Copper, metals miners and basic materials ETFs outshined the
market Monday on expectations the Federal Reserve will unleash
more economic stimulus when it meets on Thursday and Friday.
"This is what we would describe as an 'anticipated
conviction,' as was the anticipation of the Jackson Hole speech a
few weeks ago," said Ronald Lang, principal at Atlas Wealth
Management outside of Philadelphia. "Investors and traders are
waiting with full barrels loaded to trade in either direction,
based upon Bernanke's announcement. We expect significant
The poor August jobs report released Friday and labor force
participation rate hovering at 30-year lows calls for more Fed
intervention, says Randy Frederick, managing director of active
trading and derivatives at Charles Schwab.
"Get ready for QE3 (quantitative easing)," he wrote.
More QE, which is considered printing money, increases the
U.S. money supply, thereby devaluing the dollar, making goods
more expensive. A weaker dollar also makes U.S. exports more
IPath DJ-UBS Copper ETN (
) gapped up 1.28% Monday to 46.82, a new four-month high. It
followed through on Friday's high-volume rally when it broke
above its 200-day moving average to confirm a new uptrend, after
China announced a $157 billion infrastructure plan to spur
economic growth. Known as Dr. Copper, the red metal signals
whether the global economy is growing or shrinking as it's used
to make everything from consumer electronics to industrial
SPDR S&P Metals &
) climbed 1.32% to a four-month high of 44.29. It's rallied off
bottoming action and past resistance points, but it's still
trading below its 200-day line, which is bearish.
Materials Select Sector SPDR (
) rose 0.51% to a five-month peak, 37.14. It broke out of a
bullish, classic cup-with-handle pattern Friday. XLB is just
above a 36.73 buy point.
After booking their third-largest one-week rally of the year
last week, the major indexes treaded water in quiet trade while
holding near multiyear highs.
SPDR S&P 500
) ticked up 0.16%.
SPDR Dow Jones Industrial Average (
) shed 0.05%.
PowerShares QQQ (QQQ), tracking the 100 largest nonfinancial
stocks on the Nasdaq, fell 0.72%.
An analysis of the chart patterns and other technical
indicators leads Mark Arbeter, chief technical strategist at
S&P Capital IQ, to believe that the SPY will regain its 2007
high of 157.52, up 9% from current levels.
"Another arrow in the bull's quiver is the breakdown in the
U.S. Dollar Index," Arbeter wrote in his weekly technical report.
"In recent years, some of the best gains in stocks, as well as
commodities, have come during periods when the dollar was
falling, and we aren't going to argue with prior intermarket
PowerShares DB U.S.
Dollar Index Bullish (UUP) added 0.18% Monday after tumbling 1.3%
the week before.
IShares MSCI EAFE Index (EFA), tracking developed foreign
markets, fell 0.46%. It's trading near a four-month high and a
53.02 buy point in a bullish, cup-with-handle pattern.
IShares MSCI Emerging Markets Index (EEM) dropped 0.76%. It's
struggling to hold above its 200-day line.
Guild Investment Management sent out a notice to clients
Sunday recommending they buy EEM, which it sees benefiting from
coordinated economic stimulus from Europe, China and the U.S.
"The announcement of $157 billion of infrastructure spending
in China (which is the first of several major infrastructure and
monetary stimulus announcements that we expect from China)
provides a strong buy signal for China and a buy signal for some
countries that supply China," Monty Guild, chief investment
officer at Guild, wrote. "We are not raging bulls on Chinese
commodity demand, but it will be positive and should grow at
about 5% a year in the next five years."
"The very strong prospects for a QE from the U.S. give a
continuing buy signal for U.S. stocks," he added. "Continued QE
from Japan and other countries reinforces the buy signal for much
of the globe."
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