A FEW BULLS CHARGE OUT OF THE GATE It was an impressive ramp to start 2011 wasn't it? Inside the numbers there was again little volume. Markets are now much overbought and this low volume is worrisome as a cascade of heavy volume will no doubt appear from the sell-side as long as this continues. There was another round of POMO (nearly $8 billion) Monday to start the year which helps trading desks facilitate what the Fed wants -- higher stock prices. Of course the story making the biggest splash was Goldman Sachs wanting a piece of Facebook which would push the value of the company to $50 billion. Also, BAC settled some outstanding issues with FNM to the tune of $2 billion. Taken together this pushed the financial sector higher. Most economic news Monday like ISM Data was generally as expected, but higher prices in Europe spilled over early to New York. Most bulls believe a growing economy is in the works which should lead to better earnings and stock prices. That's the story, and bulls are sticking to it. The Interior Department will allow some deepwater drilling to resume oddly coincided with some selling in commodity markets, especially precious metals. But, the dollar was also somewhat stronger which would usually cause a decline. From the WSJ, volume was light and breadth quite positive. Continue to Base Metals
A LOOK AT BASE METALS Mixing things up a bit from the usual Dave's Daily format, especially on a ramped and camped day, we'll be featuring some occasional theme posts intraweek. With global economic growth expanding, particularly in emerging markets, this increases demand for raw materials including base metals. Demand from China naturally is the primary force but the world only has so much at hand. You can't an start a mine at the drop of a hat or even increase production dramatically from existing sources. Therefore, as economic growth expands from new and existing sources these materials prices may expand dramatically in the future. Again, when base metals prices are strong, it indicates stronger economic growth ahead. China has been at the forefront of demand while other countries like Brazil, Australia, Canada, Chile and others provide the supply. Many ETPs offer exposure to these sectors either as a group or individually. The latter has been the next logical step where commodity ETPs is heading. Some precious metals like platinum, palladium and silver also crossover into the industrial base metals sector. We'll save those for another day. Let's see what happens. You can follow our pithy comments on twitter and become a fan of ETF Digest on facebook. Disclaimer: Among other issues the ETF Digest maintains positions in: SPY, XLF, DBB, JJC, ECH and XME. 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 www.etfdigest.com .