natural gas, silver and metals & mining. Broad commodities as represented by the Powershares DB Commodity Index were up 4.56%. If you don't understand the role commodities can play in a portfolio, it is worth understanding. Besides what commodities can do for your IRA, owning a commodity index has the potential to make going to the gas station or grocery store a less painful pocketbook experience.
In terms of domestic industry performance, Oil & Gas related industries turned in 7 of the 10 top spots for the week. The other top three were represented by the metal & miners as well as Agribusiness.
The market experienced some positive developments during the week which may turn out to help confirm strength in the rally started on March 11th but so far we seem to be stuck in a trading range.
At present, portfolios at Dightman Capital are underweight stocks, overweight cash and inflation protected securities, and moving to an overweight in alterntive investments including commodities.
Saturday, March 15, 2008
Playing Defense
Even after Friday’s sell-off the S&P only closed down 0.40% for the week. We are still above the March 10th low and volume didn’t surge on Friday in response to the Bear Stearns warning. Tuesday’s massive rally attempt is till intact, but it won’t take much to undercut it. Should additional bearish action develop there may still be an opportunity to move into a more defensive position with portfolios but most of the work has been done.
Bonds, manage futures and commodities have served well in the most recent market declines as indicated in the following 6 month charts.
The first chart illustrates:
The second chart illustrates:
Hard assets continue to look attractive but some fundamental concerns exist with crude oil and agriculture. Supply and demand measures do not appear to support $110 a barrel crude oil and the ethanol effect on agriculture prices will develop over the years as production techniques improve.
Bonds, manage futures and commodities have served well in the most recent market declines as indicated in the following 6 month charts.
The first chart illustrates:
BWX - International Bonds (Blue)
AGG - Aggregate U.S. Bonds (Red)
^GSPC - S&P 500 (Green)
AGG - Aggregate U.S. Bonds (Red)
^GSPC - S&P 500 (Green)
The second chart illustrates:DBC - PowerShares DB Commodity (Red)
RYMFX - Rydex Managed Futures (Blue)
^GSPC - S&P 500 (Green)
RYMFX - Rydex Managed Futures (Blue)
^GSPC - S&P 500 (Green)
Hard assets continue to look attractive but some fundamental concerns exist with crude oil and agriculture. Supply and demand measures do not appear to support $110 a barrel crude oil and the ethanol effect on agriculture prices will develop over the years as production techniques improve.A positive development; sentiment has turn bearish, as measured by Investors Intelligence newsletter survey, as the number of bullish writers crashed and bears surged. When more newsletters are bearish then bullish, market bottoms usually follow, but it can take weeks, even months to materialize.
One element that is missing from today’s market is individual stock leadership. The price volume action of stocks with strong fundamentals continues to be a concern.
One element that is missing from today’s market is individual stock leadership. The price volume action of stocks with strong fundamentals continues to be a concern.
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