If you are expecting global warming stuff, it’s here:
This posting is about the other thing I do, looking at investment markets. Prior postings in this series are available here.
The charts in this posting are live charts, 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! If you would like to see the historical chart, you may enter custom date ranges on the charting tool at http://www.bigcharts.com
Wall Street Week – Monday, December 21, 2009
Well, we’ve been in a roughly sideways choppy market since about the time, last month, that I said we would be in a roughly sideways choppy market. What? You expected something more interesting? Sometimes ‘the hard bit’ in trading is the boredom. “Nothing happened” can happen for a fairly long time. OK, yes, some toppy markets have had a bit of a tumble (like gold). Yes, the dollar has had a bit of a rally. But I did say to ‘hold dollars’ and after you have ‘gone to cash’ it is just, well, boring. OK, you could have bought the ‘dollar up’ UUP ticker or the “short gold” ticker. But those are slightly exotic instruments for the average Joe or Jane sixpack. If you want to trade them, you probably don’t need me telling you about them.
So I’m mostly on the sidelines right now. Same as a month ago. You can do some small day trades. You can hold some large dividend payers (I still have my CEL that is paying well along with TGP that is a high dividend LNG tanker company, for example) along with the very long term investments (like Birkshire Hathaway BRKA / BRKB ). But there isn’t much ‘action’ in holding them. And I’m still holding my “oil trusts” as a high dividend hedge on my personal fuel consumption. Again, not a lot of “action” in saying “hold the core holdings”…
Was there money to be made? There is always money to be made, but at what cost and at what risk? It’s the Holidays. A time for family, friends, and excessive demands on your time. Not the best circumstances for making good trades. The market volume drops, you get confusing currents (like “tax loss selling” where folks may sell a lot of some position just to cover taxes on another- not very predictable…) and bored market makers look for games to play in thin individual issues. So, in my humble opinion, trade only the amount that is very comfortable, then take a break and do what really matters: spend time with family and friends.
The Long Term Context
A month or so ago I explained this particular chart. Since it takes such a long time for a 10 year weekly chart to show changes, I’m going to do a bit of a ‘change up’ this time with two variations just to keep it interesting. One as the NYSE, the other as the SPY exchange traded fund (ETF). This week the NYSE Volume is astoundingly light. A bit over a Billion shares, or about 1/10 to 1/5 of ‘typical’. When volume weakens, a trend is running out of gas. This is ‘run out of gas’ AND ‘run into a holiday wall’. There’s just nothing happening on wall street. I’ve also put DMI on the chart. You can see that the ‘black line’ is about 20. That’s ‘very weak trend’ land (and says ‘use Slow Stochastic’). We also see both the red and blue lines dropping. Both up and down tendencies are losing strength. Flat, headed flatter… Slow stochastic is ‘middle of nowhere’ but advising to stay out (‘mouth’ pointed downward, blue on top). It’s a pretty weak market when even the “fast trades in low trend markets” indicator is saying not much of interest is happening. Highest expectation is still to the downside, though.
When we look at the SPY, it has a bit more trend to the DMI indicator. Still weak, but not quite as week as the broad market. Slow Stochastic is still saying ‘sit this one out’. I’ve added the Rate of Change indicator. It is still ‘above zero’ which is technically a ‘be in’ call, but look at how close to zero we are! This is a very tepid ‘be in’! and ROC has been weakening into this point. I’d expect a tiny “Christmas Rally” into Dec 25, but some kind of drop after that until a new trend sets up in January.
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
Our basic benchmark SPY has gone into a very shallow ‘flat wobble’ for about a month and a half. No trend and not even much ripple to fast trade. No joy in Mudville to be had there. Notice that DMI even on this daily chart has gone to an incredibly low 10. That is dead flat. MACD is in a very shallow down drift (with a ‘be out’ red on top bias) as we see even the “moving average stack” go flat (MACD approaching zero, but slowly). Even RSI at ‘near 50’ mid-line and flattening is not giving anything to work with. Strange market, isn’t it? Not at all like a live jumping mid-year market… Everyone is just stepping to the side and taking a long pause.
Gold and Silver continue their ‘correction’ to the downside. The Euro and Yen both show a drop due to “dollar strength” as does BZF. Sitting in the US dollar looks like it was a pretty good call. (Whenever it was I called it… about a week into the trend, I think… probably ought to look it up. But like Italian driving: “What’sa behind you, she is a no important!”… (rough paraphrase from the movie “Gum ball Rally” I think…) Cash was even better than bonds where we see the “Fed might raise rates soon” worry putting a downward kink in even the ‘couple of years’ short maturity bond funds.
We also see the impact of the dollar strength on the foreign stock markets in the EWA Australian ETF. Stepped out at a good time, but it would be a good thing to watch for a ‘reentry’ some time next year.
Oil has flattened out after a brief ‘correction’. Not a clear reentry yet, but ok to hold high paying oil trusts. WOOD continues to climb. It would be good to check out other “softs” and ag commodities. ( Sugar SGG and Cotton BAL both are rising, though sugar is very volatile…) PCL is rising with wood. Still has a nice dividend too. It ought to continue rising for quite a while as demand for wood in building recovers.
What about Brazil? A Closer Look.
We stepped out of Brazil when they had a “Ministry of Stupidity Speaks” moment a couple of months back. We ought to keep an eye on them, though. But for now it is still a “watch but don’t touch” market.
I’ve added a couple of other ’emerging markets’ to this chart so we can see the relative performance. Mexico (EWW) had been doing well, but looks to be having a ‘holiday flat’ as well. Notice that DMI / ADX is now ‘red on top’ confirming the ‘be out of Brazil for now’ call of a while back. (Oct. 20th, 2009). In general, you can see that the (temporarily) strong dollar can take a big bite out of emerging markets. That is why ‘early out’ is especially important for this stocks. They go up a lot faster in good times, but drop more and faster when things are not as good…
In a special posting October 20th, I had said to bail from Brazil as their President had started talking about special taxes on foreign stock trades. Now you can see why I said that.
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?
Basic straight runs: Price > 25 > 50 > 75 =============================== etf.pf has 829 valid symbols (829 older than one business day) DBB 56 BDD 55 CSJ 49 ECH 36 PPH 36 RYH 36 CGW 35 CVY 35 DEF 35 DSI 35 DTN 35 DVY 35 ELR 35 FDL 35 FDV 35 FEX 35 FTA 35 FVD 35 FXH 35 FXR 35 IGM 35 IHE 35 IWZ 35 IXJ 35 IYH 35 IYJ 35 IYW 35 JNK 35 MTK 35 PBP 35 PKW 35 PNQI 35 PPA 35 PQBW 35 PTH 35 PTJ 35 PWV 35 RGI 35 ROM 35 RTG 35 RXI 35 RXL 35 SDY 35 UXI 35 VGT 35 VHT 35 VIS 35 VUG 35 XGC 35 XLI 35 XLK 35 XLY 35 IYC 34 VCR 34 BWV 33 CSD 33 EWW 33 IWV 33 MZO 33 ONEQ 33 PQY 33 REZ 33 RHM 33 RSP 33 UCC 33 VTI 33 MZN 32 BVL 31 IHF 31 UBM 29 BDG 28 JJM 28 JJT 25 JJS 21 JJU 21
And running Tickers of all kinds:
Basic straight runs: Price > 25 > 50 > 75 =============================== pf has 4735 valid symbols (4735 older than one business day) BFN 144 IMW 125 MAO 95 BJW 90 SHR 90 SEP 86 EPB 80 GOOG 79 ORH 79 DEP 78 OKS 78 SFO 78 SKC 77 XVF 77 DKL 76 KVU 76 BWP 75 PJE 73 PPI 67 PVD 67 SKP 65 BUN 62 PYT 60 TAM 59 BGH 58 FZO 58 RAI 58 SEPR 58 DBZ 57 MPS 57 NTRI 57 PAA 57 DBB 56 JW-A 56 BDD 55 DTE 55 BXT 54 EPE 53 MHT 53 MKY 52 SPSS 52 JW-B 51 TFX 51 KYN 50 RSY 50 SRU 50 CSJ 49 SZI 49 TZF 49 EW 48 NHP 48 DE 47 GKM 46 GMA 45 GOM 45 IO 43 MO 43 PER 43 RSH 43 HRS 41 UIS 41 AKAM 40 BXA 40 CNK 40 F-PA 40 F-PA 40 GJL 40 LNCR 40 MAT 40 WMZ 40 WPZ 40 AMO 39 BUW 39 LFL 39 TE 39 BGT 38 D 38 GAS 38 MED 38 MYL 38 NLX 38 TSL 38 VVR 38 WCG 38 BDK 37 BPL 37 CMN 37 COV 37 FCZ 37 LL 37 LVB 37 MDU 37 MMP 37 MSY 37 OKE 37 PCN 37 PETM 37 PFK 37 PHK 37 POM 37 SYT 37 TII 37 UTX 37 ACS 36 AMJ 36 BME 36 BTQ 36 CH 36 CHI 36 CKK 36 DRU 36 DTV 36 DUK 36 ECH 36 EEP 36 GSV 36 HE 36 HJA 36 HLS 36 KMP 36 MFY 36 MRK 36 MVI 36 PMK 36 PPH 36 RYH 36 SWM 36 ZMH 36
OOTUS – Out Of The U.S.
The currencies are all generally dropping against the US Dollar (with the Canadian FXC and Mexican FXM being mostly flat rolling).
This chart compares FXI – China 25 big stocks, EWZ – Brazil, EWO – Austria, EPI – Wisdom Tree India fund, and the Indonesia fund.
The “Emerging Market” trades have gone flat or are dropping. Time to be in cash or elsewhere in “watchful waiting”.
VIX the Volatility Index
Low, very low. It is saying “time to be sold”. We can buy back in again on one of those little blip / peaks to the upside. I’ve added a couple of tickers for some interesting sectors (such as transports, that are often a leading economic indicator) too.
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 IYT - Transports XHB - Homebuilders XRT - Retail
Notice that Transports are continuing to rise against the broad market (SPY) flat trend. Retail is doing better (it often runs up through Christmas and into the middle / end of January) and home builders are showing some signs of renewed life. All part of the “We’re Not Dead Yet, We’re Getting Better!” recovery trade.
I’m going to turn this chart around from the prior version. This is now a ‘US Dollar UP” trade chart of UUP instead of UDN.
Notice we have crossed the SMA stack to the top side. DMI is rising strongly into 20 headed for 25 with ADX+ (blue) on top. For now, it’s US Dollar time. RSI is not yet at 80, so the run has some more room (but remember that this kind of rollover to the topside will return to the SMA stack and that the SMA stack must ‘invert’ or roll over to confirm the run ‘has legs’. MACD is also “blue on top” and is above zero. Again, a bullish call on the US Dollar.
Ideas of the Week
Spend this week doing your ‘end of year’ evaluation. What was right, what was not. Where could you have done better. Plan for the new year. What will the big money dancing elephants be doing then? (And expect that as they spend the US Dollars they are presently sitting on, the US Dollar Up trade will soften or maybe even end.)
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.
Shorting the Emerging Markets would have worked (though I’m not fond of shorting thin markets like holidays) and we see that Nasdaq 100 (QQQQ) and Russell 2000 (RUT / IWM ) are both doing better than the broad market. So watch for a Tech / Small Cap outperform trend to develop. If it does, it can be traded. (RUT is an index, IWM is an ETF that follows that index)
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
Not much news here. WOOD rising, stocks flat, everything else in the list weak or falling.
So what happened in the Tech Market relative to world markets?
Tech is beating the US large stock Markets, but weakening. Mid Caps (MDY) and broad market (RUT / IWM) are starting to show a bit more life. Tech is holding up better that foreign markets, for now at least. I still like cash, trees, and shorting bonds better, though. At least for now. You can get some short choppy trades out of it, but that’s a lot like work…
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 but with TBT (the “long term bonds” short sell ETN – that is, the thing that “shorts bonds”) as the main ticker symbol:
Clearly, bonds were not a good place to be, especially long term bonds. The “short sell bonds” trade, while not exciting, has an entry call.
Since I got this part added late, it is the “one month” chart from Jan 6th, so it will include the last 3 weeks of December and be more representative of the date of this posting.
10 Best Performing Industries DJ US Aluminum Index 23.22% DJ US Coal Index 22.62% DJ US Airlines Index 18.00% DJ US Automobiles Index 16.36% DJ U.S. Iron & Steel Index 16.31% DJ US Mobile Telecommunications Ind... 14.65% DJ US Exploration & Production Inde... 14.02% DJ U.S. Industrial Metals & Mining... 12.55% DJ US Heavy Construction Index 11.11% DJ US Oil Equipment & Services Inde... 11.10%
Aluminum, coal, steel, Industrial Metal & Mining, Heavy Construction. OK, easy to spot what sector has been the target of “sector rotation” – Recovery and growth is the theme.
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 action here was Exxon bought XTO, a major US Nat.Gas company. XTO jumped, but that trade is over. Exxon dropped (common when a company spends a bundle of cash) and that probably gives a good entry point for Exxon (especially for fast traders OR very long term investors… “It’s on sale cheap, so buy some” works for both styles.)
Sugar moving up, if in fits and starts, is the interesting thing here.
Transports in general are a good early indicator. Boats, rail, maybe even some trucking. Anyone for a FDX / UPS Christmas?
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
PLD is in a very nice run. Mall REITs look nice too. Whole new meaning to ‘Mall Shopping’ eh?
Conclusions and Likely Actions
Holding cash and big dividend paying positions in well capilalized companies (like LNG tankers and oil trusts). Picking up a little realestate cheap. Watching for the “sector rotation” and doing new year planning.
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.