Random Thoughts on this Market

The market is in a strange position. The Federal Reserve took action against the odds and provided aggressive stimulus for a boost to the economy. It is what investors/markets were crying for. The feel or sentiment of these same investors/markets is more of what now, than how it will impact specific sectors or stocks. In fact, it seems less confident this week than last week prior to the announcement. Maybe with the distraction of stimulus removed the reality of where the current global economy resides is sinking in? This is something I will be watching as we move towards the fourth quarter and studying the data points for improvement or disappointment.

The Bernanke theme song, spend and the whole world spends with you, seems to be working. There is more stimulus, this time from Japan. They plan to add $120 billion to their asset purchase plan as they follow others into the free money pit. The news is helping Asian markets move higher today. Watch for a break above key resistance points in Japan (EWJ) and China (FXI), it could produce another stimulus breakout. China announced several weeks ago they are providing stimulus in the form of infrastructure, building up their transportation system. Hong Kong (EWH) and Singapore (EWS) have already made the move higher, but have been testing the move. Look for the news to help push both ETFs back towards there recent highs.

Federal Express missed earnings, as they announced several weeks ago they would. The stock fell more than 3% on Tuesday, but the real news was in their comments relative to the forward guidance. They were very clear in stating the current weakness in the global markets. Obviously they have not read about the stimulus designed to change all of that! This is the reality currently for the global economies and eventually that reality will get priced into stocks. Fedex is down 5% off the July highs and more than 10% off the March highs. The chart of IYT, iShares Transportation Index ETF looks very similar relative to performance and gradual downtrend. The transportation stocks are a good indicator for the economic picture overall.

Precious metals continue to drive higher. Gold has hit a six month higher and silver has gone along for the ride. Stimulus and renewed inflation concerns are driving the price higher. If we have any fear injected from the sovereign debt markets it will only climb higher. Looking at¬†the chart of SLV, iShres Silver Trust ETF shows the vertical move in the metal. GLD, SPDR Gold Trust ETF has been equally impressive. The first thought is tighten your stop, and second is how high can this really go? The mining ETFs for gold (GDX) and silver (SIL) have been equally impressive. Beware of a test or pullback in prices, but look for the opportunity in any short term move down. On the upside manage your risk accordingly. IF you don’t own these metals don’t chase prices it generally doesn’t end well.

Not to be political, but Obama has widened his lead on Romney is recent polls. I understand the election is still six plus weeks  away and plenty can happen, but Wall Street is starting to believe he will win, and that brings speculation into the investment prognosis. Look at the healthcare sector as an example. It finally made a move above $39 resistance level on SPDR Healthcare ETF, and we saw an equally impressive turnaround in the healthcare providers (IHF) and medical devices (IHI). As we move closer to the election I will be looking for the opportunities in the projected outcome. After all I may need the gains to pay the additional taxes due on investing and making money.

Overall the market is good shape, but we have to get through the what’s next mentality. This remains a news driven and stmulus focused market. We have mange our risk, adjust to any sentiment shifts and dig for the opporutnities on the horizon.