WSW – Thursday, August 12, 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

Today will likely be very rocky. Watch the late afternoon action. If it all falls apart, we’re headed much further down. If it stabilizes and holds, we’ve got a bit of hope. The news flow is lousy. The Fed did nothing to help. The Sovereign Risk issue still dominates. It’s a mess.

Wall Street Week – Thursday, August 12, 2010

Last posting I’d said:

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.

This round looks like a replay. The specifics change a bit, but not much. CISCO had bad guidance and slowing bookings. China said things are not so hot. It’s all just sputtering to a slowdown. OK, duck and cover time.

More “same old same old”? In reading what I said last time, I see little to change (sadly…):

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…

So congress had to run back to DC to hand out another $26 Billion to politically connected government workers unions. Same old same old.

This story does not end well. How long until November?…

OK, for the last week did anything do well? Nope. You could get a tiny bounce out of water companies, but that is not much of a trend. Soap and such did a tiny too, but you can only depend on sales of soap and water so long. And any other bet cost you.

	10 Best Performing Industries
  Industry Name	Percent Change (over time selected)  

  DJ US Water Index	1.71%  
  DJ US Nondurable Household Products...	0.82%  
  DJ US Mortgage REITs Index	-0.23%  
  DJ U.S. Household Goods & Home Cons...	-0.32%  
  DJ US Multiutilities Index	-0.36%  
  DJ US Fixed Line Telecommunications...	-0.38%  
  DJ US Tobacco Index	-0.50%  
  DJ US Gold Mining Index	-0.60%  
  DJ US Restaurants & Bars Index	-0.62%  
  DJ US Medical Supplies Index	-0.89%  

Some bets were major losers. Here’s the worst places to have been:

10 Worst Performing Industries
  Industry Name	Percent Change (over time selected)  

  DJ US Tires Index	-12.63%  
  DJ US Forestry & Paper Index	-9.38%  
  DJ US Paper Index	-9.38%  
  DJ US Business Training & Employmen...	-9.34%  
  DJ US Full Line Insurance Index	-9.20%  
  DJ US Recreational Products Index	-8.98%  
  DJ US Recreational Services Index	-7.76%  
  DJ US Transportation Services Index	-7.58%  
  DJ US Aluminum Index	-7.53%  
  DJ US Computer Hardware Index	-7.27%  

Folks are deciding that the recovery isn’t happening.

The Long Term Context

This is a very long duration chart (5 years) of NYSE and one of the S&P 500 (SPY). They 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’re going nowhere, but with increased risk of a fall.

We’ve got the Slow Stochastic near 80, but with a crossover to the downside forming. The MACD indicator is sideways 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.

Last time I’d said:

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

That was a good call and still holds, though it looks like the trend is forming to the downside. I’ll be raising my short positions.

5 Years, NYSE

5 years, NYSE

For the SPYDERS, it’s much the same.

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 and Rate Of Change had a brief trade in, but it’s just not worth it, IMHO.

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

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

That last posting is looking better and better. Then I’d said:

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.

And the short side is just what won. Oil took a hit, but the trusts are still paying those large sized dividends. The only change I’d make now is a bit more short positions, but watch the trade charts for when to flip them to a long position. As a fast chart reaches RSI of 20, cover in the shorts.

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 Races

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

This thing is just a mess. Not much trend. Big drops at the end. I hate news driven markets when The Fed talks…

RSI rolling over, MACD doing ‘crossover downside” and DMI with ‘Red On Top”. SMA stack weaving. Nothing here to like other than a potential short.

Sitting in Yen and Bonds works, but not by much.

What about Brazil? A Closer Look.

Looks like it got whacked too. I suspect the China Slowdown story caused some hedge funds to short anything ’emerging’.

Brazil the EWZ ETF vs the BZF currency ETF

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

So we’re out, and waiting for a reentry indication.

OOTUS – Out Of The U.S.

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

Clearly being OOTUS is a good place to be right now.

Currencies race

Currencies race

With Brazil and Yen looking good. (But watch out for BZF, if folks dump Brazilian stocks, the currency takes a hit.) How about gold?

Gold 1 year daily chart

Gold 1 year daily chart

A load of “talking heads” were saying to buy gold this week, including Goldman Sachs. But I’m not so sure. It looks more flat to me. The MACD is pointed up with blue on top (but below the zero line). DMI is a bit confused with very weak trend (ADX number low) and the SMA stack is weaving. I’m not going to jump on it just yet…

Some Selected Emerging Markets

Looks to me like we’ve got a ‘trade out’ indication after a nice run, here. So I’ll be out, but waiting for a re-entry.

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.

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. We did have a blip up, so as volatility picks up, things will get rocky and we drop some.

Volatility Index and Related

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

Dollar Trade -UP

Well, looks like the ‘dump dollars’ is ending. RSI coming off 20, MACD crossover upside with blue on top. Even DMI showing a bit of blue. OK, “long dollar” is on (at least against the Euro).

Ideas of the Week

Cash, watch the news flow, and make a shopping list for re-entry in 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”… has turned into a ‘drop’ to 2 weeks back. Still not much reason to be exposed to this.

10 Day Hourly Interval Broad Market

10 Day Hourly Interval Broad Market

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
TLT  Long term bonds 20 year+
USO  U.S. Oil
DBA  Agricultural basket
SLV  Silver
WOOD  Wood / Timber

Last time I’d said:

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.

And that was true for a time, then China said “slowdown” and it’s rolled over. Time to be out and looking for bargains in copper a bit later. DBA is still interesting.

So what happened in the Tech Market relative to world markets?

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

Getting spanked hard as HP (HPQ) had a CEO pants issue and CISCO had a bad guidance session. More down likely here, too.

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

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. He also added that they will buy $TRILLION of bonds as their real estate portfolio ‘runs off’ (gets repaid), so there is a bid under bonds for a while.

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

Oils get spanked in economic slowdowns, so the ‘double dip’ talk has folks stepping out of oils. I’m still holding large dividend oil and gas trusts. Not much reason to own US oils until we know what the government is going to do to them.

Some Near Oil and Oil Related Comparisions

CZZ has moved up nicely but is slowing.

SEE the SEA!

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

Shipping Comparison

When a slowdown is expected, shipping sinks 8-)

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

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. 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.

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. (There have been no comments one way or the other so I’m gong to leave them out for now. Well see. If you want them, holler…)

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.


Again, if you want any of this, let me know, or I don't see much reason to paste it in.
  

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.

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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7 Responses to WSW – Thursday, August 12, 2010

  1. KevinM says:

    Thanks again. I went ultrashort before the meeting and was looking for encouragement to not cover yet. I need S&P 1060 to make up for my three previous failed guesses that a correction is baking, then I can set a stop loss and pay attention to other hobbies. I am theoretically in it for the long haul (the next GDP positive surprise?) and am willing to bear the decay cost for years if the trend stays down.

    Waiting for Eurocrisis, or desperate congressional banker witch hunt trials, or Bernanke and company to get scapegoated out as the recession drags, or a robo-trader meltdown, or… So many possibilities to trigger downside, so few to trigger upside.

    Aint your fault if this is strike four, but I like seeing your analysis support my position.

  2. Sera says:

    Any thoughts on the Hindenburg Omen?

    http://en.wikipedia.org/wiki/Hindenburg_Omen

  3. E.M.Smith says:

    @Sera: Had not heard of the Hindenberg Omen before. Interesting set of rules…. and an Aug 12 “hit”. So no real thoughts on it other than:

    It has both a small but significant rising and small but significant dropping group of stocks at once time. This matches what I’ve empirically observed. The market ‘thins out’ before a crash and we get the money directed into a narrower group of ‘winners’ while a similar group gets abandoned. So the basic behaviour matches what I’ve seen

    @KevenM: With the 10 day hourly at RSI 80ish and MACD looking like a crossover ‘soon’ to the upside, I’d expect a short ‘relief’ rally for a day or so. Then renewed downside. I don’t know what time scale you are working, so ‘day trade’ may not be interesting. On the longer run, I think you can make money just with “If Bernanke speaks or Congress is Voting, go short. Cover when they stop or leave town on vacation.” 8-) Well, really only half joking… the system does work, it’s just the reason that gets the smiley…

  4. KevinM says:

    …almost there…

    Nobody appears to be rushing in to buy on the dip.

  5. E.M.Smith says:

    One of the things that has happened is the announced exit of a couple of large hedge funds from the field. Billions of Dollars. That will not be handed over as a suite of puts, calls, longs and shorts. So some kind of ‘liquidation’ will have to happen. Then the Philly Fed rained on the parade. Then the unemployment data showed small businesses don’t have the money for Obamacare AND hiring AND more taxes. Who knew…

    So yeah, not much buying going on. The only action is a “duck and cover” into bonds and some gold (and I’m a bit worried that gold is becoming a bit of a crowded trade…)

    Not good. Very much double plus not good.

    In the news today was that China might be just letting their holdings of US Treasuries run down. Gee, didn’t I say they would likely do that about 2 years ago? Maybe it only seemed like 2 years…

    And we now have weekly options so every friday is an options expiration friday, but the 3rd Friday is still more special. In the end, it just raises the frequency of the high frequency traders.

    So we once again have a summer doldrums going nowhere market… I suggest “beach time”.

Comments are closed.