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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 – Wednesday, April 28, 2010
I’ve been remiss in my WSW postings. Here it’s been an entire quarter since my last posting. Golly. And I’ve run out of spending money, so I need to trade up the account some more. Strange how that works. Once you can “create cash” from trading it’s just like a contract job. When you want some spending money you “take the contract” and do the work… Just there are no negotiations and you don’t have to ‘sell yourself’ like you do for a contract.
OK, a quarter ago I said:
Greece is threatening a default on their Government Bonds, but the French are saying “No Problem” about Greek bonds… Short rates have jumped up for Gilts (as, for some reason, Greece and the UK are seen as involved with each other. Probably because of the large English financial markets.)
Well that was a bit prescient. Wish I’d put on a ‘short Greek Sovereign Debt” trade… At any rate, my thoughts on Greece are covered in a posting yesterday.
I’d also noted:
So Congress raised the debt limit by another $1.9 Trillion. That ought to hold them for a few months….
Ok, what does all this mean… It means, for now, holding selected cash is a reasonable thing, and longer term, holding cash is really dumb. It means holding bonds is a very bad idea (US or European) as the Sovereign Debt issues get worked out. (Nervousness makes rates rise, driving bond prices down…)
And it means we are still in a “race to the bottom” on what currency will be worth holding.
Well, not much has changed there…
So gold is going up, GLD and GDX (the Gold Miners) are doing fine and it’s a bad idea to invest in the bonds of countries with large social spending and no financial discipline. (Why does this sound like something my Dad said in the 1960s ??… Oh, I know, because it WAS something my Dad said in the 1960s… about the time we went off the gold standard and when everything cost about 1/10 what it does now (or put the other way around, before 90%+ of the value of the dollar was eroded by inflation).
But things have moved on. The Fed has announced no change of interest rates. Oil is back up above $80/bbl. Greece is in a pickle and Spain has brought the salsa. Germany is trying to decide if they really want to screw the Greeks or have them as house guests for the next 20 years. And Obama and the Dim Dems are still trying to bugger the dollar and spend all of every scrap of national wealth they can find, but the opposition has grown enough to cause things to grind a bit more slowly. Yet The Ministry of Stupidity still found time to do the “Embarrass Rich Guys” thing with Goldman Sachs in the dock.
So, lets see, the guys who did the best at surviving this crisis; the guys who did NOT cause it (Congress did that with stupid law changes, then mandating Fanny Mae and Freddy Mac to make the housing bubble) and the guys who did not go belly up (like Bear Stearns and Lehman Bros.); THOSE guys are the bad guys? Right…
As long as that kind of clown is running Congress, it’s not a time to be invested in the USA. Trades, maybe, but treat it like a banana republic. SHORT duration trades. Fast in, fast out. No money left on the table and only smaller percentages.
So where could you have made money this last quarter?
3 month Top Performer 10 Best Performing Industries DJ US Recreational Products Index 39.09% DJ US Hotel & Lodging REITs Index 37.97% DJ US Hotels Index 36.21% DJ US Consumer Electronics Index 31.16% DJ US Real Estate Services Index 31.06% DJ US Real Estate Investment & Serv... 30.37% DJ US Real Estate Holding & Develop... 29.86% DJ US Furnishings Index 28.57% DJ US Gambling Index 28.32% DJ US Recreational Services Index 27.47% 10 Worst Performing Industries DJ US Pharmaceuticals Index -5.20% DJ US Pharmaceuticals & Biotechnolo... -4.16% DJ US Medical Supplies Index -2.86% DJ US Health Care Index -2.21% DJ US Mortgage REITs Index -1.54% DJ US Reinsurance Index -1.33% DJ US Biotechnology Index -0.99% DJ US Multiutilities Index -0.17% DJ US Electricity Index -0.03% DJ US Conventional Electricity Inde... 0.03%
Real Estate and the “We’re not dead yet so we’re going to play” trades. Not a lot of room there for error. The losers are a much more diverse group, but the losses were fairly small. Better to have been in than out.
How about the last week?
10 Best Performing Industries DJ US Hotel & Lodging REITs Index 5.64% DJ US Hotels Index 5.14% DJ US Durable Household Products In... 4.89% DJ US Recreational Products Index 4.88% DJ US Recreational Services Index 4.68% DJ US Furnishings Index 4.27% DJ US Residential REITs Index 4.15% DJ US Home Construction Index 4.12% DJ US Gambling Index 3.88% DJ US Transportation Services Index 3.80% 10 Worst Performing Industries DJ US Medical Supplies Index -7.84% DJ US Banks Index -6.07% DJ US Life Insurance Index -5.52% DJ US Airlines Index -5.45% DJ US Nonferrous Metals Index -5.38% DJ US Specialized Consumer Services... -5.05% DJ US Asset Managers Index -5.04% DJ US Biotechnology Index -4.73% DJ US Internet Index -4.65% DJ US Tobacco Index -4.64%
Not much different. Still “bottom fishing” and with broad risk. But notice that the downs were about the same size percentages as the ups? And in some cases larger? You had to be in the right sectors and out of the others or you lost money. A risky market…
The Long Term Context
This is a very long duration chart. Notice that we’re slowly rounding over into a flatter trend line. We’ve got the Slow Stochastic headed down (shorter term trade is weak or to the downside, a potential ‘re-entry” soon is possible.) The MACD indicator is weaving sideways, so we’re still going up longer term, and the DMI is still ‘blue on top” so it’s bull market rules, but that’s a lagging indicator so be prepared to ‘trade out’ at any time.
And the S&P 500 on the same scale. Here is a 5 year chart with a different set of indicators. Everything is still saying “bull market, be in” but it looks like a short term trade to the downside is “due soon”. We’ll see.
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
Zoomed in on this time scale we can see that the ‘bull run’ trade in the SPY is over for now. We have MACD with a crossover to the downside, and we have DMI with red on top. RSI has a pattern of lower highs and lower lows. We’re headed down for a while. Even wood took a plunge. That kind of sudden plunge usually means a professional outfit with tons of money is entering a very large short position. They WANT to panic folks, so they enter in size. And you get that kind of sudden one day collapse look. Whenever you see that, step aside. Time to leave that trade behind. At least until the bear raid is over.
Oddly, the BZF ticked UP. Usually when folks dump EWZ money comes out of Brazil and the currency drops. That the currency went UP implies folks are not dumping Brazil… Hmmmm… Take a closer look at Brazil… Also interesting is the way that EWA lead the roll over. Australia lead to the downside. Hmmm again. Another line of investigation.
What about Brazil? A Closer Look.
Last posting I’d said:
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.
That was a decent call. It tried to recover, but “failed to advance”. Oddly, though the stocks are rolling down, the currency is holding up. Strange… That implies little money leaving the country. Perhaps folks are buying the bonds? OK, I’d not buy EWZ right now, but I’d watch it for an entry “Real Soon Now”. We’ve got RSI headed toward 20 something. Buying time “soon”.
On January 28 I’d said:
With RSI nearing 20 and an inflection in the red line on the DMI chart, we could expect a ‘reversion to the mean’ with Brazil moving back up to the Simple Moving Average stack from the bottom. But when it touches that SMA stack, sell. Trading ‘up’ in a ‘down’ market is a hard fast trade…
And that trade did work. We’ve probably got a ‘sideways roller’ and can repeat that trade for a while. But it will get faster and choppier as time goes on.
EWZ - Brazil BZF - Brazilian Real currency FXI - China EWA - Australia EPI - India - WIsdom Tree fund EWC - Canada EWW - Mexico GUR - Middle East Fund
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?
These are not in yet
Basic straight runs: Price > 25 > 50 > 75 ===============================
And running Tickers of all kinds:
Basic straight runs:
OOTUS – Out Of The U.S.
The currencies are intriguing. We’ve got gold with a sudden jump on the Greece thing. We’ve got Canada and Mexico both rising. And we have the Brazilian Real holding up in the face of a dip in the Brazilian stock market. How odd… Looks like a bastard mix of “safety” with “not the USA or Europe – what the hell is there?!!?”
Some Selected Emerging Markets
This chart compares FXI – China 25 big stocks, EWZ – Brazil, EWO – Austria, EPI – Wisdom Tree India fund, and the Indonesia fund.
Well, we have Indonesia continuing to be a leader. Just odd. India is also nice and everything else is sort of a “why bother”. Very strange. Probably needs more time to figure it out than I’m willing to give it right now…
VIX the Volatility Index
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, a leading sector XHB - Homebuilders, a leading sector and "canary" XRT - Retail
Wow! What a spike up! but the interesting thing on this graph is the non-volatility stuff. We’ve got real estate and transports leading the pack with the home builders rising rapidly. OK, we know where to go looking for action. The “Recovery Play”. Traditionally real estate and transports are “early recovery”. Wonder if I held onto those Mall REITs (like RPT and PIE) that I owned a while ago… (The things you need to keep up on…)
This is now a ‘US Dollar UP” trade chart of UUP instead of UDN.
Last time I said:
Clearly saying “the bottom is in, own Dollars”. Not an intuitive or fundamentals based trade, but the chart says be in dollars, so that’s where I am. As they say about Quantum Mechanics: If you don’t like what it says: “Shut up and calculate”…
Well, looking at that chart I’ve got to say that was one spectacular call. And a lot of my position has been “in dollars”. Sadly, as a native of a dollar country, that means I “won” relative to the rest of the world but don’t have any more money than I had at the start of that run. I would need to buy a leveraged “dollar option” and I just didn’t place that leveraged bet. Oh Well. At least I wasn’t in a losing position!
Ideas of the Week
Real Estate, transports, oil, gold, dollars. Run to inflation protection. Especially run away from the Euro and British Pound. Brazilian currency and bonds. Canada resource stocks and currency. Mexico perhaps, and a bit of Aussie Minerals and Gold.
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.
Not much for the week, though the Australian market looks like a potential entry and Brazil is looking like a bounce off a local bottom. India has held up very very well… I suspect tomorrow, even as a Thursday, might be a good ‘couple of days’ trade entry from Brazil and Australia.
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
That plunge in “wood” is an issue. Time to step aside from the “got wood” trade. The shorts are in it, and there is nothing worse than having “short wood” ;-)
Not seeing a whole lot of love here…
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
A very nice run, but we’re seeing “get the hell out” all over this chart. Look at how the MACD is crossed over to the downside. Slow Stochastic is shouting “BE OUT” with that downward pointing mouth / lines. Even DMI is “red on top”. “It was a nice run, now get the hell out” is what this chart is saying. Could it be an “entry”? Sure. Look back 2 months. Very similar. I’d bet on “be out” though. If in doubt, put a “buy if touched” a ways above present prices and only buy back in if the trend heads up. Me? I don’t need that much juice. I’ll stick with gold miners and oil producers with fat dividends…
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:
Well, you could make money “fast trading” the short bonds position, and the “TIPS” inflation protected bond is “OK”, but not much here that is really worth the effort.
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
Conoco Philips and Total are ripping. No idea why… Perhaps their exposure to Russia? The plunge at the end is a worry. That’s the “Shorts Signature”…
CZZ is ripping! Makes me wish I hadn’t sold all those shares way back when. Then again, I’d made a bundle already… and with sugar, SGG, dropping like that I can’t see buying in to CZZ now as a major sugar grower. Not much else of interest in this area.
SEE the SEA!
Transports in general are a good early indicator. Boats, rail, maybe even some trucking. Clearly this is saying “GO to Sea!”
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 mall REITS did best. Don’t know what the deal is with PEI. I think I still own a chunk of it in my spouses account. Probably ought to check that ;-)
So “mall REITS” are looking good while the “got wood?” question says to stay away from PCL and the Lumber REITS right now. I donno… it just smells like time to “step away from the table” on real estate right now… Don’t know why, it’s a “Right Brain” thing right now that will take me a while to translate to words…
Conclusions and Likely Actions
I think I’ll look at some shorts. That “Down spike at the end of a long run up” is just shouting “Shorts are preparing to eat your lunch”. That and some gold miners looks interesting…
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.