Your Daily Profit
June 29, 2009
*****As the News Cycle Turns
*****Correction for Commodities?
*****This Week’s Economic Data
The positive headlines are everywhere this morning.
On Bloomberg alone, we read that the worst is over for Treasury bonds, factory
output improved in Japan
for the second straight month and home values in England
remained stable for the second straight month.
It’s enough to make you think that there’s an
economic recovery underway…
Of course, the best news of all would be some price
stability for homes here in the U.S.
It appears that we’re close to that point.
*****The rally that began on March 10 was largely
about economic recovery. Or maybe it’s more accurate to say that the rally
began as investors surmised that the economy wasn’t getting worse and that a
complete financial meltdown had been averted.
But in the ultimate irony, now that we are about to
start the 3rd Quarter, you know, the quarter where actual growth is
expected to return to the U.S.
economy, traders are starting to question valuations, especially in the
Bloomberg reports that commodities rose 14% in the
2nd Quarter (April-June). Now, many expect prices for some
commodities to fall by as much as 30%. That’s because producers have expanded
supply and investors have bought with little regard for fundamentals.
*****Now as you know, I have been bullish on
commodities, especially oil. But that doesn’t mean that prices will make a
one-way move higher. Commodities are called “cyclical” for a reason.
In the good economic times prices rise as
production expands to meet demand. Once supply and demand reach some level of
parity, prices start to drop and producers reel in production.
The phrase “buy low, sell high” describes commodity
investing to a tee. I’ve advised my SmallCapInvestor PRO readers to take
some gains in oil stocks, but we’ll be looking to buy back at some point this
summer, because any price correction for oil and other commodities is all but
certain to be brief.
*****Now let’s have a look at the economic calendar
this week. Remember, the 4th of July is on Saturday this year
meaning the Federal government and the markets will be closed on Friday the 3rd.
Many will treat this day as a holiday, including yours truly.
Tomorrow, June 30th, we get Consumer
Confidence, The Chicago PMI
manufacturing survey and the Case-Schiller home price index for April.
Clearly, the home price index is the big one.
Expectations are that home prices fell another 18% in April. Any improvement
will be bullish, as home prices area integral to economic health.
Wednesday, July 1, we get construction spending,
the ISM Index, truck and auto sales, pending home sales and oil inventories.
Then, on Thursday, July 2, we get factory orders, initial
unemployment claims, factory orders, average workweek (a measure of
productivity), and the big one – non-farm payrolls.
Of course, it’s possible for payrolls and jobless
claims to expand at the same time. Traders will look to non-farm payrolls as an
indication that businesses expect better times ahead.
*****If you missed Jason Cimpl’s video chart
analysis on Friday, you missed a great discussion about a potential
head-and-shoulders pattern playing out on the Russell 3000. Here’s the LINK again if you want to watch it.
(Or go to trademasterstocks.com/videoreport/)
*****As always, please write and share your
thoughts and comments: firstname.lastname@example.org. I’ll talk to you tomorrow.
P.S. Over the weekend I sent
investors some information on dividend stocks and how to use them to shore up
your retirement funds (whether you’re already retired or it’s still some years
away). I’m following with my Top Stock Insights service. In case
you missed it, you can get that information HERE.
06-29-2009 11:48 AM