Fading Momentum: Dave's Daily

Some worry that interest rates are rising quickly steepening the yield curve which in turn rallies the dollar and hurts commodities.
By Dave Fry ,

FADING MOMENTUM WITHIN CROSSCURRENTS

Some worry that interest rates are rising quickly steepening the yield curve which in turn rallies the dollar and hurts commodities. Clearly, rising interest rates have always been the enemy of commodities especially when they rally the dollar. Politics are also in play as investors fret that congress won't pass the Obama deal made with republicans. That seems a little too short-term in thinking since next month republicans take charge of the agenda either way. So, investors are trying to come to an understanding of current conditions feeding sector rotation and a lack of resolve.

Copper has always been a measure of economic growth; hence the "Dr. Copper" nickname given the metals ability to forecast accurately. Copper prices are setting new highs and that indicates strong demand particularly from China where every economist worries about bubbles and economic dangers. But, I'll go with the good doctor.

We haven't gotten much in the way of economic data recently but that will change with Jobless Claims on Thursday as if anyone cares based on recent reactions to both a good or poor report.

The lack of conviction is reflected by another low volume trading day on Wednesday. Breadth was mixed.

Continue to U.S. Sectors, Stocks & Bonds

Continue to Currency & Commodity Markets

Continue to Overseas Markets & ETFs

The

NYMO

is a market breadth indicator that is based on the difference between the number of advancing and declining issues on the NYSE. When readings are +60/-60 markets are extended short-term.

The

McClellan Summation Index

is a long-term version of the McClellan Oscillator. It is a market breadth indicator, and interpretation is similar to that of the McClellan Oscillator, except that it is more suited to major trends. I believe readings of +1000/-1000 reveal markets as much extended.

The

VIX

is a widely used measure of market risk and is often referred to as the "investor fear gauge". Our own interpretation is highlighted in the chart above. The VIX measures the level of put option activity over a 30-day period. Greater buying of put options (protection) causes the index to rise.

Continue to Concluding Remarks

The light volume is troubling and investors seem to have sold much of the economic news from Tuesday. It may be many will hit the exits if congress doesn't pass the tax compromise since some will want to lock in their tax liability. It seems though once republicans take charge the tax issue will be resolved retroactively. But nothing is a sure thing so some may hit the exits anyway.

Higher interest rates will compete for investor's money and hurt commodity markets should this persist. It's a contradiction to what Bernanke & Co are doing. The bond vigilantes vs monetary policy is something to behold.

Thursday is Jobless Claims but I wonder if the report will carry any weight or make a difference to what's ahead.

December should be the best month for bulls but there's too many conflicting issues presently restraining enthusiasm.

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The charts and comments are only the author's view of market activity and aren't recommendations to buy or sell any security.  Market sectors and related ETFs are selected based on his opinion as to their importance in providing the viewer a comprehensive summary of market conditions for the featured period.  Chart annotations aren't predictive of any future market action rather they only demonstrate the author's opinion as to a range of possibilities going forward. More detailed information, including actionable alerts, are available to subscribers at

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This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

Dave Fry is founder and publisher of

ETF Digest

, Dave's Daily blog and the best-selling book author of

Create Your Own ETF Hedge Fund, A DIY Strategy for Private Wealth Management

, published by Wiley Finance in 2008. A detailed bio is here:

Dave Fry.

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