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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: 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:
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
Wall Street Week – Monday, August 23, 2010
So what made money last week? Some of the same things that lost money 2 weeks ago. We’ve got ‘range trading’ going on. Buy on down days, sell on up days, don’t carry the trade over a weekend. Hedge funds issued their required reports showing a rising stake in gold, so the ‘late to the party’ hedge funds are buying gold miners to play catch-up (IMHO). The ‘software’ is likely from Intel (INTC) buying McAfee; a news driven ‘one off’.
10 Best Performing Industries Industry Name Percent Change DJ US Mortgage Finance Index 4.24% DJ US Home Improvement Retailers In... 3.99% DJ US Gold Mining Index 3.08% DJ US Consumer Electronics Index 2.63% DJ US Software Index 2.52% DJ U.S. Iron & Steel Index 2.46% DJ US Telecommunications Equipment... 2.39% DJ US Platinum & Precious Metals In... 2.28% DJ US Real Estate Services Index 2.25% DJ US Restaurants & Bars Index 2.10%
Some bets were major losers. Here’s the worst places to have been:
10 Worst Performing Industries Industry Name Percent Change DJ US Airlines Index -4.54% DJ US Life Insurance Index -4.11% DJ US Food Retailers & Wholesalers... -4.00% DJ US Internet Index -3.39% DJ US Full Line Insurance Index -3.38% DJ US Automobiles Index -2.91% DJ US Oil Equipment & Services Inde... -2.71% DJ US Oil Equipment, Services & Dis... -2.69% DJ US Banks Index -2.51% DJ US Biotechnology Index -2.51%
Quite a mixed bag, and not a lot of ‘theme’. The ‘end of summer vacation travel’ mixed with a bit of ‘recession cutting demand for oil’. (FWIW, we are entering “Hurricane Season” when oil can spike on volatile weather news. While BP is off the radar as a Gulf threat, the hurricanes are just starting up. Weather driven oil trading begins in earnest now).
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. The indicators are weakening.
We’ve got the Slow Stochastic near 80, but with a crossover to the downside. The MACD indicator is sideways and below 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.
This argues for a multi-week downward trend to the markets. Figure September for a loser of a month, and perhaps October too. Bias to be ‘out or short’. Cash, bonds, and perhaps gold as ‘safe haven’ plays.
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, and is headed back toward a mid-line crossing where you trade out. Rate Of Change has gone flat. All the risk, little to no reward.
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.
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
Long term bonds took a jump, but faded at the end. Yen is still rising, but the Japanese minsters are trying to find a way to stop it. Still messy.
What about Brazil? A Closer Look.
The interesting thing here is the “EPI” line for an India fund. News flow on India has been good lately with at least one of the Financial Shows talking it up.
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.
Not much of interest. Short Euro long yen?
A load of “talking heads” were saying to buy gold this week, last week it was Goldman Sachs. But I’m not so sure. It looks more flat to me. If you want to play ‘catch up’ with Gold, I would be more likely to use silver or copper.
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.
IDX Indonesia Fund FXI China EWZ Brazil EWO Austria ('emerging Europe proxy) EPI India with dividends and growth fund
Indonesia is making a run at the top, if it does make a new high, that would be a good indication of strength. For now it’s just risk of a ‘failure to advance’ given all the context.
VIX the Volatility Index
Last week I said:
“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.”
Looks the same to me now. Not a lot of joy here.
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
This is a ‘US Dollar UP” trade chart of UUP. The down bet is UDN.
That RSI near 20 was a great ‘buy dollars’ entry indication. Looks like the Euro is being whacked again.
Ideas of the Week
Cash, watch the news flow, and make a shopping list for shorts.
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.
Slowly dropping with ‘wiggles’. Easiest thing to do is be out or be short.
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 TLT Long term bonds 20 year+ USO U.S. Oil DBA Agricultural basket SLV Silver WOOD Wood / Timber
The China slowdown theme continues to keep copper a bit weak. Silver is flat too. Makes gold look a bit lonely… Oil is dropping on the ‘slowdown’ theme along with the seasonal slack time between vacation driving and winter heating. Look for a good oil entry a few weeks / months from now. Stocks are clearly underperforming commodities right now, but cash and bonds are beating both.
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
One of the better dogs in the dog show…
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:
Last posting I’d said:
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.
Hard to argue with a $One Trillion Dollar Bid$ …
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
Same basic story as last time:
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.
But with the addition that it’s now hurricane season, so things can be very volatile in a weather driven way. Watch for hurricanes threatening the major oil refineries on the Gulf Coast and “The LOOP” where supertankers unload. BP is off the radar as a Gulf risk, but hurricanes are now on.
CZZ has moved up nicely but took a dip. It’s back at the Simple Moving Average stack, so it’s a ‘reentry’ point. But the context is a bit of a worry. Still, sugar as a commodity is likely a decent play.
SEE the SEA!
No real change here from last time either:
“Looks like crude oil tankers are in demand. VLCCF is also the abbreviation for Very Large Crude Carrying er Fellow… or Fleet, or something… ”
When a slowdown is expected, shipping sinks 8-)
Largely rolled over to dead money at best. Watch ’em and wait. May be forming a bottom, but it’s a bit early.
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. The “Summer cooling demand’ trade on natural gas is over (used to make electricity in peak demand turbines) and the winter demand is not in place yet. Watch for natural gas to drop and plan a re-entry just before winter gets rolling.
Automated Stock Screens
So far nobody has said a thing about the automated stock screens, so I’m leaving them out for a while. If no body looked at them, there is no reason for me to do the work of making this part of the posting.
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
(On Hold unless someone says they want this.)
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.
Let me know if this is of any use to folks, or just takes up way too much room for not much of interest.
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.
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.