Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
Technical Analyst: Gold Price Weakness Should Be Short Term - 24th May 19
Silver Price Looking Weaker than Gold - 24th May 19
Nigel Farage's Brexit Party EU Elections Seats Results Forecast - 24th May 19
Powerful Signal from Gold GDX - 24th May 19
Eye Opening Currency Charts – Why Precious Metals Are Falling - 23rd May 19
Netflix Has 175 Days Left to Pull Off a Miracle… or It’s All Over - 23rd May 19
Capitalism Works, Ravenous Capitalism Doesn’t - 23rd May 19
The Euro Is Bidding Its Time: A Reversal at Hand? - 23rd May 19
Gold Demand Rose 7% in Q1 2019. A Launching Pad Higher for Gold? - 23rd May 19
Global Economic Tensions Translate Into Oil Price Volatility - 22nd May 19
The Coming Pension Crisis Is So Big That It’s a Problem for Everyone - 22nd May 19
Crude Oil, Hot Stocks, and Currencies – Markets III - 22nd May 19
The No.1 Energy Stock for 2019 - 22nd May 19
Brexit Party and Lib-Dems Pull Further Away from Labour and Tories in Latest Opinion Polls - 22nd May 19
The Deep State vs Donald Trump - US vs Them Part 2 - 21st May 19
Deep State & Financial Powers Worry about Alternative Currencies - 21st May 19
Gold’s Exciting Boredom - 21st May 19
Trade War Fears Again, Will Stocks Resume the Downtrend? - 21st May 19
Buffett Mistake Costs Him $4.3 Billion This Year—Here’s What Every Investor Can Learn from It - 21st May 19
Dow Stock Market Trend Forecast 2019 May Update - Video - 20th May 19
A Brief History of Financial Entropy - 20th May 19
Gold, MMT, Fiat Money Inflation In France - 20th May 19
WAR - Us versus Them Narrative - 20th May 19
US - Iran War Safe-haven Reasons to Own Gold - 20th May 19
How long does Google have to reference a website? - 20th May 19
Tory Leadership Contest - Will Michael Gove Stab Boris Johnson in the Back Again? - 19th May 19
Stock Market Counter-trend Rally - 19th May 19
Will Stock Market “Sell in May, Go Away” Lead to a Correction… or a Crash? - 19th May 19
US vs. Global Stocks Sector Rotation – What Next? Part 1 - 19th May 19
BrExit Party EarthQuake Could Win it 150 MP's at Next UK General Election! - 18th May 19
Dow Stock Market Trend Forecast 2019 May Update - 18th May 19
US Economy to Die a Traditional Death… Inflation Is Going to Move Higher - 18th May 19
Trump’s Trade War Is Good for These 3 Dividend Stocks - 18th May 19
GDX Gold Mining Stocks Fundamentals Update - 17th May 19
Stock Markets Rally Hard – Is The Volatility Move Over? - 17th May 19
The Use of Technical Analysis for Forex Traders - 17th May 19
Brexit Party Set to Storm EU Parliament Elections - Seats Forecast - 17th May 19
Is the Trade War a Catalyst for Gold? - 17th May 19
This Is a Recession Indicator No One Is Talking About—and It’s Flashing Red - 17th May 19
War! Good or Bad for Stocks? - 17th May 19
How Many Seats Will Brexit Party Win - EU Parliament Elections Forecast 2019 - 16th May 19
It’s Not Technology but the Fed That Is Taking Away Jobs - 16th May 19
Learn to Protect your Forex Trading Capital - 16th May 19
Gold Ratio Charts Offer The Keys to the Bull Market - 16th May 19
Is Someone Secretly Smashing the Stock Market at Night? - 16th May 19

Market Oracle FREE Newsletter

U.S. House Prices Analysis and Trend Forecast 2019 to 2021

How to Make Money on the Summer Stocks & Commodities Rally

Stock-Markets / Investing 2009 Jun 12, 2009 - 10:09 AM GMT

By: Uncommon_Wisdom

Stock-Markets

Best Financial Markets Analysis ArticleSean Brodrick writes: These are not normal markets — take what you know about how the market moves on fundamentals and throw them out the window, where they will probably drown in a flood of government money.

The government is spending so much money that, according to USA Today, taxpayers are on the hook for an extra $55,000 a household to cover rising federal commitments made just in the past year. That’s a rise of $6.8 trillion in new obligations in 2008 alone!


Yes, those debts will come due, and then there could be hell to pay. In the meantime, let’s look at what the government has bought us — all the ingredients for a sizzling summer rally.

Here are three signs that the market has higher to go, and this rally could last for some time …

Sign #1: The Bottom Is Falling Out of the Bond Market

The IEF (7-10 yr Treasury fun) broke support on high volume.

See this updated live at: http://stockcharts.com/h-sc/ui?s=IEF&p=W&b=5&g=0&id=p97978855999&a=170158252

Let’s not even talk about long-term bonds, and China’s sudden allergy to them. Let’s talk about the 7-10 year bond U.S. Treasuries market.

The middle part of the Treasury curve started rallying in mid-2007 when our financial system and economy hit the skids. During times of stress, investors seek safety, and we’re always told there is nothing safer than a U.S. Treasury bond.

However, this market started selling off in May, when the stock market started to rally. Indeed, riskier assets like stocks, high-grade corporate bonds and even junk bonds are all rallying. This tells us that investors are reallocating money into riskier assets.

Interestingly, President Obama’s budget calls for yields on the 10-year note to rise no higher than 5.25 percent in the next decade. This chart is saying it may not work out that way, and when Obama’s plans hit the rocky shoals of reality, that could throw the market for a loop. But that won’t be anytime soon.

How to play this move: The ProShares UltraShort Barclays 7-10 Year Treasury ETF (PST) aims to track twice the inverse of the move in mid-curve Treasuries.

Sign #2: HPQ Refuses to Die!

Last month, Hewlett-Packard (HPQ) missed badly when it reported second-quarter numbers. EPS tumbled to $0.70 in the latest quarter from $0.80 in the year-earlier period. PC sales dropped 19 percent, printer supplies dropped 23 percent, and the server and storage division dropped 28 percent.

Management’s guidance for upcoming quarters sounded like something written from a hospital burn unit. The stock swooned.

But then June came along. And HPQ rallied right its 200-day moving average. Money is pouring into this stock.

HPQ pushed above its 200-day moving average and is in an uptrend.

See this updated live at: http://stockcharts.com/..

Importantly, HPQ is a tech bellwether. It is the largest seller worldwide of personal computers, passing Dell’s sales in December.

Also, a large share of HPQ’s business is overseas; therefore, it is more likely than most to catch a rebound in emerging markets.

Because HPQ is a bellwether, it may lead the tech sector higher.

How to play this move: The iShares Dow Jones U.S. Technology Sector Index Fund (IYW) tracks the tech sector, and the ProShares Ultra Technology ETF (ROM) aims to track twice the movement of a basket of tech stocks.

Sign #3: Oil Isn’t the Only Commodity Going Higher

We have seen oil rally recently. Part of this is the anti-dollar trade — if there’s an international currency besides the U.S. dollar it’s oil because everyone uses oil.

The Chinese, even if they stop supporting the U.S. dollar, will still use oil. In fact, if you saw my notes for my Neil Cavuto appearance last week, they’re using a lot of it.

But it’s not just oil that is taking off. Take a look at a chart of the CCI Index. Like the better-known CRB Index, the CCI charts a broad basket of commodities. Unlike the CRB, which is heavily weighted toward energy, the CCI is equally weighted.

The CCI Index is above its 200-day moving average and poised for bigger move.

See this updated live at: http://stockcharts.com/..

As we can see from the chart, the CCI is breaking out to the upside. It is also above its 200-day moving average, and the 50-day moving average is above the 200-day moving average — an indication that the bullish intermediate trend is overwhelming the bearish longer-term trend.

This is the reflation trade in action. It points to a weaker dollar/higher commodity prices in the intermediate term. This, in turn, should be good for commodity stocks.

How to play this move: The iPath Dow Jones-AIG Commodity Index ETN (DJP) tracks a basket of 19 commodities, 36 percent in agriculture, 30 percent in metals and 34 percent in energy.

The PowerShares DB Commodity Double Long ETN (DYY) adds leverage to juice up to a target of twice the underlying commodity basket’s returns.

So we have a market where bonds are going down, a tech/market bellwether is going higher and commodities are reflating.

Yours for trading profits,

Sean

This investment news is brought to you by Uncommon Wisdom. Uncommon Wisdom is a free daily investment newsletter from Weiss Research analysts offering the latest investing news and financial insights for the stock market, precious metals, natural resources, Asian and South American markets. From time to time, the authors of Uncommon Wisdom also cover other topics they feel can contribute to making you healthy, wealthy and wise. To view archives or subscribe, visit http://www.uncommonwisdomdaily.com.

Uncommon Wisdom Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules