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.
PGH Pengrowth Energy has new management and they have announced that they will retain more of the earnings to grow the company and pay a smaller dividend. (7.8% as of the dividend just paid). Given the looming change of Canadian tax treatment of energy trusts in 2011 or so, I don’t see that as enough excess payout to cover the risk and the 15% Foreign Tax. I will be rolling my holdings out of PGH and into PWE and probably LINE.
This PGH strategy is probably a good one, shifting from high dividends with more taxation to capital gains with less, but it does not meet my goal of a high cash flow dividend payer.
THPW, Thorium Power, that was a 25 cent penny stock did a 30:1 reverse stock split and changed their name to Lightbridge LTBG. For completely opaque reasons, it has also headed up in a rocket ride. Why? Don’t ask why…
Well, the ISM (manufacturers data) was good so the market has headed up. My “buy if touched” orders have pretty much put me at 100% “in” and I bought a couple of things off my “buy ideas” below. I’m now holding some foreign sovereign debt (PCY) and some Indonesia fund (IDX). I also bought back in to RCL Royal Caribbean Cruise Lines and I’ve increased my CPST (I do “core holding plus trade” with CPST).
Looks like the “nervous time” at the SMA stack as resolved to the upside. The default is to buy at the SMA stack, since you get about 3 or 4 moves to the upside for one to the downside. And whenever the downside move through the SMA stack happens, you just stop out at a small loss, so the “buy the touch” is the right behaviour. Oil and gold have both headed up as well (based on the “recovery will happen” story returning). So the Oil Trusts are rising nicely. Nordstroms gave high guidance so popped 9% and has all of retail waking up. Glad I have that XRT position and glad I have the retail holdings for my spouse!
Wall Street Week – Sunday, October 4, 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.
We are still in the “roll down” phase. The news flow has all been from traders obsessing that the market has gone up for a long time and is “due” for a sell off. That usually leads to a dip, and that is what looks to be happening.
What I said last week still holds:
“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).”
I managed to buy some small positions in a couple of stocks and ETFs near the top of this run. Fairly common for me. One of my failings is impatience. I can’t quite just sit it out and wait for a clean “dip” entry indication. So I buy a small “marker” position. Having scratched that itch, I can then wait for a better entry to buy more. That is a personal coping behaviour that you need not use if you have more self control ;-)
I suspect we will see a bit more down / sideways / down behaviour before we return to the long term up trend. I’m holding on to my large dividend payers and some core positions. I’m also holding on to most of my foreign stock ETFs since their stronger gain will mean they are more likely to go sideways than drop a lot.
Worrisom things? On the 1 year chart of SPY we have a recent top of the RSI index that is lower than the last top. A weakening trend to this run. MACD is also ‘red on top headed down’ and aproaching zero. But ADX / DMI now also has “red on top”. My trading rules say to be out of trades at this point. So I’m not holding on to any “fast trade” positions. Why?
To buy things at the bottom of a dip you need to be in cash. Preferably “settled cash”. That means you must have sold several days before the bottom of the dip. And THAT means you must sell when the roll down happens.
Just bought something? You are SURE it will go up? You can’t have been wrong! The long term chart is good! The company fundamentals are sound!! Guess what, none of that means a thing. To buy you must have cash. To have the cash, you must have sold. Period. Now if you are not a trader, you can choose to “ride it out” as a longer term investor. The trader must time the re-entry on the dip, the investor gives up that potential gain, but also gives up the work load of getting in and out and gives up the risk of missing the re-entry… Some of my positions are investments, some are trades. Some will be sold, some not.
Last posting is here:
and has a lot of descriptions of ways to place trades and time entries.
Also last week I identified an interesting potential “bottom fish” and showed the chart. We can see that it is now back at the moving average stack. It would be reasonable to either start “scaling in” now or to put a ‘buy if touched” order above the present stock price and ratchet it down if the price drops more. This ticker, BTW, is a “thin stock” so limit orders only, please… Make the market maker come to you.
Last week I said:
“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!) “
CTO is now at $37.36 and dipped to $36.01 at the low. You probably have about a week of mostly sideways motion before it starts up, based on the behaviour last time it was at the SMA stack. JOE is dropping faster and I suspect has further to go. Even though JOE is traded in much more volume, it has more volatile price action. Why? I’d speculate it is the different personalities of the two major market makers in the two 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”. With that said, I would expect us to return to that 100 day (20 week) gold simple moving average line. Also, if you look at the curve of the “off the bottom” shot up, it is slowly losing slope and slowing the rise. Don’t be surprised if we get a couple of months of sidways, slightly down back to the moving averages. On the 1 year daily chart, this would look “dramatic” but on this 10 year chart, it will just be a “dip” to the gold line. Again, look at ‘04 on this graph. A fairly long “wobbling sideways” market trying to make up its mind. We could easily have something like that again in the next year or two. Now? Who knows. Let the chart be your guide… It says be in, expect a dip right now, and emphasize safe positions that will pay you to wait. Things with dividends. But have a little “juice” in your portfolio to keep you interested and in the game.
This is a new section. I have a new tool that searches chart patterns and finds those that I describe to it as “interesting”. For this section, “interesting” is those that have price over 25 day Simple Moving Average over 50 SMA over 75 SMA. Basically, those that are in a steady up run.
This is most likely to continue, but will at some point hit a “dip” and fall off this search, only to return at the next rise. Realize that these have not been filtered in any way for the quality of the fund, nor for the volume traded, nor for what they hold. Each ticker must be looked at for those qualities before buying anything. This is just a way to find “things of interest” to explore. So what is on the top of the list? CFT is a Barclays Bond fund. Yahoo says:
The investment seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the U.S. investment-grade credit sector of the bond market as defined by the Barclays Capital U.S. Credit index. The fund generally invests at least 90% of the assets in the securities of underlying index. It may invest the remainder of the assets in securities not included in its underlying index but which BGFA believes will help the fund track its underling index. It’s nondiversified.
Skipping down, PCY is the Powershares Emerging Market Soverign Dept fund and the XPH is the “Spyders” pharmaceutical fund. All of these are in a nice chart pattern, by definition of the tool. Mostly you just need to screen them for your particular needs, and for any “too thin” with too little volume to be of interest (i.e. you want over 10,000 shares / day trading). TZD, for example, is an iShares “Target Date 2010 Index fund” that had zero volume Friday and not much before that. Complex product not easily understood and likely going to be closed if these kinds of sales are all it can do. Why buy it if it might be closed and you are back in cash against your will?
You also might need to look for any funds sponsored by a “flakey” company, but with the financial meltdown we’ve been through, these survivors ought to be OK.
Also of interest on this list is BNZ, The New Zealand currency, the Kiwi is rising nicely. I’ve bought some of NZT, New Zealand Telecom, as a way to get exposure into New Zealand even though the NZT chart is a bit flat right now. We also see EWA, the Australia Fund well up on this chart. WIP is the SPYDER that invests in International Government Inflation Protected Bonds. Nice, very nice. IHE is the iShares Dow Jones Pharmaceutical Index Fund, looks like an entry on the chart too. RHS is the Rydex S&P Equal Weight Consumers Staples ETF. Yeah, all the stuff we buy even in bad economic times. Traded thin at 700 shares, but it does point you at the Consumer Staples sector as a place to investigate…
I think I like this tool. It finds interesting things that are relatively easy to evaluate.
CFT 94 MZN 89 ITR 75 PCY 69 CIU 66 IHE 60 RHS 59 XPH 59 BNZ 58 DNH 58 EWA 58 WIP 58 EMB 52 TZD 49 BLV 48 MZO 45 MZG 42 BIV 40 BND 40 GBF 40 GVI 40 IPE 40 LAG 40 AGG 39 HYD 39 BWZ 38 DBR 38 IGOV 38 BSV 37 MBB 37 INY 34 KXI 34 THD 34 PZT 33
You can explore the rest on your own, if you like.
OOTUS – Out Of The U.S.
The big news here was that Brazil got the Olympics… and EWZ popped up nearly 2% on a down market day. Have I told you lately that I like Brazil?
To me, it looks like China has gone flat and may be rolling into a drop. The IIF india fund is flat to dropping, but the Wisdom Tree EPI is continuing to rise nicely. That is a graphic demonstration of the merit of an active fund managed to hold profitable companies vs those that are more of a broad index of a country.
I still like Indonesia and will be buying a little bit “soon” as a toy if nothing else.:
This chart compares FXI – China 25 big stocks, EWZ – Brazil, EWO – Austria, EPI – Wisdom Tree India fund, and the Indonesia fund.
In this roll down of the market, all three of IDX, EWZ, and EPI have held up nicely. I’ll be rolling more of my money into them, and less into some of the others. I’m especially looking at lighter positions in China.
VIX the Volatility Index
What I said last week still holds:
Shows a “blip up” in volatility. That often indicates a “dip” is started to form. Hold some cash and watch for a good entry.
I suspect that entry is near…
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
This chart shows that betting against the U.S. Dollar is still a winning trade. OOTUS wins. It does show the dollar having an up “blip” as the market dips. Fairly common. I would not make direct dollar trades, but I’m willing to have foreign stocks in selected markets.
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 and the British Pound, FXB.
Ideas of the Week
I like the idea of some selected bond funds including some of the emerging market bond funds off of the “Running Tickers” tool up above.
It is also “time to be nervous”. We are back at the short term moving average stack. If this thing punches on down on volume, bail out for a while, it is a “short bear raid” trying to “retest” the bottom from a few months ago. Unlikely, but a possible into the 3rd week of October.
And I’m going to explore some of those ‘lesser’ emerging markets, like Indonesia. I don’t know, it’s just sort of a bit fun and exotic…
Last week I said:
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.
While I think it is important to hold some oil trusts at this time, I’m a little more of the opinion that crude will likely take a price cut. Not all the way back to $40, but maybe down to $50. Long term, it is going to go up; but right now we have something like 100 M bbl in ‘floating storage’ (that is, ships parked) and Saudi already has 4 Mbbl/day “shut-in”. Not particularly “bullish”… So “go lightly” on the oil positions until we see how this turns out. If the economy of the world picks up, we will get a jump up in oiil prices, and if Iran does something stupid, a rise. But if we have another economic turn down and Saudi does not slow the pumping, prices will fade. I think OPEC will defend $60 to $70 / bbl, so the downside risk is low, but don’t jump in in size. Also, with winter coming and natural gas at extreme lows, using the “gas rich” trusts is likely to be better.
Last weeks posting has a run down of various Oil & Gas Trusts.
A few weeks ago I said:
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.
We’re at $22, but given the market context, I’m waiting a bit longer for a better ‘re-entry’. I’ll probably use a “buy if touched order” rather than trying to time the entry myself. The chart shows big “one day pops” and “gap higher at the open” on entry days. Very hard to time that with a chart that lags the “action” at the open…
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.
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.
Most interesting is that EWZ, Brazil, is rising against the tide.
WIth RSI down at 20 and MACD looking like a ‘cross over’ to the upside might be happening ‘soon’, we could easily have an up day on Monday or Tuesday…
Other Asset Classes
The 6 month 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
We’ve got a commodities roll down in progress. Oddly, Silver is moving down while Gold and the Yen are moving up. Classic “flight to safety” and traders pushing down on an extended momentum to the upside in commodities. So the “big trades” are moving to cash and gold and pushing “stuff” down. OK, make a shopping list of “stuff” you wanted that had run up too much to buy in. Watch the copper stocks (PCU, FCX) and the silver play SLW and SLV for entries “soon”.
So what happened in the Tech Market relative to world 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
Rolled over more or less right on cue. MACD looks like a fairly reliable trade indicator for the QQQQ ticker. Buy and sell on crossovers. Slow Stochastic ought to cross over first as the ‘set the trigger’, then on MACD make the entry.
Were Bonds a good idea?
OK, lets take a peak at the Bonds Race.
Long term US Governments TLT took a hit while TIP, the inflation protected bonds popped up. Someone is worried about inflation.
10 Best Performing Industries 3.29% DJ US Drug Retailers Index 3.08% DJ US Footwear Index 2.49% DJ US Soft Drinks Index 2.48% DJ US Publishing Index 2.44% DJ US Aerospace & Defense Index 2.30% DJ US Food & Drug Retailers Index 2.30% DJ US Beverages Index 1.95% DJ US Reinsurance Index 1.54% DJ US Property & Casualty Insurance... 1.52% DJ US Electricity Index
The “hunker down” trade into “Consumer Staples” of food, drugs, shoes, drinks. A little “goverment continues to make war” trade and folks are getting comfortable with owning insurance companies again. It would be worth it to explore the insurance companies for those of interest. I’m not going to since I already hold a “too large” position in BRKA and can not reasonably justify holding more insurance companies.
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. Everything else is “having issues”.
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.
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
Looks like the “saftey trade” is back on. Gold, Yen FXY up, other stuff down. Heck, just parking your money in Brazilian Reals BZF outperformed the US stock market.
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.
Gotta love Brazil. Just gotta love it. Late stage in this run, and I’m waiting for a dip to double my position, but don’t know if I’ll get one any time soon…
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
These look pretty dismal. RSI is rolling between 50 and 20. A classic ‘running down’ configuration. It’s at 20 now, so a day trade to the upside is possible, but why bother?
Notable exception is COP. Connoco is holding a lot of natural gas. Someone is betting nat gas is going up… IMHO.
Not much to see here. Same old same old. EWZ and Brazilian Real going up, not much else.
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 got whacked by the shorts on the “lets short what we shorted for the last 2 years” trade. But the chart shows a bottom is in. This is the chance to add to your REIT “marker positions” or “tinies” not a time to sell and run away.
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
Same thing as before:
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.
The hardest thing about trading is the waiting for things that you know are coming a month or more away… then doing the right thing at the time it feels exactly wrong. Buying when everyone is panic selling. Selling when you have the glow of success over your gains.