If you are expecting global warming stuff, it’s here:
https://chiefio.wordpress.com/category/agw-and-gistemp-issues/ and under the GIStemp tab up top.
This posting is about the other thing I do, looking at investment markets.
IMHO, we are at a “local market top”. I’ve largely stepped aside to cash for any volatile positions. I continue to hold things like high dividend oil trusts and long term investments like BRKA Birkshire Hathaway. But it’s time to assure you have stop loss orders in place and watch the market closely.
It is likely that I may be slow in getting out the next “WSW” due to something I discovered in the way NASA GISS GIStemp handles temperatures and the “Global Warming” hysteria. Please forgive that delay, should it happen.
Wall Street Week – Sunday, October 18, 2009
Well, we are back “off to the races”. This is the most frequent occurance when you hit the moving average stack. About one in 3 or one in 4 you punch through lower in a “correction” rather than a “dip”. The best bet is for the rebound, but you are ready for a “sell out” if the dip turns into a correction. In any case, we ‘resolved to the upside’. Good enough.
We got through options expiration on Friday, Oct 16 with only a tiny sag. These folks have a nice readable calendar
This matters because the “hot hands” and “big players” do a lot of options. At expiration, these bets “settle” and you get a “tell” about what they are doing. This week, the “tell” said “more or less balanced book”. The good news is that a balanced trade book is not betting (nor pushing) the market down. The bad news is that we’re near the end of a long run and ‘balanced book’ often proceeds “down soon”. The “smart money” is not yet shorting things (pushing down) nor have they driven it up hard (not making a lot of new bets). We’re in the “cruising” stage. We keep going the way we’ve been going, but not forever…
So I’m “all in” but the next thing to do is to watch for the next reversal / correction back to the Simple Moving Averages and prepare for it. Sell your loosers, keep your winners, put stop loss orders behind the ones that have run up the most, and think “protecton” not “bet big now”. Bet big AT the SMA stack, protect when far away from it.
Oh, and start taking your positions and plotting them all on one chart (as we do here and under the “races” tab. Pick he worst ones and sell them. They will go down the most in a reversal. Pick the ones with large secure dividends and those doing “stairsteps up” (up, flat, up, flat…) as your “hold through the reversal” positions.
If you would like to see what I said last week, that posting is here:
The Long Term Context
Last week I explained this particular chart. This week we look at it again. Volume is a bit light, again, but Slow Stochastic is again turning up. This is a very long term chart, so I interpret this as saying “one more run up, then we’re going to be thining out and looking for a return to the SMA stack.
I’m repeating this text from last week. It looks to me like we have “one eye” and we’re setting up to form the second. So read this again, look at the chart, and watch the next couple of weeks for a down turn after Slow Stochastic is back at the top and inflects.
OK, look first at volume. We have red bars and we have a sideways red line. The sideways red line in a running average of past weeks. Notice that recently volume is below that red line. We have a white blob under the line and above volume. I think of those as “spooky eyes”. When you see two of them, it means volume is falling off and it is time to start being a bit more worried than usual. Take a look at the end of ‘08 where volume has two white blobs with a small spike between them. When you see those “volume eyes” looking at you, go to cash and take a vacation…
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
Same story we’ve seen for months now. Resource economies and non-dollar resource plays winning. Oil has taken off, though. Time to revisit the oil play. Euro, Yen and Gold beating the dollar, but the Brazilian Real is beating them all. Easy money. Resources and OOTUS. Expect this to last for months. Wobbles, returns to the SMA stack, yes, but the theme is going to be around for a while.
What about Brazil? A Closer Look.
What I said last week still holds:
Gotta love Brazil. Just gotta love it. But look at the distance from the SMA stack. And look at RSI at 80. This is looking like a “blow off top” where it spikes up, then drops. Have a stop loss behind your position and ride if for all it is worth, but it’s a bit late to be adding to Brazil and it is time to start thinking about how deep the next “dip” will be …
The oil spike and the spike in sugar (SGG) have giving it another lift, but watch out for the inevitable dip. Long term good, but don’t buy on an 80 RSI after a big run up…
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 each ticker will hit a “dip” and fall off this search, only to return at the next rise. So a high number is good, until it fails, and a low number can mean time for a second bite at the apple. Being ON the list can be as important as rank on the list. Races tell you how to rank them. 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?
MZN 99 PCY 79 IHE 70 RHS 69 XPH 69 BNZ 68 DNH 68 EWA 68 PAF 68 WIP 68 EMB 62 TZD 59 MZO 55 IPE 50 BWZ 48 DBR 48 IGOV 48 BSV 47 MBB 47 KXI 44 VDC 43 XLP 43 ISHG 37 DEM 33 DGS 33 EU 33 EWT 33 TIP 33 BRF 32 EPI 32 EWX 32 FXA 32 PIN 32 QAI 32 VWO 32 AAXJ 31 ADRE 31 BIK 31 BZF 31 DBV 31 DEF 31 EDC 31 EEB 31 EEH 31 EEM 31 EWM 31 EWZ 31 FDN 31 FPX 31 FRN 31 FXG 31 GML 31 GMM 31 GULF 31 ICI 31 INP 31 IRO 31 IYK 31 PBS 31 PSL 31 PTE 31 UGE 31 URR 31 VOX 31 XGC 31 BKF 30 CSD 30 CZA 30 ERO 30 GUR 30 GXG 30 HYG 30 IAI 30 IDX 30 ILF 30 JNK 30 PNQI 30 PNXQ 30 HHH 29 PGX 28 XES 28 IAU 27 GLD 26 DGL 25 DGP 25 RSX 25 UBG 25 UGL 25 DBP 24 EIS 24 JJP 24 CEW 23 ENY 23 MES 23 IIH 22 EET 21 PMNA 20 PVI 20 XRU 18 BVL 17 INR 17 GWO 14 FXC 12 FXE 12 FXF 12 IAH 12 MCRO 12 PPH 12 TUR 12 UDN 12 ULE 12 AFK 11 AGQ 11 AIA 11 AOA 11 AOK 11 AOM 11 BJK 11 BSC 11 CVY 11 DBS 11 DES 11 DEW 11 DLS 11 DND 11 DON 11 DPN 11 DRF 11 DRW 11 DTD 11 DTH 11 DTN 11 DVY 11 DWX 11 EES 11 ELR 11 ELV 11 EMG 11 EMM 11 EPP 11 EPS 11 ERX 11 EWI 11 EWK 11 EWN 11 EWP 11 EWW 11 EZM 11 EZU 11 FAD 11 FCG 11 FDM 11 FDV 11 FGD 11 FNI 11 FNX 11 FTC 11 FXD 11 FXH 11 FXL 11 FXN 11 FXO 11 FXU 11 GAF 11 GCE 11 GDX 11 GMF 11 HGI 11 IAK 11 ICN 11 IDV 11 IEO 11 IEZ 11 IGE 11 IGF 11 IGN 11 IGV 11 IJH 11 IJK 11 IJT 11 ISI 11 ITA 11 IVE 11 IWP 11 IWR 11 IWS 11 IYC 11 IYE 11 IYF 11 IYG 11 JKD 11 JKH 11 JKI 11 JKL 11 KCE 11 KIE 11 KLD 11 KOL 11 LVL 11 MDY 11 NFO 11 NIB 11 NY 11 OEF 11 OIH 11 PAO 11 PBP 11 PDN 11 PDP 11 PEF 11 PEJ 11 PEY 11 PEZ 11 PFA 11 PFI 11 PFM 11 PGM 11 PHB 11 PIE 11 PJG 11 PJP 11 PKOL 11 PQBW 11 PQZ 11 PRF 11 PRFZ 11 PSJ 11 PSP 11 PTF 11 PTRP 11 PWB 11 PWJ 11 PWP 11 PXE 11 PXH 11 PXI 11 PXJ 11 PXQ 11 PXR 11 PYH 11 QQEW 11 QQXT 11 RCD 11 RFG 11 RFL 11 RPG 11 RPV 11 RWV 11 RWW 11 RYE 11 RYF 11 RYJ 11 RZG 11 RZV 11 SLV 11 SLX 11 STH 11 SZR 11 TOK 11 UKW 11 UYG 11 VCR 11 VDE 11 VFH 11 VIG 11 VO 11 VOE 11 VOT 11 VSS 11 VYM 11 XLE 11 XLY 11 XME 11 XOP 11
Several of these we’ve seen in prior weeks. We have PAF near the top, so we could ask Yahoo what it is:
Another Asia-ex-Japan fund. I’m in EPP, but this is nice confirmation. At the bottom (at 11) is XME a miners and metals fund. And XOP an Oil Exploration and Production fund. Two things we know are running right now. A quick scan also shows silver SLV, oil services OIH, Coal KOL and even MDY the “mid cap” index fund all on the list. And several of my favorite EWx funds including Brazil EWZ. All of that gives confidence that the others have some merit as well. All in all, a nice shopping list. Stable growers tend to rise to the top of this list while rolling or volatile trades tend toward the bottom. They all are “running up” by definition of the screen. So if you want more sedate steady growth, head toward the top. More “action” will tend to the bottom. If you want the most growth per unit time (alpha) you will need to “race” them against each other on a common chart. I’ve bought a couple of things off this list and I’m happy with the results.
You can explore the rest on your own, if you like.
OOTUS – Out Of The U.S.
If you are in England, put your money in anything else. The pound has had a bit of an upturn lately, but I don’t see much reason for it to hold. The Yen took a dip. Odd. It usually isn’t very volatile. Probably a central bank intervention, IMHO.
The “Emerging Markets” are all running up nicely. Have been. Will be for a while. Hop on and ride…
This chart compares FXI – China 25 big stocks, EWZ – Brazil, EWO – Austria, EPI – Wisdom Tree India fund, and the Indonesia fund.
I own some of all of these but FXI (which I might trade back into). A very nice set of things to be riding.
VIX the Volatility Index
Low, very low. It is not very interesting right now, and mostly indicates “not time to buy” and “not time to sell” – yet.
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 down trade” has moved above the last high. Our “failure to advance” has been broken.
Also, on the RSI, we have this peak being far lower than the last peak. That usually means a trade is “ending soon”.
I would not expect the dollar to run up, but rather to go ‘flat’ for a while. Then it will likely resume the drop as the “stimulus” and “spending programs” continue. We’ve got a $1.4 Trillion deficit this year and no sign of any attempt to reduce spending. That is pretty much guarnateed to “bugger the dollar” long term. Any “dollar strength” will be short lived and an opportunity to re-enter OOTUS and “dollar down” trades.
FXY, the Japanese Yen, is a safe place to park your money followed closely by the Aussy FXA and the Swiss Franc FXF. FXY is dropping a bit right now in what looks like central bank activity. BZF, the Brazilian Real is rising nicely).
Ideas of the Week
I’m “all in” at this point, so no ideas yet. Just protecting gains at they happen. The RIMM “friend of the market maker” trade is exited. I’m pretty much “all in” and at that point the only real “idea” that matters is when to exit a position…
What does the 10 day hourly chart say is happening now?
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.
The “good stuff” continues to be good, the US market is weaker than the OOTUS trades. And I was too slow to do the “day trade” out of QQQQ before the roll down into Friday. I expect we’ll have a rebound and I’ll ride it through to then. This is why I’m interested in an automated trade system for QQQQ; I just don’t pay attention to it on a fast enough basis to make the day trades consistently.
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!
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
The “stuff trade” is still running. Metals, wood, oil, silver, you name it.
Oil has started to shoot up. This is why I hold a core position in oil trusts at all time. I size that position so that the dividends cover my oil use. If oil goes up, I don’t care. My dividends go up in proportion. Sometimes I add a trade around it, but doing “Core plus Trade” is a great way to handle oil. The implication is that other oil companies will also start running up a bit now. I’d concentrate on OOTUS oils, since we don’t know what congress will nationalize next (healthcare, banks, and car companies being already on the list or “done deals”…).
So what happened in the Tech Market relative to world markets?
Tech is beating the rest of the US Markets, but OOTUS is still the most stellar choice. The chart does look a bit “toppy” now, and it is time to plan a “trade out”. Put your stop loss orders in place.
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
Were Bonds a good idea?
OK, lets take a peak at the Bonds Race.
WIP and TIP are winning and that indicates a general world concern about inflation. You ought to have a concern as well. Other bonds are not doing so well. That’s a clue too. Out of regular bonds. In strong currencies. Money to inflation protected assets. WIP and TIP are inflation protected bond funds. TIP is U.S. Treasuries with an inflation adjustment, WIP is “world” bonds with a similar inflation “kicker”.
LQD corporate bonds are in a strong “roll down” and TLT the long term treasuries are also falling. If you must do bonds and can’t do an inflation protection version, at least stay with very short maturities, like SHY. You will still lose the amount of inflation in real purchasing power, but at least you will not have the loss of sales price from a dropping bond market.
10 Best Performing Industries 9.39% DJ US Transportation Services Index 8.77% DJ US Food Retailers & Wholesalers... 6.80% DJ US Automobiles Index 6.04% DJ US Furnishings Index 6.01% DJ US Oil Equipment & Services Inde... 5.88% DJ US Oil Equipment, Services & Dis... 5.79% DJ US Waste & Disposal Services Ind... 5.68% DJ US Railroads Index 5.26% DJ US Integrated Oil & Gas Index 4.97% DJ US Oil & Gas Index
An odd list. Transportation & rails, food, cars, furniture. Oil I understand. When oil runs up, the industry goes up too, and we had an oil spike up in price. The furnishings and autos has to be bottom fishing. Waste disposal is a “run for safety” play as is food. The transportations are the unexpected ones. Ryder, ticker R, is up 15% on the week. The chart has a nice bottom in and it’s running upside. INT World Fuel Services is on a tear upward, but I know nothing about them. Worth investigating… Then a group of 4 and 5 letter tickers I’ve never seen before, several with latin names. All worth a look to see if there is a South American trucking play here or if it is the Mexco spike sliding into Mexican stocks. UNP and NSC show rails in a nice run and this as a spike off of the SMA stack.
The “autos” were lead by HOG Harley Davidson
17.31% HOG Harley-Davidson Inc 10.80% FIAZY Fiat S P A 9.07% PEUGY Peugeot Citroen S A 7.96% FIATY Fiat S P A 5.14% VLKAY Volkswagen Ag 4.21% F Ford Motor Co 4.12% FPRA Ford Motor Co 7.5 PC NTS 3.69% FPRS Ford Mtr Co Cap Tr Ii
HOG looks like a nice run, but a 17% week is a bit much, wait for a pull back. Ford is doing nicely, especially the preferreds FPRA and FPRS that have a nice dividend. Fiat is the odd one. Someone thinks they can make Chrysler go, I guess… FIAZY has little volume. And Peugeot, who would have thought… I don’t think they will beat the OOTUS trade, but hey, they are going up.
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
The Oils had a great run this week. Guess someone realized that the world will continue to run on oil for decades to come… CVX, COP both looked good. SU was stellar.
With oil waking up, these have taken off as well. Brazil and the Real are continuing to do well. CZZ is looking ready to start a new run and XES (or OIH) the oil services fund is moving (hardley a surprise when oil is rising. You need to drill and pipe more of it…)
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
No real change from last week:
Nice slow rising bottom fish. I think there is more money to be made elsewhere, but “buy a tiny” and start accumulating good properties at this bottom.
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
Easing out of positions. Some by design, most by a “trailing stop loss” order to make the decision for me.
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.
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.