WSW Monday, December 21, 2009

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

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

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

Daily Notes

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.

10 Years, NYSE

10 years, NYSE

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.

10 Years, SPY

10 years, SPY

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

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.

Brazil the EWZ ETF vs the BZF currency ETF

Brazil ETF vs Currency Race

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.

Running ETFs

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.

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

The currencies are all generally dropping against the US Dollar (with the Canadian FXC and Mexican FXM being mostly flat rolling).

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.

The “Emerging Market” trades have gone flat or are dropping. Time to be in cash or elsewhere in “watchful waiting”.

VIX the Volatility Index

Volatility Index and Related

Volatility Index and Related

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.

The Dollar

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.

Dollar Trade -UP

Dollar Trade -UP

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.

10 Day Hourly Interval Broad Market

10 Day Hourly Interval Broad Market

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:

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

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…

Tech vs Other Markets

Tech vs Other 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

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:

Bonds - TBT to Short Them

Bonds - TBT to Short Them

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.

What sectors won this week?

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.

What About Oils?


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

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.)

Some Near Oil and Oil Related Comparisions

.

Sugar moving up, if in fits and starts, is the interesting thing here.

SEA - A Boatload of Boats ETF

SEA - A Boatload of Boats ETF

Transports in general are a good early indicator. Boats, rail, maybe even some trucking. Anyone for a FDX / UPS Christmas?

The REITS race – Real Estate Investment Trusts

REITS Race

REITS Race


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.

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.

Click for Disclaimers, Disclosures, and Where To Get Charts

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.

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About E.M.Smith

A technical managerial sort interested in things from Stonehenge to computer science. My present "hot buttons' are the mythology of Climate Change and ancient metrology; but things change...
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4 Responses to WSW Monday, December 21, 2009

  1. MaryJoe says:

    hey this is a real nice post and i also like your blog layout, have bookmarked your site and looking for more updates.

  2. Samantha says:

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    Wall Street Week – Monday, December 21, 2009

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  3. pyromancer76 says:

    I don’t know where to post this, but at least this category has a January comment. You must be very busy now that you are a celebrity of sorts on AGW and hide-the-declining-thermometers.

    In another comment on a WSW post, I mentioned Karl Denninger and you asked me about him. I continue to read his articles about what is right (very little) and what is wrong with our financial system and the fraudsters (financial elitists) who are hiding the equity decline in their stock offerings to the point where they have been offering debt for equity — and getting paid for it by Obama’s administration. Today’s article – 1/21 – I think is right on (http://market-ticker.denninger.net/).

    “Mish Misses the Mark (Glass-Steagall)”: Denninger argues for reinstating G-S, “splitting up the commercial banking and investment functions into physically and legally separate firms….this will mean the equity market will adjust to actual, not falsely-inflated value on a forward basis….” He also argues for accountability — “prosecuting of wrong-doing and strong anti-fraud statutes [already on the books]” enforced against everyone, even the elites, including the political class.

    My questions to you is about how you “sniff-out” debt masquerading as equity in the global market in which you trade for a living. In my study (and some teaching) of the history of Wall Street, debt masquerading as equity always seems to be a substantial part of the boom-and-bust cycle, usually about every 20-30 years, 19th through the 20th centuries. (At the moment I notice that this cycling might coincide with that of our global warmings and coolings!) At present, we seem to have a “decline” in the time between busts, and the busts have gotten progressively worse. Perhaps this means that there is less and less “equity” or “value” in what is put up for trading. I am concerned.

  4. E.M.Smith says:

    And well you ought to be worried.

    BTW, I have been complaining about the repeal of G-S since not too long BEFORE it was repealed. Basically, it was a very bad idea as soon as it was proposed…

    We had a Very Bad Decade. Smart folks figured out how to fix it, and did. Time passes (about 50 years) and folks forget. So they take off the rules that fixed it… and things collapsed horridly. Gee, how to fix it…

    Debt / Equity: All you do is look at the Debt to Equity ratio. If the local accounting rules are so broken that you can not get a Debt to Equity ratio, you find a better place to play…

    LEH Lehman Bros was working with a 40:1 leverage via debt. They are now gone. “Normal” bank ratios are in the 10:1 or 15:1 range. Folks who were in the 20:1 + range (but less than 40:1) ended up being tarped. Not really all that hard to spot.

    The hard part is NOT buying LEH when it was rocketing up for 15+ years. (I in fact did buy it. You ride bubbles, but nervously, and get out at the slightest hint of trouble… I sold it as soon as it “went flat”…)

    BTW, I had a “January Starting” WSW in the works, but didn’t finish it when I got swamped. So far, it’s no big loss. Bonds are a bad idea when FED is done cutting rates. Stocks have been flat (and started a short term crash lately). Commodities were up, then rolled over as China said they were clamping down on loans. Frankly, just sitting in cash and holding some oil trusts and fat dividend payers has not been a bad place to do “Duck and Cover”… So a new one is coming Real Soon Now, but for now it’s just “dry powder” time…

    In summary to your question: I don’t spend too much time worried about debt, hidden debt, debt / equity ratios, etc. I DO depend on stock price behaviour to tell me when “it’s time to leave the party”…

Comments are closed.