WSW Tuesday, September 15, 2009

If you are expecting global warming stuff, it’s here:

https://chiefio.wordpress.com/category/agw-and-gistemp-issues/

With a more specific look at GIStemp here:

https://chiefio.wordpress.com/gistemp/

This posting is about the other thing I do, looking at investment markets.

Daily Notes

17 September 2009:

On “Fast Money” on CNBC one of the guests pointed out that the S&P 500 is 20% above the 200 day moving average line and that when that has happened a strong “correction” has usually followed. I tend to agree (reversion to the mean does happen) but it is the ‘when’ that is hard to figure out. Put stop loss orders behind positions you have trouble timing for sell. I’m going to be “nervous” for the next week or two…

16 September 2009: I’ve lightened some positions (a mixture of needing some cash for kids tuition and car repairs; along with a desire to have ‘settled cash’ ready for after options expiration). It is worth realizing that options expire this Friday. That is often a volatile day and it gives a ‘tell’ about what the big players in the market are doing. Last month, we rallied into expiration, then rolled down to the end of the month. I’m still about 70% “in the market”, but you must have some cash or you can’t make any new trades! RCL had spiked up, so I sold. I’m looking to trade back in in about a week. Similarly I was “up big” in CZZ and it had become too high a percentage for my “percentage rules” (see the posting on portfolio construction under the “Economics, Trading, and Money” category) so I reduced it back to in line (no more than 10% in any one position, better at 5%). See the ‘holdings’ link if you want to see what I’m still holding now. This “cash raise” will be “settled money” for next Monday and that will let me put “protective puts” behind positions if we do the same as last month or “redeploy” into new ideas if the run continues. Let the 1 year daily chart guide your timing and direction. It presently shows RSI approaching 80 and price well above the SMA stack, so it argues for ‘a few more days up, then a dip’. We’ll see.

Wall Street Week – Tuesday, September 15, 2009

Remember that on any stock or ticker I say I’m looking at, you don’t just go buy it. You wait for a stock entry indication to get the best possible entry into the position.

The market This Summer

We are reaching the end of “The Summer Doldrums”. Time to put the lawn furniture away, cover the pool, make sure the roof doesn’t leak, put some extra food in the pantry and check that the generator works and there are fresh batteries in the flashlight… Oh, and time to start being more “in sync” with the financial markets.

Every year there is this odd time of the mid summer doldrums. In prior years I tried to make money out of it with rapid trading, but it is typically hard to do. The “Market Makers” are taking vacations. Congress is out of session. France (and much of the rest of Europe) is on the beach in August, so they are not moving things. Basically, you are playing against the floor brokers and the stock specialists who, with lighter than typical trading, can often “game” the system more easily. Not by much, but as a stock trader who only trades one stock, you bounce it back and forth by a dollar or so and you can make money in an otherwise flat market. So the market tends to be mostly sideways with some “chop” and no real themes. It is hard to “trend trade” a trendless market and it is hard to out “day trade” a professional day trader who focuses on only one stock and has a $Billion or so line of credit behind him.

So typically (not always, sometimes there are “things happening” that make summer a decent time to participate, but “typically”) I figure I ought to work on those “other projects” too. Vacations, “stay-cations”, roofs, gardens, computers, etc. Most of my money gets parked in things with high dividends, or great longer term prospects but nothing you can “trade” fast. Things like CZZ that has ridden the sugar market higher. (Bought it at about $2.68 to $3 depending on traunch. Now at $8.50). And I step away from the table. When school starts, it is time to “re-engage”.

Why then? Because that is when all of the OTHER folks are getting back to work too. Remember: It isn’t about you, it is all about them and what they are doing.

The Long Term Context

This is a good time to check in on our long term context. To look at the 10 year chart of weekly values. That tells us if we are in a bull market (going up), a bear market (going down, usually fast), or what.

Chart of10 years, weekly, comparative markets

10 years, weekly, comparative markets

SPY  -  S&P 500 U.S. stocks
EWZ  -  Brazil
EWA  -  Australia
EWG  -  Germany
EWQ  -  France
QQQQ -  NASDAQ 100 tech stocks

We can see here that the same trend for Australia and Brazil to outperform that we identified a year or more ago is still holding. You can also see that gold has been doing well. Those trends are likely to continue. We can also see that even Europe is outperforming the U.S.A. The world is casting it’s votes with it’s dollars, and those votes say that being out of the USA is the place to be, even if it is in old, unionized, and semi-socialist countries. This may seem paradoxical, folks fleeing a socialist agenda in the USA by running to places with greater socialist leanings, but it’s all about the change to socialism. In the places that have already adapted, the survivors have figure out how to make some money and stay in business. As the USA takes that plunge, the risk to any given company is gigantic. So it is that risk of unfettered and out of control change that is to be avoided, at any cost. Also, the US Dollar is being printed like crazy. The Euro, not so much …

But my benchmark for the Bull/Bear decision is not the Rest Of World, it is the S&P 500. So we will take a closer look at it:

Chart of10 years, weekly, comparative markets

10 years, weekly, comparative markets

This shows a great example of a long term market shifted from a crash into a new longer term bull market. Ralize that this 10 year chart does not tell you what will happen tomorrow or even next week. It does tell you what will happen over the next 4 years… And this is a market headed up (even if more slowly than the rest of the world).

How do we read this chart? First, look at the red / black price ticks. That shows a general up trend after a hard crash. Coming off the bottom we had one attempt to sell down again, that got to the blue line and bouced off. The gold, blue, and red lines are three Simple Moving Averages of 20, 40, and 60 weeks. (And since a ‘market week’ is 5 days, that is the 100, 200, and 300 day Simple Moving Average more or less.) Many folks pay attention to the 200 day SMA, so that blue line is in some ways the more important one. OK, the “moving average stack” was “red on top, price on bottom” all through the bear market. We now have “price on top” with the gold line headed for the top too, and blue headed up with more slope than the red line. We will have a “confirmed bull market” when the SMA stack is back to “Price over Gold over Blue over Red”, but there is money to be made even before that point. (In fact, you make more money, but with more risk, by calling the turn early, due to the percentage expansion being larger).

Next, look at the very bottom, the DMI / ADX chart. That shows “Blue DMI+ on top” A Bull market. We have the ADX (black line) at about 25, so it is a medium strength move. It can be ridden for a while.

Above that is the MACD (moving average convergence divergence). We have blue over red and both lines above zero. Bull market. Notice that the ‘cross over’ of blue above red called the bottom fairly well and earlier than the DMI / ADX. MACD makes an early call, DMI confirms it. MACD lets you trade in faster, DMI lets you sleep well about it…

OK, our “Early Warning Signal” comes from the next line up. RSI – Relative Strength Index. It tells you when folks are just too in love with stocks, or too affraid of them, and turns are likely “real soon now”. It hit 20 a few months before the absolute market bottom. Notice that following “dip” at the exact market bottom? That’s your “buy now” early alert. It had a “higher low”.

It does something very similar at tops. Look back at 2007, see the line of “lower highs” on the RSI, those peaks drifting downward? That’s your “get out soon or now” early alert. Watch for it again about 2016.

During a down run, RSI tends to oscillate from the zero line toward 20. During up runs, it oscillates from zero toward the 80 line. At this point, we ought to have a few years “above zero” to work with.

So that is our context. A broad bull market, running higher. But look back at 2005. The market can drift down, or sideways, for most of a year during a long term bull market. So choose your entry points using faster charts (1 year daily interval is good for most folks). If you are a very long term invester, you can just put your money in a bit at a time (say, 1/10 per month) called ‘averaging in’ and you ought to do OK. It is a reasonable alternative strategy to ‘timing the market’ on a ‘fast’ basis.

Notice that “A trend in motion tends to stay in motion for a very long time. -e.m.smith” and as you look back on this decade long chart, you can easily see that runs continue for 1 to 2 years to the downside and for 5 to 6 years to the upside. Sometimes the upside can run out to 7 years or more. Oddly enough, and never very clearly justified, these cycles tend to be syncronized with the sunspot cycle. Not precisely, just enough to be creepy!

OOTUS – Out Of The U.S.

OOTUS (Out Of The U.S.) has been running up since September 1 (and is more volatile that U.S. Markets), but I think it is still working longer term. The most interesting thing here is EWO (Austria) that’s on a nice run upward. That’s a “tell” to look at all the eastern Europe plays as having potential. I’m primarily in Brazil and Australia, but Emerging Europe and China have long term growth as well. Russia ought to be a grower, too, but I just can’t get past the political risk from a confiscatory government that does not value property rights as much as political connections. (Golly, sounds a little like the U.S.A. under the present regime… but I AM talking about the Russians… I think… )

See the racing stocks tab for currencies and for foreign emerging stock markets for the latest moves.

The currencies tab shows that the ‘usual suspects’ are running up. Gold, Swiss Franc FXF, Japanese Yen FXY, Brazilian Real BZF, Aussy FXA. This trend will continue as long as the U.S. Congress is spending all the money it has, all the money it can tax from you, and all the money it doesn’t have too … When the printing press is running, you run too.

Last month I said:

It’s also true that during recoveries, things tend toward “jump up and slide”. So you can’t wait for a trend to develop to buy in. You need to either buy into the position while it slides slowly lower “scaling in” or you need to put a “buy if touched” order above the ticker and get bought in on the day of the jump. So, for example, EWZ is sliding sideways. It’s chart on a trend following basis says “be out”. Yet we’ve already had the Great Panic Dump so the folks who can be scared witless have already been scared out. As Brazil reports good news, or has great earning selling things to China, individual stocks will jump up in a matter of a couple of days. The average (EWZ) will move a bit more slowly, but not slowly enough for a 20 or 30 day trend following strategy to work well. So it’s best to either put on rapid trades based on news events (earnings reports date) or buy if touched floating above EWZ waiting for news to drive it into an upward run. I have a modest “core” position in EWZ that does not get sold (long term growth play) and will have a “buy if touched” above it from time to time (as I have cash from other position sales)

That advice still holds. If you had a “buy if touched” above EWZ and slowly worked it down as the price dropped into the last two weeks of August, you would have been “bought in” at a low price in the first few days of September. For now, if you are in, be ready to have a stop loss below your position to sell you out early on a roll down then trade back in at the simple moving average touch of about the 50 day line. If you are out, you can buy in at these levels for a slow drift up (knowing that there will be a “down day” dip back to the simple moving average that is a chance to buy more, not to sell). “Buy the Dips” or “Scale In”. Do Not panic out at a return to the SMA stack! That is selling low and buying high. Bad Juju!

Last month I also said:

Go shopping where the money flows… IAF is holding a 9% dividend even though it’s run up to about $10 from the $7 ish point where I loaded up. It’s looking a bit “toppy” on a trade basis, and it’s thinly traded so scale in if you are trading large positions, but for a long term investment, hard to beat. Fat dividend. Rising currency. Broadly diversified fund in a resource driven market, but with some decent banks and a stellar Mall REIT inside (Westfield). Nice.

It is now at $11.77 and the dividend is down to 6.8% (largely due to the price rise). Not quite as attractive for new buys, but still a nice dividend and a decent growth prospect. I will likely reduce my holdings just a little, since I’m aproaching a “double” in it. One of my “rules” is “Sell half on a double”. IAF being thinly traded, to move volume it needs to be done a little at a time over a longer period of time, so you can’t just run in and dump a bundle in one sale or buy a bundle in one buy. For that, use EWA. For example, today IAF has traded 41,000 shares total. If you try to dump 1000 shares in one go, or buy 1000 in one go, you are most likely the bulk of the market at that moment. At about 6000 shares per hour, moving 1000 in 5 minutes would be 12,000 / hour, and you would be starting to over run the natural rate of trade (thus moving the price by your volume…).

Thin stocks can be useful, but you must pay attention to the volume and how big you are (or are not) relative to that volume. I like IAF as a long term hold, so I don’t mind the thin volume. If it drops under me, I tend to just buy more at the firesale prices, then sell it back out slowly on a recovery. Work with the market maker – if he is being flooded with sell orders, he will drop the price since he MUST buy the stock. He KNOWS he can make a profit if the price is low enough. So, then, do you. When he runs the price back up after the flood and slowly bleeds out the excess inventory, you do the same. Picking a “thin” stock and becoming an anonymous “Friend Of The Market Maker” can be an easy trade strategy…

VIX the Volatility Index

The chart of VIX – the Volatility Index.

Volatility goes “way high” in a crash. We are continuing the slow collapse of volatility back to low levels. Selling options will not get you much premium, but buying options will cost less and less for any given amount of protection. The VIX is saying that if the market starts moving, it isn’t moving very fast. Those big dividend stocks are more likely to rise in value as other assets become “dead money” just laying there. It also says that it will be relatively cheap to “buy protection” via buying “put” options. If you hold a lot of some stock, it may be cheaper to buy some puts rather than sell out the position if you get a ‘top indication’ on your position.

VIX  - Volatility Index (not a ticker, you can't trade it)
VXX - Short term VIX futures ETN (a ticker you can trade)
VXZ - Medium term VIX futures ETN (a ticker you can trade)
FXY  Japanese Yen
SH  "Short" sell of SPY
SPY  S&P 500 benchmark

So this says you can expect fairly slow changes of direction from the market. But watch that RSI for indications that we’ve reached a limit case and might have a rapid jump in a new direction… For now, expect the market to continue upward, but at modest rates, and be ready to buy puts as protection if things get dodgy.

The Dollar

Dollar Trade -Down - back on

Dollar Trade -Down - back on

Last month I said:

Here we can see the “dollar down” trade is old news. Don’t expect much action in the dollar. From this point on (for a while), you must look to the individual things driving the other currencies, not just to worries about the dollar. With the dollar trade gone flat, you can use it as a reasonably stable ruler for a while.

Well, that “for a while” turns out to have been all of 3 weeks. Congress is back in session and we’ve re-entered the land of “The Ministry of Stupidity Speaks”. More talk of $Trillion dollar medical plan boondogles, more talk of taxing the rich, more talk of $Trillion dollar deficits. So the money leaves town, and the exchange rates show that. Note To Self: Map dollar movements vs congressional callendar with special emphasis on democrats attacking business…

OK, “dollar down” trade is back on. I’d care more if I didn’t already have a lot of my positions denominated in Aussy, Loonie (Canadian), Real (Brazil), Yuan (China), Yen (Japan), Shekel (Israel) and even whatever they use in Turkey, Rupee (India) etc. currencies. (FXI, PGH, PWE, EWZ, CZZ, HOGS, FUJI Heavy, CEL, TKC, TTM, etc.)

Ideas of the Week

The OOTUS baskets look really good. EWZ, EEM, IIF, IAF, EWA, etc.

Copper has continued to run, now it looks like Aluminum is joining in. I continue to hold my PCU and will be watching for an entry back into FCX. With folks all wanting to jump on the electric car and windmill bandwagon, it will take one heck of a lot of copper.

I’m continuing to clip my coupons, but as the yield drops (as the price rises, the constant payout becomes a smaller percentage) I will be looking to redeploy some money into more active trades.

Oil Trusts continue to have nice dividends along with growth potential. LINE (LINN Energy) has a 10% dividend and is moving higher. PWE has been held down due to low natural gas prices, but with natural gas showing “bottomed bounce” action, PWE is ready to head up. It presently has an 11.4% dividend and bounced up 4.5% today (on the gas news).

If you buy gas or heat your home, it is always nice to buy it from yourself…

The “consumer is back” trade is showing signs of life. The casinos are up as are the cruise lines. RCL and CCL are two I hold. But with RCL up 7.5% today, and RSI headed for 80, this is probably not the time to enter a new position. Wait for a pull back or do a ‘day trade’ on a 10 day 15 minute chart.

It also looks like recovery in the rail and shipping lines is underway.

There is also talk on the “trader shows” about a global infrastructure build out trade. Companies like GE, FWLT, JOYG, etc. This deserves investigation.

And when economic recovery starts, the chemical companies usually move with it. DOW, DD, EMN, BAK, SSL et. al. This is a place to be as well. The chart shows them all “running” at the moment.

Lets go look at the indexes and “stuff” and see what pops up.

What does the 10 day hourly chart say is happening now?

The charts on this posting are very large. On a Mac with Safari, “CTRL” and a mouse click lets you open them in another window for better viewing. Other browsers, YMMV…

One minor note, before we drop to the 10 day, realize that on the 10 year we’ve got a firm “buy” signal. The crash is over, and for long term investors, this is a “bottom” on a decade scale. You can still improve your performance with shorter term trades and calling an entry to the day or month rather than to the year, but if you are from the “bonds 3 years – stocks 7 ” economic cycle trade, it’s time to go shopping for stocks.

Here’s a 10 day houly chart of the Dow 30 Industrials (DIA), the S&P 500 (SPY), the Nasdaq tech companies (QQQQ), the Russel 2000 (RUT), and both a Brazil fund (EWZ) and an Australia fund (EWA). It also has a ‘short fund’ (SH) on the chart so you can see what being short this market is doing right now. We also have EWO, an emerging Europe Austria fund, EWW for Mexico and IIF for India.

10 Day Hourly Interval Broad Market

10 Day Hourly Interval Broad Market

This is a live chart, so my comments will describe how it is now, but in a week it will be showing new data and a new week. Since I think it’s more important to be in touch with what the market is doing NOW than to preserve the historical chart, this is, IMHO, a reasonble choice. Just don’t be surprised if the chart I describe is not the one you see a few weeks from now!

Running up nicely. India on a tear, Brazil running up, EWO ripping, though EWW Mexico is flattened a bit. Tech QQQQ continues to beat the broad US market. (Austria is a gateway to “emerging Europe” and Mexico is a US recovery play – a lot of the cement the US uses is made by Cemex CX in Mexico, for example.)

You can also see how the “short fund” that uses options has collapsed in “value” as the VIX has dropped and the value of the option premium has dropped with it. Not a time to be long ETNs (Exchange Traded Notes) that use options instead of holding real stock positions.

Other Asset Classes

The 6 month asset class race:

Asset Class Race

Asset Class Race


SPY  S & P 500 US stocks
GLD  Gold
EEM  Emerging Markets
FXY  Japanese Yen
JJC  Copper
SHY  Short term bonds 1-3 year
USO  U.S. Oil
DBA  Agricultural basket
SLV  Silver
WOOD  Wood / Timber

EEM, the emerging markets back on track for higher. Wood and Copper up nicely. That will continue to hold as the world economy recovers and we build things again. Silver has started a tear trying to catch up with copper and gold. If you missed the gold run (it has gone flat in this 6 month window after a big run up), you can probably hop on some silver miners here. See the silver chart under the racing stocks tab at the top. Ag has gone flat along with the other asset classes.

So what happened in the Tech Market relative to world markets?

Recent months - A Tale of Two Markets

Recent months - A Tale of Two Markets


QQQQ  Nasdaq 100 mostly Tech companies
DIA  Dow Jones 30 Industrials
SPY  S & P 500 largest companies in the U.S.A.
MDY  Midcap  (Middle sized in terms of market capitalization)
RUT  Russel 2000 - a collection of 2000 companies from small to large.
EWZ  Brazil fund
EWA  Australia fund
EWO  Austria fund
EWW  Mexico fund

It’s “outperforming” the other US markets, but the place to be is clearly the Austria / Australia / Brazil markets. Notice the nice entry call by the Slow Stochastic as it did a red-cross-over-blue the first few days of September. It’s now “pegged high” that means a steady up run. If it opens up a “mouth” pointed down, expect a return to the SMA stack. For now, though, DMI and MACD argue for “stair steps up”: Sideways, up, sidways, up; and not very much downdraft on the dips.

This is probably also a good time to point out that these trends have been in place since the ‘bottom call’ some year or so ago. Trends persist for a long time. You can literally bank on it.

Were Bonds a good idea?

OK, lets take a peak at the Bonds Race.

Oddly, yes; but not by enough to matter and mostly corporate bonds (LQD) and the long term government paper. (TLT but only if you got a good entry at a bottom point) and only by a tiny little bit. Other than that, the safe bond positions mostly did nothing. Not a time to be in bonds. One Notable Exception: TIP is the Treasury Inflation Protected Securities. Notice the recent bump up as inflation fears kicked in. If I were buying bonds now, TIP is the only one I’d buy. You want that inflation protection guarantee as the printing presses run…

What sectors won this month?

Yes, I’m showing you the 1 month list here (since I took a long time off) but the link in the title will still get you the 1 week list.

33.78%  DJ US Platinum & Precious Metals In...
26.33%  DJ US Full Line Insurance Index
16.94%  DJ US Paper Index
16.94%  DJ US Forestry & Paper Index
16.27%  DJ US Gold Mining Index
15.20%  DJ US Gambling Index
11.66%  DJ US Airlines Index
11.25%  DJ US Mining Index
11.05%  DJ US Consumer Electronics Index
11.04%  DJ US Recreational Products Index

Now, compare that with last month’s list:

	   
47.81%  DJ US Full Line Insurance Index	  
35.50%  DJ US Tires Index	  
33.59%  DJ US Recreational Products Index	  
31.36%  DJ US Home Construction Index	  
31.27%  DJ US Gambling Index	  
30.55%  DJ US Forestry & Paper Index	  
30.55%  DJ US Paper Index	  
29.49%  DJ US Automobiles Index	  
29.20%  DJ US Aluminum Index	  
28.96%  DJ US Travel & Tourism Index	 

Notice that we see many of the same players? Gambling, Insurance, paper, and some ‘near friends’ like gold and platinum. This is the “consumer recovery” trade. This trend will ‘have legs’ and continue for a while. It takes time for industries to recover. You can trade this from the resource side (copper, aluminum, wood, etc.) from the resource countries side (Australia, Brazil, Canada), from the recreation industries side (casinos, cruise lines), from the manufacturing side (Ford, Tires, etc.).

But NEVER EVER invest in an airline. They are speculative day trades only. They consistently lose money and go bancrupt. Got it?

Last month I said:

We can see it was the “consumer recovery” play. This will continue. Nobody thinks the consumer has completely recovered yet.

That is still true.

BTW, you can click on the link in the title of this section to get the list of sectors for this week. You can change the time period to 1 month. And, you can click on any given sector to see what stocks are inside that sector. Just pick one, or race them to see what you like. Yes, I’m teaching you to fish, not handing you a fish. In a week, a dead fish is not very pleasant, but a day spent fishing can be very rewarding…

A Broad View

Finally, my “Rorschach Race” (under the “Racing Stocks” tab up top too).

EWJ  Japan fund
SPY  S & P 500
EWZ  Brazil fund
FXI  China fund
SH   Short S & P 500
RWM  Short Russel 2000
EPI  India fund
EWU  United Kingdom fund
EWP  Spain fund
EWG  Germany fund

Last month I said:

The “usual suspects” of India, China, Brazil are looking good. The one surprise is how well Spain is doing. Food for thought and will probably mean a bit of a lift for other “Latin” stocks as they cross invest.

The interesting twist this month is how well India is doing. Just ripping! And China is lagging the rest of the world a bit. But EVERYONE is beating the pants off of the U.S. markets. Think about it…

What Is Our Context

Let’s look at the S&P 500 largest stocks in America compared with some other kinds of assets; a couple of month maturity bond fund, oil, gold, Yen.

Asset Class Races

Asset Class Recent Race

SPY       The S&P 500 ETF
GLD       Gold ETF
USO       Oil ETF
FXY       Japanese Yen currency fund
SHY       1 to 3 year U.S. Treasury Bond fund
FXE       Euro currency ETF
SLV       Silver fund
BZF       Brazilian currency ETF
EWA       Austria ETF
WOOD      A wood and paper products fund

The big winners are the same story… Australia, BRIC, etc. The “safety trade” of Euros, Gold, etc. had gone flat, but is showing a bit of renewed life at the end. Silver has started a rip upward. Oil is in a ‘flat roll’, so you can trade the ripples. Overall, stocks are where you want to be, and OOTUS is best, with emphasis on emerging markets: India, Brazil, EEM and resource economies: EWA, EWC, EWZ.

Last month I said:

Ok, start loading up on positions whenever RSI returns to 50 on the 1 year or 6 month charts or use the 10 day chart to time entries (see the timing an entry posting from the link up top). Watch for a “dip” in late August (probably near options expiration) or late September (also at options expiration – 3rd Friday…) as probably good entry times. Oh, and notice that oil tends to drop middle-late each month. Want to buy oil? That’s your time…

That advice, too, still holds. The August “dip” came on the last day of August, after options expiration. That is a positive sign. It says that a lot of options were ‘balanced’. Not heavily bet either direction. So you have your model. You can ‘scale in’ or you can ‘time the entry’ and you know what’s hot (and likely to stay that way).

Stock Indicators – what and how

If all this talk of indicators is leaving you wondering what the heck I’m talking about, hit the link in the heading of this section and there is a bit of an explanation.

What about Brazil?

Brazil the EWZ ETF vs the BZF currency ETF

Brazil ETF vs Currency Race

Last month I said:

Brazil has transitioned to “stairsteps up”. It’s set up for a long run to the upside. Watch for RSI 50 for entries.

Look at RSI on Sept 1. Nice call if I do say so myself ;-) We are now MACD with blue on top and above zero, so the next “dip” will likely have RSI about 55. Use slow stochastic to time an entry more precisely or just use a “buy if touched” order above the prior day high price. (Me? I have a ‘core position’ that I don’t sell. It’s just too good for ‘long term good money’ to risk trading out of it all. Then I trade a small position around that. ) Notice also that the Real is showing strength, but most of the move is not just the currency.

What About Oils?


XOM  Exxon Mobil - Largest, U.S. / Global
COP  Conoco Philips - U.S.  with Russian exposure
CVX  Chevron Texaco - U.S.
PBR  Petrobras - Brazil
PCZ  Petro Canada HAS NOW MERGED WITH SU SUNCOR
BP   British Petroleum
STO  Norway
E    Eni Italy
TOT  Total - France
RDSA  Royal Dutch Shell
IMO  Imperial Oil - Canada Oil and Oil Sands
SU   Suncor - Canadian Oil Sands
SSL  Sasol - South African Synthetic Oil Company

Oil is largely in a flat roll. The “oil majors” like Exxon and CVX are flat. The folks in the alternative oils (tar sands) can make a bucket of profit with oil at these prices AND can grow. So SU Suncor is ripping higher. Their merger news with Petro Canada didn’t hurt either. PBR continues to find massive oil off the coast of Brazil and IMO is in the tar sands business too. All of them ought to be “money good” as the economy recovers and world demand for oil holds or rises.

Some Near Oil and Oil Related Comparisions

Can I gloat, just a little? CZZ. I bought a boat load of shares at $2.68 to $3 a share. I’ve “sold down” about 1/2 of it, but god it feels good to get a tripple in something. It doesn’t happen often, but when it does 8-)

It is probably a bit late to get in ‘in size’, but long term I think it will be a nice growth stock. So a small position, even at these levels, can be a reasonable buy. Before the crash, it was up to about $15 IIRC. They did a secondary offering at $12 that was used to buy a big chunk of land. That land will have inherent value for centuries to come, as will the sugar grown on it. I would not worry about it being “fully valued” for about 2 years and about $15+ on the stock price. It just won’t be the rocket ride it has been.

The REITS race – Real Estate Investment Trusts

The REITS are showing early signs of life. BXP, VTR, PSA, HCP, HGN all rising. Time to nibble a little. Get some “marker positions” in those with nice dividends and in an area you like.

The REITS have a decade long recovery in front of them. Still plenty of time. Just check the “coverage ratio” on their debt and make sure you are well diversified. (i.e. 3 or 4 of them, not just one, OK?)

PEI  Pennsylvania Real Estate - Mall REIT
VTR  Ventas - sr. care, nursing homes, hospitals
PSA  Public Storage - junk storage units
BXP  Boston Properties - office REIT on BosWash corridor  
HCN  Health Care REIT -  extended care, senior care, medical offices
HCP  Health Care Properties - ex. care, senior living, Dr. offices
PCL  Plum Creek Timber - lumber and trees REIT
SPY  S & P 500 broad stock market benchmark
RPT  Ramco Mall REIT
PLD  Prologis - logistics 

And Other Bottom Fishing

At any given time, you want to be rolling some of your big winners into positions that have a lot of head room. If something has doubled, it is not likely to double again at anywhere near the same rate. If something is down 90% (so it would take a 10 times growth to get back to that point) it is much more likely that it can take a “double” back to just 80% down… That’s a “bottom fishing” candidate.

Well, another “toot of my own horn”, if I may. Last month I said:


Well, Aluminum stocks are a good place to play the recovery. ACH Aluminum of China, is a volatile rocket ride (pick your entry!) and AA is the stodgy American way to play it. The others are smaller and more volatile, but for risk takers who watch more closely, give more “juice”.

AA is up 7.8% today. Nice. Very nice. It has more room to the upside as the economic recovery plays out. See the Aluminum Race for more candidates.

The Aluminum Race

Conclusions and Likely Actions

I’m about 80% in, lightening my dividend stocks and increasing the resource economies (EWZ, EWA, EWC and constituents). Along with some retail, financials like BRKA, and bottom fishing positions. I’ll be watching for a roll down at options expiration to go “all in”, but with RSI for the major markets at near 80, watch for a 50 (on the daily chart) to get in. We know we are off a hard bottom on the 10 year chart, but we also know that an economic recovery takes years and markets wobble a lot along the way. You want to be in, and there are plenty of opportunities to pick a good entry.

Click for Disclaimers, Disclosures, and Where To Get Charts

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About E.M.Smith

A technical managerial sort interested in things from Stonehenge to computer science. My present "hot buttons' are the mythology of Climate Change and ancient metrology; but things change...
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