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Morning Cup of Jo: Volatility Has Likely Just Begun


Eye on the ball!


"Industry need not wish, and he that lives upon hopes will die fasting. There are no gains without pains …. If we are industrious, we shall never starve; for at the workingman's house hunger looks in, but dares not enter!"

--Benjamin Franklin

Market Comment:

Good morning. Buckle your seatbelts as the volatility has likely just begun. As predicted in last week's Jo the markets ended last week closing out the first quarter with nothing short of hurricane-like whipsaws from institutional investors. Interestingly enough, the first few days of the second quarter have presented the same choppiness. However, these whipsaws have not yet provided any significant technical change in the market's condition.

On Friday of this week we will get a peek at the employment picture and "The Mother of All" economic reports: March non-farm payrolls with the consensus looking for 190K / 253K for the prior. For now the Treasury and oil markets seem to be dominating the daily headlines. More importantly, we're just now entering the earnings season for Q2. With the strength in the U.S. economy over the last three months we don't expect too many disappointments. However, the driving factor will remain the guidance corporations put forth for the remainder of the year.

As many Bears (and some Bulls) become more concerned about the U.S. stock markets' ability to provide adequate performance, they are turning to alternative investments within the global markets. For example, the I-shares MSCI Emerging Markets ETF (EEM). This ETF is an emerging markets index managed by Barclays Global and holds around 200 securities, including both as ADR's and GDR's (American and Global Depositary Receipts), and provides exposure to about 20 global equity markets including South Korea, South Africa, Brazil and Taiwan. The performance this year has been nothing short of astonishing and just now broke out of another consolidation base. Let's take a look…

Click chart for larger image:

In July of 2005 the EEM broke out of a cup and handle base, re-tested in October and has since continued on an upward trend. Since January it has formed a second tier base called a double bottom with a handle. It busted through the neckline, with massive accumulation volume, on the first day of this new quarter.

Opportunities such as this one seem to be the focus of many managers given the concern about interest rate movements, inflation and corresponding economic growth. For those sharing similar uncertainty, keep your eyes wide open as there are many possibilities to consider.

Good luck & until next time…


No positions in stocks mentioned.

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