WSW – Sunday, September 27, 2009

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

With a more specific look at GIStemp here:

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

Daily Notes

I have a new toy… I now have a way to screen tickers for certain moving average configurations (along with other things) and rank them based on recent price action. Here is a sample of the output. This is from a broad set of several hundred ETF “tickers”. These have not been further screened for anything such as commodity vs bonds vs foreign; nor have they been screened to remove the “thin” tickers. (Those are things I’ll be doing before I do anything significant with these results). The only screening done on these is that they are ETFs, they have price above the 25 day Simple Moving Average, that is above the 50 day SMA, that is above the 75 d SMA. They are then given a ranking based on a proprietary formula. Notice that this is not just Beta or Alpha (two usual measures of stock motion) but related to a longer term Alpha (tendency to rise).

To my surprise, the top two are both bond funds. I’ve warned away from bonds at this point since the FED can not cut rates further, but that is without a direct chart of the price action. On a 1 year basis, these have outperformed EWZ (Brazil) largely due to the bottom of the crash being only 7 months ago. On a 6 month basis, EWZ beats them. So a lot of it comes down to the “cherry pick” of the exact market bottom to get into EWZ.

Also of interest is that several of my favored funds show on this list (this is just the top tier of the best). So you can find EWZ, EWA, and EWO on the list. I most likely need to tune up the duration of the time used for ranking (EWZ ought to rank higher, sooner) but the tool seems to work rather well.

More importantly, it lets me see what I’m missing with my non-computerized tools. For example, EPP is an “Asia without Japan” fund. Moving nicely (and I’ve bought some now). I tend to ignore the “mixed pot” funds just because they are harder to understand what is in them. Similarly, EZU is a “European Monetary Union” fund. A nice basket of the EU. Ranks fairly high and broadly diversified. Not the rocket ride that Brazil is, but less volatile to the downside too. EWL is Switzerland, an old friend I’d forgotten to check on lately. Bought a bit of it too.

Several funds, like FDD, are stock funds that select on dividends. That several showed up in the screen tells me I need to think about them a bit more. PCY is an “emerging market sovereign debt” fund. I didn’t even know such a fund existed. Then we have things like LD “lead” at 49 that ranks above EWZ and EWO. I knew lead was running up on Chinese electric bike battery demand, but didn’t have a “number” on it. That “number” helps…

Here’s the list:

   CFT 91
   LQD 88
   MZN 86
   ITR 72
   PCY 66
   TZL 65
   CIU 63
   FDD 57
   IHE 57
   IXJ 57
   PJP 57
   FGD 56
   IDV 56
   RHS 56
   RWX 56
   RYH 56
   XPH 56
   BNZ 55
   DEW 55
   DLS 55
   DNH 55
   DTH 55
   EPP 55
   EWA 55
   EWL 55
   GWX 55
   MDD 55
   OTP 55
   PAF 55
   PIO 55
   SCZ 55
   TZO 55
   VPL 55
   WIP 55
   WPS 55
  IFSM 54
   TZV 51
   EWK 50
   FEU 50
   EFA 49
   EMB 49
    LD 49
   VEA 49
   DIM 48
   DWM 48
   EWO 48
   EFV 46
   RFV 46
   TZD 46
   TZE 46
   AOK 45
   BLV 45
   EZU 45

skipping down…

   EMM 18
   EMV 18
   EPS 18
   EWG 18
   EWM 18
   EWZ 18
   EXT 18

So I’ll be using my “new toy” to do a better job of screening a wider scope of ETFs (and eventually stocks too) and as a source of ideas and feedback about what I might be missing with my usual habits.

So take a couple of minutes. Put a ticker or two into a Bigcharts chart, and then click on the “profile” link at the far right of that chart for more details. And don’t forget to look at how much volume trades. Something that trades 100 shares a day is not likely to be around in 6 months… even 1000 shares a day will be a thin trade and hard to get decent price action from it.

Wall Street Week – Sunday, September 27, 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.

Well, the “roll down” back to the moving average stack is underway. If you are a long term investor, just ride it out. If you are a short term trader you ought to already be “sold out” (via a “stop loss” order or from watching a short term timing chart like a 10 day hourly chart).

For folks who have been “on the sideline” in this latest run up, now is when you ought to be making your shopping list to buy in at the bottom of the “dip” and time your entry with the tools shown in that “stock entry indication” link; OK? As we saw in the last posting:,
we are now in a bull market, off the bottom. The price and the 20 week moving average (100 day – 5 day business weeks) on the 10 year weekly chart are both “on top” with the 40 week (200 day) Simple Moving Average headed up too. Once it has crossed the 60 week (300 day) SMA we will have hard confirmation of this new bull market. (But by then much of the potential gain has passed, so you must “grasp the nettle” for maximum gain… but use protective strategies to avoid being “caught out” if a refersal hits. (Things like “stop loss” orders that sell you position if it moves against you or buying “puts” if you are an option trader. Or even just watching your purchases closely so if they start moving against you , you sell. “The first loss is the best loss”.)

My expectation is that we’ve got more drop to go in the next week or two. So make your shopping list now and time your entry for maximum gain. Last week I sold my trading account down to 1/2 cash to be able to protect the other positions. My long term account stays about 85% invested at this point (and much of my long term holdings are things like Oil Trusts that pay a large dividend on a monthly basis, so trading them is a pain anyway, or Birkshire Hathaway where trading is a silling behaviour. Trying to second guess Warren Buffet is just a dumb thing to do. Yeah, I’ve traded the BRKB shares from time to time on a short term basis, but it really is best as a long term buy and hold.)

Whenever the “entry indicators” say it’s time to get in, and the price turns back up, that is when you buy in. This can be done with a “buy if touched” order, for example. You place an order to buy above the present priced, then move it down a little each day. When the stock heads up, your order will be hit and you will buy at that price. I’ll use GE as an example here. (Yes, I think GE is a fine buy with a potential double in front of it, but it’s a bit on the slow side for my style. If you are from the “sleep well” instead of the “eat well” side of things, it could be right for you. I like more “juice” but don’t mind the heartburn side of the “juice”…

GE closed Friday at $16.37. The chart looks like it is near the top of a run away from the moving average stack. A move back to the 50 day moving average looks to me like a price of about $15 or maybe a little lower (you get to project both the dropping price and the rising 50 day SMA forward to a probable intersection.) OK, how do you get that $15 or $14.50 price?

1) You can put in an order to buy at $14.50 and hope it hits that price. This can fail if the price drops to $13.50 in that you missed a cheaper entry. It can also fail if the price drops to $14.55 and heads up, leaving you with no “buy”. It is a reasonable strategy, but you must allow for the modes of failure.

2) You can wait for the day that the stock turns and heads up, then put in an order to buy. This can fail if you don’t watch the stock all day every day. It might hit $14.30, then rocket up to $16 in one half of a day.

3) You can use a full service broker if you are big enough a player and tell them what you want then let them figure out the best way to do it. This has large commissions and, if you are not a big player, all you will get is a mediocre buy anyway.

4) You can “scale in”. Placing a set of 4 or more buy orders. Either over time (buy 1/4 each of several different days) or over price (placing buy orders at $15.50, $15.00, $14.75, $14.50 ). Each of these will get you some stock and your average price will be “pretty good”. You will get some at close to the bottom and will not be “skunked” and left with no stock if it just dips a little and good news sends it rocketing up. Unfortunately, you also might scale in to a stock that drops to $12 before it starts up… or down.

5) And this leads us to the “buy if touched” order. It is a little like an upside down “stop loss” order. In fact, for Schwab, you place the order as a “buy order” with a “stop price”. A bit confusing, but OK, it works. So for Schwab I think of it as a “buy stop” order. It takes more work and attention than the other strategies, but I think the result is often safer and frequently better. So, for example, about Tuesday you put in a “buy if touched” order for GE at $16 (assuming it has dropped below that price by then). If Wednesday it is trading at $15.50 to $15.30 you would change your order to “buy if touched at $15.75”. You do this each day until you get “bought in”. The “tricky bit” is making sure you pick a price high enough that a one day blip up does not buy you in to a dropping trend. At the bottom, you will likely leave $0.50 to $1 on the table of “theoretical” gain from a perfect buy, but I think that is a small “slippage” for the qualities of a good fill and a decent timing of the buy that you get with the “buy if touched” order.

And yes, you can combine these strategies. I will often have a “buy if touched” above and a “limit buy” below the stock price. If it breaks down sharply I get a bargain, if it runs away to the upside I get something, and if it does both I win big. Inspect the daily ranges of the price chart for any particular stock and look for “blips” where the market maker shoots the price up a bunch (briefly) to tag ‘buy if touched’ orders at a price that he then drops later in the day (or the other side, look for dips down where he is hitting “stop loss” orders to pick up stock cheap that he then sells out at higher prices later in the day.) Make sure your orders are just outside those ranges.

Thinly traded stocks are more prone to this behaviour than major stocks like GE or averages like SPY; so be particularly carfull with “buy if touched” and “stop loss” orders on thin stocks trading less than 100,000 to 1,000,000 shares a day. For example: CTO – Consolidated Tomoka Land, a Florida developer of shopping centers and homes – has a great bottom pattern to the chart. But it traded 4000 shares on Friday at the $40 / share range. $160,000 all day. Call it about $20,000 / hour. You put in a $2000 order, that is 6 minutes of trading time. There will be some time during the day you may be the only order on the books. If you have a “buy if touched” floating at $44 do you think some market maker might put in a “buy” of one share at $45 to trigger your order at $44 then drop the price back to $39 after filling you at $44? Yes, they do that kind of thing.

Consolidated Tomoka CTO 3 Year Chart

Consolidated Tomoka CTO 3 Year Chart

It looks to me like a $35 to $37 price for a good entry on a pull back, but let the SMA stack be your guide. JOE is a similar Forida land company that is more broadly traded (but also volatile). This is probably a good time to put on a “tiny” in the recovery of Florida real estate longer term (as the prices show an entry point!)

I once “gamed” the market maker on one of these stocks with a bogus “buy limit” below his market price. He raised the price trying to get me to fear the price was running away from me. I raised a little. He raised more. Then I sold my 2000 shares at this new higher quote and cancelled my buy order. Dicey and risky? Yup. Two can play at this game and he had gamed me the prior week. I would not have done it had he not played me first. He was pissed and immediatly went to a wide spread (buy very low, sell very high), but by then I was done. So just be very careful with “thin” stocks.

The Long Term Context

I’m repeating this chart from last week. Keep it in mind. This is a bottom on a 10 year view and we need to be more in than out. Yeah, their might be a slow year, or even an attempt to run the market back down to these longer term SMAs, but our bias is now to be “in” instead of “out”. The detailed analysis of how to read it is in the last posting in the link above.

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).

Notice that “A trend in motion tends to remain 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 or more.

OOTUS – Out Of The U.S.

This theme will be with us for the next few decades, so get used to it. The quantity of dollars being printed by the USA is astounding. The rate of spending them, however, is even greater. This is going to collapse, badly. I’d give it about 8 years to do so (big things move slowly…). It is remotely possible that Bernanke can work some economic magic on this, but I’m not going to hold my breath… Nor is the rest of the world.

A little while ago China announced a deal with PetroBras PBR for a few decades of oil from the new field PBR found. They paid for it with the transfer of $200 Billion of U.S. Treasuries. Venezuela this week announced the intent to sell $3 Billion in U.S. Treasuries “immediately”. There is your “tell”. Folks swinging “big weight” are dumping the dollar and buying long term real value resources.

PBR, btw, is a good long term holding. Notice, though, that it has a jagged tendency to price dips. You want to buy one of those dips, not one of the peaks, or you are going to be wating a month or two just to get back to where you bought it… They have found a few dozen billion more barrels of oil than they had at the price peak back in 2008 on this 3 year chart. There physical value has gone up, and their price is lower. Right now the stock is “wobbling sideways” but the bottoms of the dips are higher over time. This will likely lead to an upside breakout in a few months. Yes, there is resistance at $45 a share and you can likely buy some at $40 if you are careful; but you don’t find billions of barrels of oil and stay down for long… They will be selling those $200 Billion of U.S.A Treasuries over the next decade as they need to fund the development of that oil field; so at this point they are pretty much guaranteed the revenues will come. At this point, I have a core position in PRRA (the preferred shares) and will be adding some PBR in my trading account with a target price of near $40. If it breaks through $45 to the upside (on, oh, some Iranian stupidity) buy in fast. (Maybe with a “buy if touched”? ;-)

Petrobras PBR 3 Year Chart

Petrobras PBR 3 Year Chart

What I said last posting still holds:

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.

Though I need to add that my concerns about “confiscatory government” and “property rights” is one that now applies to the U.S.A. in some small way. (If you can consider the takeover of the Financial, Automotive, and soon to be Healthcare, industries as ‘small’. About 1/2 ? the economy more or less?) The flat out theft of the propery rights of the bond holders in the auto companies to be given to the UAW union as a political gift under direct federal pressure is very reminicent of a Russian move.

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.

Honorable mention goes to Indonesia this posting:

Indonesia Fund 1 Year Chart

Indonesia Fund 1 Year Chart

This chart compares FXI – China 25 big stocks, EWZ – Brazil, EWO – Austria, EPI – Wisdom Tree India fund, and the Indonesia fund.

Not an entry at the moment, but a very impressive run from a new fairly young fund. I will likely add to EPI and EWZ on any pull back and take initial positions in FXI and IDX as an entry is indicated. EWZ has a large exposure to PBR, so you get a “two ‘fer” if you buy EWZ, both a growing emerging market economy AND a major oil player.

VIX the Volatility Index

The chart of VIX – the Volatility Index.

Shows a “blip up” in volatility. That often indicates a “dip” is started to form. Hold some cash and watch for a good entry.

What I said last posting still holds:

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

The Dollar

Dollar Trade -Down - back on

Dollar Trade -Down - back on

This chart shows that betting against the U.S. Dollar is still a winning trade. OOTUS wins.

FXY, the Japanese Yen, is a safe place to park your money followed closely by the Brazilian Real BXF, the Aussy FXA and the Swiss Franc FXF. Dropping against the dollar is the Mexican Peso FXM.

Ideas of the Week

Last posting’s ideas still hold this 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.

With the notible change that the copper comodity JJC has “gone flat” at a decent price level. PCU and FCX will likey run on a bit more as prior sales contracts expire and are refilled at the new higher level and as those revenues show up. But longer term, JJC will need to resume the rise or the copper miners will “go flat” as well. Oh, and I’m using EPI rather than the other Indian funds (EPI has great managment and is winning the “India race”).

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.

Still true. I would emphasize that now is a decent time to buy some oil. If anything happens in Iran (and folks rattling sabers is enough) oil prices will stay high. Yeah, there is alot of oil in storage, but the idea that oil will collapse back to $40 is just broken. Saudi will close the spigot if that starts to happen. So I hold some Canadian Oil Trusts (you pay a larger foreign tax so you must allow that you will not get all the dividend so knock a couple of points off (15% of the dividend so a 10% dividend puts 8.5% in your pocket); but Canadian Trusts are outside US congressional reach AND can buy new assets. US Trusts can only pump what they have and not replace it, so they are a “wasting asset”.) Each trust also has different “hedging” strategies, so some may have locked in $40 oil at the bottom, or $120 at the top, or be selling at ‘spot’ and have a wandering dividend.

UPDATE: October 19, 2009. PGH has changed their dividend policy and is no longer a very high dividend play (7.6% as I type this). I’ve moved my PGH into PWE and LINE.

OK, PGH is yielding 11.34% right now (and does a pretty good job of hedging to a medium term oil price, so it is a fairly stable dividend). You will get about 9% after foreign taxes. Not bad. PWE is yielding 10.92% and is holding a lot of natural gas. As natural gas rises off the catatrophic low price it is presently at, they will make more money. I have enough PGH to pay my gasoline bill and enough PWE to cover the heating and cooking. I’m “locked in” as covered for the rest of my life.

LINE – Linn Energy, is paying 10.89% on a U.S.A. based company with a nicely rising chart. Looks to me like an entry “soon”, but you are one news story away from a politically driven oil price spike. I’d “scale in” 1/4 at a time or so over the next month.

PVX – Provident Energy Trust is paying 11.89% is a Canadian trust in Alberta, so you have the “Foreign Tax” issue. It has some “midstream” NGL (Natural Gas Liquids – propane) as well.

On the flip side, we have SJT – San Juan Basin Trust. It has a 3.6% yield and is way down in price (I’d call it a bottom). It has done a “dead cat bounce” of the bottom and a bit of recent spike that I think looks like a “short cover” rally on the Iran news. I’m not sure exactly what the story is, SJT has a reputable history, but I’d expect that either they locked in some oil contracts to sell at the $40 range or they have a lot of gas and gas has had a price collapse. In either case, it ought to recover longer term. Buying a “tiny” as a speculation and /or just watching it closely and doing the homework to answer “Why?” could be fairly profitable… Their last dividend announcement makes it sound like they are almost entirely natural gas driven. A decent way to bet on Nat.Gas IMHO. I will likely take a ‘tiny’ position so as to keep an eye on it. IFF natural gas runs up in a cold winter, your dividend will spike and the price ought to follow. (IF prices stay low, a 4% range dividend from an energy trust will not support the present price…) So it all depends on what happens to natural gas demand vs supply.

PBT – Perminan Basin Royalty Trust is yielding 6.38% and is in a similar situation. As is Cross Timbers Royalty Trust CRT and 7.64% yield

HGT – Hugoton Realty Trust, is running up (peaked at $18, llkely entry at about $15.50 to $16) with a 6.33% dividend. Similar story to SJT but running a bit earlier from insider buying.

NRT – Northern European Oil Royalty Trust is yielding 7.48% and looks a bit “toppy” to me. It is based in New Jersey, so who knows what it really owns. Their earnings announcement says:

Net income in the third quarter of 2009 was lower than the third quarter 2008 due to lower gas prices and lower average exchange rates which contributed to the decline in royalty income. Gas sales were virtually unchanged. The Trust receives nearly all of its royalties under two royalty agreements. The Mobil Agreement is the higher royalty rate agreement and covers gas sales from the western half of the Oldenburg concession. The OEG Agreement is the lower royalty rate agreement and covers gas sales from the entire Oldenburg concession.

So wherever “Oldenburg” is, that’s what they lease. I’d guess North Sea, but that’s just a guess based on the names.

For a decent return with upside potential and inflation protection, it is a pretty decent deal to pick on (or a couple) of these trusts and just put them away for a while.

Last posting I’d said:

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.

I sold out of my RCL shortly after that. It is now in a ‘correcting’ movement back toward the SMA stack. I’m looking for a ‘reentry’ at about $20 to $22, but the price action will tell me exactly when. It could go as low as $16 to $18 if it hits the 75 day moving average as it did2 months ago. The longer term up trend will likely hold, but after the spike up, it’s time to wait for a re-entry.

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!

We’ve rolled over short term. Notice that while the USA has dipped to a flat, EWZ dipped and recovered to a rise end of the week. EWW – Mexico rolled over first, but also turned up late Friday. Might it be a leading indicator? Or just falling more for internal reasons? Keep an eye on it and see. My guess is just that we had a ‘short cover’ ralley of folks not wanting to hold positions over the weekend. My money is bet on Brazil.

Also notice that SH showed signs of life. Buying SH on any of Monday-Wednesday of last week would have offered some protection against the dip. Notice too that it rises based on both the drop in SPY and the jump up in VIX since it is based on options (it is an ETN or “Note” that holds options contracts, not an ETF of “Fund” that holds actual stocks). So you get a “two fer” when a drop comes and VIX rises.

Notice also that RSI is now at 20. This suggests a rise about Tuesday on a day trade basis. Expect a “down” open Monday then watch for a reversal. I’d expect the “bounce” to not last long and the “correction” to continue into Friday. (But as always: It’s not about me, it is about them. It is’t what I think that matters, it is what they do. So watch the prices in the market and it will tell you what they are doing and I will change what I think apace…) So at this point I would not buy a new SH position, I’d wait until RSI is up closer to 80 and then reasses.

UPDATE: Well, we had a very “UP” open on Monday. So the market was moving faster than I expected. We also have the “end of month” and “end of quarter” processes happening. What are they? At the end of the quarter, money managers who “missed” the hot stocks often buy some of them for “window dressing” their holdings reports. They can say: “See, I’m holding Apple!” even though they did not hold it for most of the run. this causes stocks that have been “hot” to get a bump at the end of the quarter. It also means they dump those that were a “miss”. RIMM had a miss on earnings and is down about 20% in the last 2 days; so I bought 100 shares as a ‘market makers friend’ trading the direction the market maker is trading. He has to buy all the shares being dumped, but can set the price “way low” to have a good shot at a profit selling them back in a week or two. End of month has all the “monthly savers” money go into funds. All those payroll deductions for IRA and 401k plans. So you want to own stocks going into the end of month, then lighten the holdings after the “bump” (at least, if you are playing the direction of the market maker…). So the “day trade” was up for the day, and we have an established run up; but the 1 year daily chart still shows that the better entry will come on a bigger pull back. What to do? I “day trade” some and I “long term hold” some and I “trend trade” on that longer term entry some too. Pick a style that suits you and trade that time scale.

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 continues strong. Wood and Copper up nicely, but copper has gone flat recently and rolled down a bit at the end.

PCL – Plum Creek Timber is wobbling to a stable bottom and yields 5.48% at present. This is a “Timber REIT” and as prices for wood rise, they make more money and must send it out in dividends. They have announced improved earnings both of the last quarters and that WOOD line says they will have more. As housing builds recover, volumes will rise too. As a long term holding, this is a great time to scale in to PCL with a potential double over 5 years.

Last posting I said:

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.

Well that was pretty bad advice. The “gone flat” in gold ought to have clued me in that a top was near. What happened to the precious metals miners this week?

Best Performing Stocks

21.43%  CVVUF  CanAlaska Uranium Ltd.
13.22%  MVG  MAG Silver Corp.
 3.03%  IMR  IMA Exploration Inc.
-2.96%  IMPUY  Impala Platinum Hldgs
-3.08%  CALVF  Caledonia Mining Corporati...
-3.94%  MGN  Mines Management, Inc.
-4.44%  MNEAF  Minera Andes Inc.
-5.32%  HL  Hecla Mining Co
-5.66%  HLPRC  Hecla Mng Co
-5.73%  ANO  Anooraq Resources Corporat...

Worst Performing Stocks

-27.78%  NBRI  North Bay Resources Inc
-17.46%  ASGMF  Avino Silver & Gold Mines...
-17.28%  PAL  North American Palladium L...
-16.65%  SWC  Stillwater Mining Co
-15.84%  BHMNF  Birch Mountain Resources L...
-14.43%  EXK  Endeavour Silver Corp.
-12.58%  ASWRF Anglo Swiss Resources Inc.
-11.96%  AQPTY Aquarius Platinum Ltd
-10.90%  SSRI  Silver Standard Resources...
 -9.90%  MGH  Minco Gold Corporation

OK, so It’s a set up for a “work out”. You have a “tell” in MVG that managed to move against the tide. Don’t know much about it, but the chart looks like a flat roller near the bottom. Probably some “short cover” action. A decent sign that the bottom is secure. You also get a “second bite at the apple” in stocks like SWC and PAL that had been running up nicely. I will likely add to my SWC position on this pull back. Auto manufacturing is picking up and that takes platinum, paladium, and related catalysts.

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

Continued “outperforming” the other US markets, but the place to be is clearly the Austria / Australia / Brazil markets. Notice the nice exit call by the Slow Stochastic as it did a ble-cross-over-red mid September. Put a trailing stop loss order in when SlowStoch goes “steady high” then sell when it turns down. Easy trade in a running market.

Last posting I said about the SlowStoch:

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.

That was a pretty good call. With MACD now also looking to cross over to “mouth open down” I’d wait a while to reenter a QQQQ long trade.

Were Bonds a good idea?

OK, lets take a peak at the Bonds Race.

Yes; mostly corporate bonds (LQD) and the long term government paper. (TLT) 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… You would have made money holding long term bonds in the last few months. It wasn’t a bad position, but you would make more in stocks and foreign markets.

What sectors won this week?

And what sectors took the biggest hit.

10 Best Performing Industries

2.44%  DJ US Aerospace & Defense Index
2.35%  DJ US Automobiles Index
1.52%  DJ US Electricity Index
0.93%  DJ US Nondurable Household Products...
0.39%  DJ US Toys Index
0.32%  DJ US Recreational Services Index
0.30%  DJ US Personal Products Index
0.19%  DJ US Brewers Index
0.15%  DJ US Fixed Line Telecommunications...
-0.01% DJ US Internet Index
10 Worst Performing Industries
  Industry Name
Percent Change (over time selected)  

-10.38%  DJ US Home Construction Index
 -7.96%  DJ US Mortgage Finance Index
 -7.60%  DJ US Heavy Construction Index
 -7.38%  DJ US Specialty Finance Index
 -7.22%  DJ US Life Insurance Index
 -7.06%  DJ US Aluminum Index
 -6.93%  DJ US Construction & Materials Inde...
 -6.64%  DJ US Paper Index
 -6.64%  DJ US Forestry & Paper Index
 -6.44%  DJ US Building Materials & Fixtures...

OK, so congress is back in session and folks have figure out tht home building, construction, and lending are still being “helped” by congress. Materials, after a nice run, are taking a pause and rolling back to the SMA stack in a “dip”. So Aluminum, paper, building materials all took a hit. Holding up was goverment specing on military goods, the goverment supported automakers (where the Ford Preferred FPRS, F/PRS, or F-S was up 12% and has a 10.23% yeild. Very Nice and reasonably secure, though at the moment the dividend is being differed and accumulated. FRPA, F/PRA is the senior preferred paying 9.72% and is paying current dividends. So use F/PRS for an IRA where the taxes on the differed dividends are not an issue and you can wait for the day when they “catch up” the accumulated dividend payout; and use F/PRA if you want dividend payments now) along with some utilities (electricity, phones) and the “small indulgences” stocks (toys, non-durables, and of course, Beer, with some personal products and a bit of recreation. We’re not buying a new home, nor building new shopping centers, but we are having a beer at the beach and getting some toys for the kids. Yes, it can be that simple.) Click through the sector listss (that you get to from the heading on this section) to see individual stocks for ideas.

For example, the top “US Brewers” were foreign with Coors as a notable part Canadian:

 0.94%  KNBWY  Kirin Hldgs Company Ltd
 0.61%  FBRWY  Fosters Group Ltd
 0.19%  TAP  Molson Coors Brewing Compa...
-0.01%  ABVC  Companhia de Bebidas das A...
-0.44%  TSGTY  Tsingtao Brewery Ltd
-0.89%  ABV  Companhia de Bebidas das A.

So literally it’s time to “sit back and have a cold one”! TAP would be my choice, but KNBWY is nice too. (Alot of this is likely to be currency movements rather than the stock, but I’m fine with that.)

Remember, 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, 3 months, or a year. 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.

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

Has India, via EPI, still doing well with Brazil close behind and Spain doing nicely. Japan has “gone flat” as has the US market with this roll down. The other grade out in between them.

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, with gold rolling over at the end. Silver has joined gold headed down with a vengance. Oil is in a ‘flat roll’, and took a down hit this week. Overall, stocks is where you want to be, and OOTUS is where, with emphasis on emerging markets: India, Brazil, Australia and EEM. Heck, just parking your money in Brazilian Reals BZF outperformed the US stock market.

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? A Closer Look.

Brazil the EWZ ETF vs the BZF currency ETF

Brazil ETF vs Currency Race

Looks to me like we are headed into a flat and possible dip. Time to buy is near. With the Real rising, the dip will be shallow at best.

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
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. I’d go for the oil trusts rather than a “major”. The refiners (VLO, MRO, TSO, SUN) look like new runs off the bottom to me, but it’s a fairly competative business.

Some Near Oil and Oil Related Comparisions


Last posting I’d said I was selling down my CZZ after the rocket ride, but holding a core. Well, it has rolled down since then. I expect it to continue to “base sideways” for a while, then resume a slower upward run sometime next year. For now I’m holding a few hundred shares as a core position. World sugar is in shortage so a large chunk of Brazilian sugar land is a decent thing to own long term.

XES or OIH – oil services funds, look like a reasonble play here. Pick your entry through. Brazil and the Real continue to be nice. I will likely move some of my oil mioney into chemicals going forward (economic recovery play). BAK is a Brazillian chemical maker on a tear right now. DOW and DD deserve a look too.

The REITS race – Real Estate Investment Trusts

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 

The REITS are moving. BXP, VTR, PSA, HCP, HGN all rising. Time to start raising the quantities. I’m in RPT, PEI and PLD as ‘bottom fish’ but you might want something with a lower risk profile.

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?)

Conclusions and Likely Actions

Waiting for the bottom of this dip to “load up” again. IFF MACD says “trade out” I’ll put some protective behaviours on my positions (“puts” or owning a “short ETF”) I’ll likely add some more REITS and some bottomfish oil and gas trusts. I’ll also spend a bit of time contemplating chemical companies and maybe even buy a bit of Indonesia. And I always watch for opportunities to buy more Brazil on any pull back.

I bought an early position in IRL the Ireland fund last week. I’ll add to that “marker position” on a return to the SMA stack ( about $7 to $7.50) In the long run the Irish banks will recover. The fund also holds a large position in a global infrastructure company that does a lot of road work and will benefit from “stimulus money” in the USA.

Click for Disclaimers, Disclosures, and Where To Get Charts

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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9 Responses to WSW – Sunday, September 27, 2009

  1. Dennis Elliott says:

    I am struck by the fact that Government Motors canceled their contract with SWC to supply palladium (used in cat. converters, I think). Regardless of the Montana Governor’s supposedly close relationship with the President and the fact that Montana Senator Baucus runs the powerful Finance Committee, both of whom went to bat for SWC, GM went with Russian palladium. As SWC is the only producer in the U.S., why do you see them as a good play? Is it because of the lack of trust in the Russian government?

    Also, who is a good, solid silver company that can hold together in the downs and make a good run in the ups? Oh, sorry. I see you recommend a silver fund.

  2. E.M.Smith says:

    I “like” SWC because I’m familiar with the company. They will sell all their platinum to someone, and the loss of a GM contract is an annoyance, but won’t really impact the price they get ( in fact, with platinum ‘way low’ and headed up during a recovery, I’d rather have someone selling into a rising “spot” market than selling into a locked in low contract.) And yes, I have a small distrust of Russia. The bigger issue with auto makers, though, is that the use of platinum is being regularly reduced as they find cheaper catalysts that do the same job. These can be the Palladium type, Rhodium, or even a Palladium / Rhodium / Nickel blend. They can also be from the zeolite family (a kind of rock – called a “molecular sieve”). So over time Platinum will be driven less by catalytic converters in cars and more by things like petrochemicals and refineries.

    But that kind of detail is not so important. In all cases Platinum moves with the business cycle. At the bottom of a recession, you load up. At the top of the “good times” you sell out. Platinum will double over the next few years on a business cycle recovery no matter what economy where in the world does the recovery and the growth. So that’s why I’m slowly building a platinum position (and will likely add some PAL at some point).

    Per Silver: There are so many ways to approach it and all of them are risky. The miners are volatile and sometimes flakey. The SLV ETF is the easiest way for most folks. It directly holds the commodity.

    Silver is a byproduct of copper production, so sometimes it is inversely related to copper production (you must mine and refine the copper and thus get silver, and you sell the silver whatever the price is and the demand be damned.)

    The small miners are often driven by daily news and “finds”, so it’s a tough market to pick someone without doing the homework yourself and monitoring it all the time. The big miners are typically in several metals so are not a “pure play”.

    BTW: I can not make any “recommendations”. I can only tell you what I do, what I know, and what I like. If I make individual recommendations, that would put me in violation of securities laws as I am not a Registered Agent or Adviser.

    Given that, SLW Silver Wheaton is a silver “streaming” company. They buy silver from a bunch of miners and do all the rest of the processing. They are presently on a tear upward. I like them as an easy way to get a broad exposure to silver markets without the single mine specific issues.

    I’m also fond of PAL North American Paladium, but it is a bit on the “small and volatile” side for most folks.

  3. Dennis Elliott says:

    Thanks, E.M. I understand the caveats in your presentation.

    I have also worked with miners in another life and know well their eternal optimism and often unfortunate reality. Invariably, if they could get a bigger dozer,shovel,dragline,(insert your favorite big toy) so they “get down to that ledge” they would be rich “I tells ya”. On the other hand, most of the discoveries we have wouldn’t have been made without them and that attitude.

  4. E.M.Smith says:


    Yup. I grew up in “Gold Country”. (Between “Oroville” the city of gold and “Placerville”…) As kids we would go out to where the ’49ers had mined gold and “pan for it” with whatever dish came to hand. It was fairly common to get a little “color” in the pan on the first day. Never found a nugget, but a few flakes are enough to keep you working that shovel all day long ;-)

    My Dad sold land for part of his life. We sometimes went to the hills where there were a row of folks panning for gold on their “claims” along the creek. One guy even showed me his pill bottle of gold (I’d guess about 1/2 to 1 ounce); unusual for a miner as they don’t like to advertise a ‘strike’ – but my Dad knew him and I think had done the paperwork for his “fee simple” deed. I asked him how long it took and he said it had been “most of the summer”. Call it $200 / month… That was when I lost interest…

    On the other hand, there was a several dozen pound “nugget” pulled out of the area at one point in the past and a 25 pound nugget in 1973 from the nearby Yuba River, and lots of folks made a living at it. (The local “dive shop” sold dredges along with wet suits and pans 8-) My Mom was a waitress at the “Miners Inn”. I think I was learning about placer deposits, veins, quartz, pyrites, sluices and dredges from about the age of 5. Oddly enough, the major thing I learned was that there were LOTS of other minerals you could mine and claim more reliably than you could pan for gold! But it really helped if you were a trained geologist and worked for a company with resources and facilities… And I learned to never trust what a miner said about their claim, only accept the assay reports.

    Though there are still times I think that having a camper on 5 to 10 acres of creek and spending my time sitting by a creek in the woods working a sluice box for more than enough lunch money is not a particularly bad way to experience the world ;-)

    The estimates are that about 80% of the gold is still in the hills, just waiting to be eroded out and washed into placers. Every year you can come back to a creek that was ‘panned out’ and find new color (especially after major storm runoff).

    Ah well, it is just a lot easier to buy shares in a proven productive general miner, like a BHP or RTP, or a basket of gold mining stocks like the GDX, then go sit by the side of the creek and let someone else do the mining 8-)

  5. Iridium says:


    I am getting interested in this part of your blog :)
    I have a question: do you use any kind of “online platform” to pass the orders? I know about such platforms for currency as I tried some time ago but I don’t know about online trading for “this stuff” (don’t know the general name in english!).
    Do you have any advice as I don’t feel like calling or visiting the bank for each order.

    Thank you in advance

  6. E.M.Smith says:


    This is what I do for a living. I trade my portfolio. Sometimes I win, sometimes I lose, but most of the time I win more than I lose (or I don’t eat…)

    Charles Schwab is a clean reliable stock broker and they have an online platform for orders (i.e. their web site ) as do most brokers these days. They also have a non-web page dedicated software product, but like most folks they expect you to live on a PC. I’m more a Macintosh and Linux person and don’t own any PC “up to date” enough for their package AND have no desire to get onto the Microsoft Update Wheel of Fortune…

    I don’t know what restrictions might be in place in the E.U., but in the USA just about anyone can trade from home with the internet and a web browser. Some “deep discount” brokers were formed largely based on the idea of not needing all those physical offices if you trade over the internet. E-Trade and TD Ameritrade come to mind. (TD is Toronto Dominion Bank – Canada)

    First: TD Ameritrade

    The have a Canadian site, with French:

    But I saw no France site. Their “International sites link” does have a Luxembourg site that lets you choose your language:

    Next up, E-TRADE:

    and they seem to have a French site as well:

    I had an account with them for a while and liked it OK. They were a bit too heavy a “page weight” for use on a dial-up line (but few folks are still using dial-up these days…)

    I don’t use any of the fully automated stations (things like “TradeStation” even though they have an interesting looking product. I’m more interested in developing my own proprietary system (first results pasted in daily comments above ;-)

    Why? Usually you have to pay a fee for the data feed of a couple of hundred bucks a month (at least when I looked into it…) and the software costs another few hundred$$$. I can’t really justify that expense right now. Maybe next year if I’m still doing this for a living ;-)

    Also, be advised that the stock ticker symbols I quote here are on the USA stock exchanges. They will have different names on the European exchanges. You can trade most stocks from most places in the world in most countries of the world, but most of the time the name of the security changes. So if you have a French account, you might need to find the ticker in France for the same product.

    Some English Jargon:

    Securities – Just about anything that is expected to have value and is usually a piece of paper or an electronic equivalent. Everything listed here other than “hard assets” is a security.

    Hard Assets – things like gold, silver, land, paintings, gems. Physical stuff of value. Note that you you can buy a security that holds a hard asset. GLD is a ‘ticker symbol’ for a fund that buys and holds bars of gold. If you buy GLD you have a security, not a hard asset; but you hope and expect that it is backed by hard assets in their vault somewhere.

    Bonds – An “I.O.U.” or a promise to pay in the future. Sovereign Debt is a bond issued by a government and U.S. Treasuries are the sovereign debt of the U.S. Government.

    Stocks – A partial ownership interest in a company. You are given a ‘share’ of the company and hope the company makes enough money to pay any bank loans, mortgages, bond holders, taxes, employees, and just about everyone else in the world and have a little bit left over for you. If they do, you hope some of that is payed to you as a dividend and some other is used to grow the company (retained earnings) so the stock price goes up.

    ETF – Exchange Traded Fund. This is a collection of securities that are bundled together and traded as a basket. It may have some bonds, some hard assets, some stocks. Each ETF has it’s own mix of securities. Some are specialized, like GLD, others are more broad, like EWZ that owns a basket of Brazilian stocks. TIP is a basket of U.S.A. Treasuries with an inflation protection ‘kicker’ or automatic adjustment built in. There are about 800 ETFs that I know of ;-)

    ETN – Exchange Traded Note. Practically indistinguishable from an ETF. The difference is that they hold more exotic contracts rather than stocks and bonds. Things like options and futures contracts. In general, not good for long term holdings, but more for rapid trading (options are usually a ‘wasting asset’ and may pop up short term, but eventually expire worthless. The fund tries to mitigate this by rolling over the holdings every expiration date, but inevitably this has some ‘shrinkage’).

    Commodities – These “as traded” are a contract for “stuff”. Things like cows, corn, coffee, wood, gold, copper. Some are ETFs and some are ETNs. You can also directly trade the futures contracts or the options on commodities but those take special accounts and skills that the average person doesn’t have.

    Things that trade on an exchange have a name and a symbol. The symbol is the short hand way of naming the security that is traded. Different countries have different ticker symbols. Some of the Asian countries use a string of digits. The USA uses a string of letters with some occasional punctuation. Sometimes, especially for “preferred stocks”, the ticker used for order entry at the broker will be different from the one used at Bigcharts or at Yahoo Finance. FPRA F-PA F/PRA might all be the same stock. FPRA on Bigcharts, F-PA on Yahoo and F/PRA on Schwab. This usually does not happen with regular stocks, but for some reason preferred stocks are less consistent. Typing “Areva” into the “enter symbol” box on BigCharts shows that the same stock can be bought on 4 different exchanges:

    XETRA XE:890173
    LSE UK:0K8J

    And you can see the part to the left of the : is most likely the ticker used on that exchange if you were buying it in that country. (Here in the USA we get to use the whole handle to specify that overseas echange).

    Hope this helps.

    Bon Chance!

  7. Iridium says:

    Thank you very much for all the details!

    I am surprised that a same company may be quoted on different places.. with slightly different prices… is that different stocks on each market?

  8. I usually don’t post on Blogs but ya forced me to, great info.. excellent! … I’ll add a backlink and bookmark your site. :)

  9. Iridium says:

    comments on an old thread, but you wrote the PGH issue is in this one.
    Reason for changing policy might be that (I didn’t see it in your posts, I may have missed it though, as it is old news):
    The tax status of Canadian trusts is to change in 2011, according to a proposal made by Jim Flaherty, the Canadian Finance Minister on October 31, 2006. Commencing in 2011, trusts would be taxed like all other corporations, at the full 31.5% rate; this would remove the advantage for which they were set up in the first place.
    Unless a counter proposal from liberal party… which seems unlikely to gain any election before 2011 as far as I see, so perhaps PGH is slowly getting prepared?

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