WSW – 22 July 2010

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

Canonical in reverse date order:

https://chiefio.wordpress.com/category/agw-and-gistemp-issues/

Intro page with favorites:

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

Input Data Issues:

https://chiefio.wordpress.com/category/ncdc-ghcn-issues/

This posting is about the other thing I do, looking at investment markets. Prior postings in this series are available here: https://chiefio.wordpress.com/category/wall-street-week/

Posts with some relevance to trades, but not in the format of a full WSW analysis, are available under this category:
https://chiefio.wordpress.com/category/economics-trading-and-money/

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 is more important to be in touch with what the market is doing NOW than to preserve the historical chart, this is, IMHO, a reasonable 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 www.bigcharts.com

Daily Notes

None Yet.

Wall Street Week – Thursday, July 22, 2010

Bernanke talks, markets tank. It’s been that way for a while now. He reminds us that The Fed is driving this bus and it nearly went off a cliff, but we’re all fine now, right?… And he reminds us of the $14 Trillion debt the USA is racking up, and the States that are near bankruptcy, and the lack of economic growth (but it will start Real Soon Now… /sarcoff>… ) and we are reminded that the Congress Critters to whom he is explaining all this are mostly just out for their own preening self interest and aggrandizement.

OK, any ‘content’? My biggest takeaway was that he’s fine with the FinReg bill. Understandable, as it means he has more toys to play with. And given a non-Glass-Steagall world, he had found himself unable to legally take action to bail out the investment banks, so Bear Stearns got the shaft. But there were a few thousand pages of God Only Knows What crammed into that monstrosity. Including a few dozen agencies with behaviours and rules To Be Determined; so it will be a while before we find out how much damage it does.

The rest of the speech was the usual stuff. Dancing around saying he would not step on congressional areas of policy, while saying his areas were well tended and congress need not step on them, and everything would be fine, honest, but there were some ‘issues’ that needed a bit of gardening, like, oh, $Trillion items on the balance sheet…

At the end of it, I’m not seeing much to get excited about one way or the other. We already knew that Sovereign Risk was rising in the USA. We already knew jobs and production were running to China. We already knew Congress was more the problem than the cure. And we already knew that The Fed was trying to hold things together in a bad situation.

So folks will go back to talking about “jobs bills” and continue to ignore “national wealth creation”, and we will slowly spiral down as more money goes to “shovel ready” jobs that do not create net gains in national wealth, but do pay off selected untions for political favors. And we will continue to have the daemonizing of business. So businesses will continue to sit on the $Trillion or so of cash they are not investing while they wait to see how much more Sovereign Risk will be shoved down their throats and into their wallets.

Business managers are nervous creatures. They just don’t hire and invest in capital stock when Congress is busy picking pockets… It’s one hand on the wallet, the other fending off the grab…

Oddly, you can make money on a statistical basis if you only own stocks when congress is out of session and sell them when it is in session. Strange, but true…

	
10 Best Performing Industries
  Industry Name	Percent Change (over time selected)  
  DJ US Nonferrous Metals Index	3.08%  
  DJ US Investment Services Index	1.66%  
  DJ US Soft Drinks Index	1.34%  
  DJ US Beverages Index	1.26%  
  DJ U.S. Industrial Metals & Mining...	1.12%  
  DJ US Oil Equipment & Services Inde...	0.88%  
  DJ US Travel & Tourism Index	0.80%  
  DJ US Brewers Index	0.76%  
  DJ US Tires Index	0.72%  
  DJ US Coal Index	0.71%  
 

So you could make money in non-ferrous metals (mostly copper) and not a lot else.

Where could you lose money?

10 Worst Performing Industries
  Industry Name	Percent Change (over time selected)  
  DJ US Banks Index	-7.94%  
  DJ US Hotel & Lodging REITs Index	-6.90%  
  DJ US Airlines Index	-6.39%  
  DJ US Full Line Insurance Index	-6.24%  
  DJ US Consumer Finance Index	-6.14%  
  DJ US Medical Equipment Index	-5.68%  
  DJ US Gold Mining Index	-5.45%  
  DJ US Recreational Services Index	-5.28%  
  DJ US Financials Index	-4.98%  
  DJ US Recreational Products Index	-4.94%  

Oh, look, Banks and Financials. Congress must be in session…

And worth noting is that during this peak of the vacation season, airlines and hotels are tanking along with recreational services and products. Yes sir, that “recovery” is going along just fine… ( I don’t know if I ought to put a /sarcoff> on that or not…)

Notice that the “up to down” ratio of the percentages is ‘not good’. It’s a hard time to make money owning the stocks, but easier if you are short them.

Mexico was out performing the US markets last few postings. Lets start with a quick check on Mexico and see if it is still doing that.

EWW Mexico ETF vs SPY USA Markets and FXM Mexican Peso ETF

Here we still see that the Mexican Peso is more or less stable compared to the US Dollar, but with a slight uplift. You can also see how FXM, the peso, is driven up and down in sync with stock market moves. We can also see that the US market and the Mexican market tend to move together. Generally, Mexico is still over performing the US market. Sad, really, when you think about it. A country wracked with near civil war on the border over drug lords and with massive illegal immigration as folks do anything to get out for a better future is beating the USA. Oh well, times change…

OK, some general comments on this chart. Last time I’d said:

There is a very large and colorful body of pre-existing work and terminology on stock patterns. Some of it ‘speaks to me’ and some does not. Notice that the tops of the price curve are making ‘lower highs’ while the bottoms are making ‘higher lows’ (while the SPY is just lower for both…) IIRC, that is traditionally called a “pennant” after the triangle shaped flag. (There is a ‘flag’ shape as well with parallel sides). But that does not speak to me. So instead I call this “wedging in”. The prices are making a wedge shape headed to a point. When they collide, something has to give.

And we are still seeing that ‘wedging in’ happen.

We are closer to The Point now, and I’d expect a break-out in the next week, one way or the other. Picking which way a Wedgie will break is very hard. It’s a battle ground between buyers (raising the bottoms) and sellers (pushing down the tops) and we don’t know who has the bigger wallet.

So we look at the other indicators.

RSI is ‘ringing down’ to a neutral, MACD is doing the same, ending near the zero line. DMI is showing dead momentum. It’s all just dead money saying nothing. “When in doubt, be out”. (Memorize that. Honest.)

So what to do with this information? As we approach the point of the wedge, the range shrinks and the frequency picks up. It gets harder and harder to trade it via a faster chart. So just step aside.

Until a trend develops, you can’t ride the trend (or ‘trend trade’). You could go to a much longer time period and make an investment decision based on a 10 year weekly tick-mark chart, or you could move to a ‘fast chart’ and swing trade (or a very fast chart and day trade). Remember that MACD works best on trending stocks. ADX over 25. Slow Stochastic is better for trading ‘rollers’. This chart has some trade indicators on it.

Mexico Slow Stochastic, Williams %R, Rate of Change

Slow Stochastic (that is actually a fairly fast indicator) is undecided in the middle of it’s range. Williams %R and ROC are both going limp too. Not much to work with here.

How about a ‘fast chart”? This is the 10 day, hourly tick-mark, swing traders chart.

Mexico 10 day hourly chart

Same three indicators as in our default charts. RSI, MACD, and DMI. RSI gives a ‘look ahead’, MACD tells us NOW, and DMI confirms our context. We’ve gone to little one and two day jumps for trades. You pretty much have to be a day trader on a live feed as the point of the wedge forms.

OK, so much for fast charts. Now we’re going to pull our ‘time scope’ back out to the investor time frame. If it’s gone to ‘to fast a swing’ to trade it, is it time to invest?

The Long Term Context

This is a very long duration chart (5 years) of the S&P 500 (SPY). It will not change much from week to week (just one tick mark) so guides longer term attitude.

Notice that we’ve slowly rounded over into a flat trend line. The moving averages are pointing sideways. We’ve got the Slow Stochastic headed up, but with a crossover confusion in the middle. The MACD indicator is clearly ‘Red On Top’ and crossed the zero line to the negative , so the investment trend is to the downside. DMI is ‘Red On Top’ too, so the major bias stays negative. We’re in a longer term flat to falling market. Our long term context is significantly risky.

So we have lots of risk, and not much reward potential. Time to sit on your cash and wait for a trend to develop.

5 years, NYSE

We continue to have ‘bear market be out or short’ indications. RSI is still ‘stair steps down’ from an approach to near 80. Williams %R is in the ‘be out now’ range (wait for a cross over of the mid-line to reenter) and Rate Of Change is also saying the trend is down. Notice how the same information can come in several different indicators? Everybody is saying ‘be out now’. “Early out, Late in” is how you manage the risk, so don’t be all antsy to be ‘early in’, OK?

SPY 5 year weekly tick, RSI, Williams %R, ROC

OK, these are long term charts, and the indicators will lag faster charts when a ‘turn’ to the upside comes. But they tell you which way the risk is running. Right now the risk is in the market. Buy things with inherent value and good dividends while you wait. (Oil and gas trusts, strong bonds in stable currencies, etc. But it’s “watching and waiting” time. And yes, a 1 year chart will show trades, but remember the ‘upside’ is in the context of a longer term dead market… You will make as much money (or more) on the short side.

What Is Our Context

Let’s look at the S&P 500 largest stocks in America compared with some other kinds of assets; a 20 year+ maturity bond fund, oil, gold, Yen.

Asset Class Recent Race

SPY       The S&P 500 ETF
GLD       Gold ETF
USO       Oil ETF
FXY       Japanese Yen currency fund
TLT       20 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

We have MACD below the zero line, and we have DMI with all colors merging on the dead zone. RSI has a pattern that is encouraging. We’ve come up off a ‘near 20’ range. That usually precedes a rise. But it also can be an indication of a dropping stock that took a short run up in a falling context (more nearly what we’ve seen). Overall, not much ‘juice’ in the US market.

Last time I’d said:

The most interesting thing on the chart is the way foreign exchange is acting. Yen, Euro, even Brazilian Reals are rising. Time to be ‘out of dollars’.

That’s been a pretty good call. I note also that EWA is looking interesting. Australia is, perhaps, past it’s “Ministry of Stupidity Speaks” moment with the mining tax dance…

What about Brazil? A Closer Look.

Last time I’d said:

So we’ve got Brazil dragging on the bottom of this stack. Mexico and India are beating it. But clearly the chart now says Brazil is a good risk again.

And Brazil has held up nicely. Still not a tearing run, but it looks like an accumulation phase starting to me. I’m going to wait for it to break out past those prior highs (it looks like it’s topping out at about the same -2% point the last few weeks) before I hop on it, but it is a time to watch and plan.

Brazil ETF vs Currency Race

EWZ  - Brazil
BZF  - Brazilian Real currency
FXI  - China
EWA  - Australia
EPI  - India - WIsdom Tree fund
EWC  - Canada
EWW  - Mexico
GUR  - Middle East Fund

We have a rising RSI off of a bottom ‘near 20’. MACD is ‘blue on top’ and above zero (if only just barely) and DMI is also ‘blue on top’ (even if the ADX line says the trend is weak for now at 12).

It looks to me like the “Emerging Markets” trade is back on. In a tepid kind of way.

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 intriguing. We’ve got gold rolled over and the non-US currencies rising, Looks like a ‘dump dollars’ trade to me.

Currencies race

But the Gold chart is still worrisome to me:

Gold 1 year daily chart

After a “Failure To Advance”, we’ve now punched through the SMA stack. If we return to about the 50 day Simple Moving Average and bounce off it to the downside, it’s a good short Gold trade; until then it’s just a ‘flat Gold, be out’.

Some Selected Emerging Markets

Looks to me like Indonesia, India, and Brazil are all establishing trends and are ‘good to go’ for a while.

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.

IDX  Indonesia Fund
FXI  China
EWZ  Brazil
EWO  Austria ('emerging Europe proxy)
EPI  India with dividends and growth fund

VIX the Volatility Index

We’re still getting the peaks characteristic of a falling market, but with lower strength over time. Not much trend, but what there is says things going a bit flat.

Volatility Index and Related

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

Not really much news there.

The Dollar

This is a ‘US Dollar UP” trade chart of UUP. The down bet is UDN.

Dollar Trade -UP

OK, a classic near parabolic rise to a ‘blow off top”, then a punch through the SMA lines and we’re down below, rising back toward them. Classic top. With RSI ‘near 20’ watch for it to show slightly higher bottoms as we get over this overdone plunge.

Ideas of the Week

Selected buying in strong emerging markets.

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.

“Violently going nowhere”… Just wait for all the day traders and floor brokers to realize that they are just playing with themselves… when they are all done being hot and bothered, then you can think about buying something.

10 Day Hourly Interval Broad Market

Other Asset Classes

The 6 month asset class race:

Asset Class Race

SPY  S & P 500 US stocks
GLD  Gold
EEM  Emerging Markets
FXY  Japanese Yen
JJC  Copper
TLT  Long term bonds 20 year+
USO  U.S. Oil
DBA  Agricultural basket
SLV  Silver
WOOD  Wood / Timber

Copper is an early recovery indicator, and it has started a bit of a rise. Bodes well for China. Argues for a breakout to the upside from the point of the wedge.

Last time I’d said ” More interesting to me is DBA and JJC that look like a bottom is in.” I’d count that as another correct call.

So what happened in the Tech Market relative to world 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

Doing “OK” and a bit better than the S&P. More “juice” available from an emerging market rebound, though.

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 are still doing fine. Bernanke signaled no rise of interest rates any time soon (when that happens, bonds drop) so the bond trade ‘has legs’ until the next Fed meeting.

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 European oils look like they have bottomed (click the heading to get the chart for this group) while the US oils are just flattened. BP looks like it’s made a temporary bottom (that is, the shorts look like they have covered for now.) but I’d still avoid it other than for day trades.

Some Near Oil and Oil Related Comparisions

CZZ is moving nicely. And I own some. May buy some more…

SEE the SEA!

They’ve changed the ticker on this one, so now it comes in two segments. It’s still SEA in letters, but the security ID has changed. So this chart is the historical and the next one is the recent:

SEA - A Boatload of Boats ETF

I do wish the folks assigning tickers kept them more stable over time. On this next chart, the missing part of ‘SEA’ from above is that dark reddish bit at the right side. The rest is a variety of ships. Looks like crude oil tankers are in demand. VLCCF is also the abbreviation for Very Large Crude Carrying er Fellow… or Fleet, or something…

Shipping Comparison

OK, shipping is still not moving up. No big ‘economic recovery’ showing up in shipping stocks yet.

The REITS race – Real Estate Investment Trusts

Largely rolled over to dead money at best. Watch ’em and wait. May be forming a bottom, but it’s a bit early.

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 

Conclusions and Likely Actions

Mostly just sitting on the sidelines now. But moving my cash to non-US currencies and buying selected ’emerging values’. Playing a bit with shorts and collecting oil and gas trust dividends (heavy on gas). I’ll be watching gold for a ‘reentry’ if it starts to move again (and for a potential short if the news flow turns good and the chart rolls over…)

Automated Stock Screens

I’ve moved the automated tool screens here. They are large listings of stock tickers that are not all that visually interesting, so I’m putting them at the bottom. Holler if you don’t like it here.

Running Stocks and ETFs

I have a 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 the 50 day Simple Moving Average. 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 significantly for the quality of the fund, nor for the volume traded, nor for what they hold. I have filtered for “over a buck” price. Each ticker must be looked at for those qualities before buying anything. This is just a way to find “things of interest” to explore.

[chiefio@Hummer reports]$ cat Over50.list 
pf has 4532 valid symbols (356 older than one business day)
  

Also, let me know what you think of the screens. Let me know if this is of any use to folks, or just takes up way too much room for not much of interest.

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 paragraph 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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