An Impromptu Q&A Session

 | Jan 30, 2013 | 7:40 AM EST  | Comments
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Stock quotes in this article:

DBC

,

EEM

Readers have recently sent me a number of queries multiple times -- so, for today's column, let's do a bit of a question-and-answer session.

The first question was about commodities. I have a strong tendency to be early in my calls but, if you'll recall, earlier this month I looked at corn, which I thought was quite overdue for a bounce. At the time I noted that, because commodities had suffered in 2012, it seemed everyone had extrapolated that to mean that the same would occur in 2013.

In that same piece I highlighted PowerShares DB Com Index Tracking Fund (DBC). At the time it was priced at $27.50, and it has only reached $28.15 at this point. But, as you can see, the chart is much more developed, with a base that folks can clearly see -- which is probably why I'm now getting questions about it! A breakout would measure to between $29 and $29.25.

DBC

This, of course, has led to questions on emerging markets. Prior to Tuesday's rally, iShares MSCI Emerging Markets Index (EEM) was down on the year, and had lagged badly. As it attempts to play catch-up, I'd encourage you to turn your attention to Brazil -- the base in the BRIC bloc (Brazil, Russia, India and China) that no one even mentions anymore. Apparently folks are too focused on Japan, China and Europe.

Remember, Brazil is set to host the Olympics in 2016, as well as the World Cup next year. While this isn't perfectly analogous, if you look at the Chinese market starting in 2005 -- three years prior to their Olympic Games hosting -- you'll see it was up at least fivefold. I don't expect that magnitude of a move in Brazil. But it does make you wonder why Brazil is getting so little attention, doesn't it?

There are many who would call the January action in iShares MSCI Brazil Index (EWZ) a cup-and-handle. I would just say that, if this fund can get up through $58, it'll constitute a breakout from a base. 

EWZ

Another question was on the Dow Jones Utility Average. I did not like the Utes up around 490 on their way to 500, but when they got to their target at 435 in late November and folks were anxious about the sector, I thought the index was due to bounce. It has now returned to resistance as it approaches 475-ish. I think that level should half this current rally, and that it will be difficult to get through that level without a correction.

Dow Jones Utility Average

 Finally, the question of the day was about the underperformance of the Russell 2000 relative to the S&P 500. Some think I am shocked at is that the ratio hasn't yet gotten down to 1.65. However, I would note that this does bear watching. Despite the rally over these last two weeks, the ratio itself stands where it had been Jan. 9, so the outperformance has slowed. A higher high in the ratio would be bearish.

Russell 2000 vs. S&P 500


 Overbought/Oversold Oscillator -- NYSE

 Overbought/Oversold Oscillator -- Nasdaq

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