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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, September 6, 2010
The best and worst of the week? The best includes those things most written off on the theory of a ‘double dip’ recession. Real estate, metals, paper, labor. And long term consumer goods like furniture that you can always stretch for another year. Insurance has made a bit of a bounce back too, as hurricanes have failed to destroy the East Coast of the USA and as folks with jobs are likely to by life insurance.
10 Best Performing Industries Industry Name Percent Change (over time selected) DJ US Business Training & Employmen... 9.87% DJ US Nonferrous Metals Index 9.37% DJ US Paper Index 9.34% DJ US Forestry & Paper Index 9.34% DJ US Recreational Services Index 9.28% DJ US Life Insurance Index 7.89% DJ U.S. Industrial Metals & Mining... 7.81% DJ US Full Line Insurance Index 7.55% DJ US Real Estate Services Index 7.38% DJ US Furnishings Index 7.29%
Some bets were major losers. But notice that only the very first one, Booze, was actually a loser. Here’s the worst places to have been:
10 Worst Performing Industries Industry Name Percent Change (over time selected) DJ US Distillers & Vintners Index -0.60% DJ US Nondurable Household Products... 0.98% DJ US Food Producers Index 1.13% DJ US Gold Mining Index 1.34% DJ US Multiutilities Index 1.38% DJ US Food Products Index 1.47% DJ US Semiconductors Index 1.68% DJ US Food & Beverage Index 1.70% DJ US Gas, Water & Multiutilities I... 1.72% DJ US Utilities Index 1.73%
Dumping the ‘safety trade’ of stuff we must buy (food, beverages, utilities, gas, water) and gold miners weakening.
It is always possible that some of this was just “short covering” prior to the start of a long weekend. There was good news in the “news flow” though, so I suspect we’ll be needing bad news flow to turn this run around.
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.
Same as last time:
Notice that we’ve slowly rounded over into a flat trend line. The moving averages are pointing sideways. We’re going nowhere…
Though I’d add that the shorter term trend is for a small rise. Slow Stochastic is looking like a reversal, and with MACD flattening into a sideways, perhaps with a crossover to the topside “soon”, we’re left with the DMI as “red on top” to caution us that any positive run is a new thing and not in keeping with our longer term context. Yet.
Spiders (S&P 500) looks very similar. Sideways mostly with risk of down, but with a present trend of a trade higher.
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 has bounced off the midline, so that’s a ‘short term trade in’ while Rate Of Change is nearly neutral. OK, on a very long term chart, a short term ‘trade in’ can be weeks long.
What Is Our Asset Class 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
Bonds (TLT) have had a double top “failure to advance” and a closer look showed it’s time to be out of long term tradable bonds. (No, you don’t need to sell your $50 savings bonds, especially those with an inflation adjustment, just the long term bond funds are at high risk.) More detail here:
We still have some action in gold, but it is looking a bit weak now too. Silver is on a bit of a rocket ride (being both a precious metal and an industrial metal it can do well in the transition times). Despite massive central bank intervention, the Japanese Yen is still rising along with the Euro and the Brazilian Real.
We note that the SPY main ticker of the graph shows a clear “buy” signal with the MACD crossover toward the upside with “blue on top” AND the DMI/ADX showing “blue on top”. This is in the context of RSI about mid-way from the center line to the bottom, so we may be in a simple sideways market that will ‘roll’ between range bound limits.
Australia, as a resource country, is also rising very nicely. This implies the metals and miners ought to be doing well, too.
What about Brazil? A Closer Look.
Brazil has rapidly taken a spike up. Friday it had a bit of weakness, but not enough to reverse the indicators. DMI is clearly “blue on top” and MACD is slightly above zero and slightly “blue on top”. India, Mexico, China all taking a step up. The Emerging Markets trade is back on. I’ll need to do a shorter term race of them to see who’s fastest out the gate. For now I’m just back in ‘the usual suspects’. When markets move fast, you just buy what you know first, then optimize later.
EWZ - Brazil BZF - Brazilian Real currency FXI - China EWA - Australia EPI - India - WIsdom Tree fund EWC - Canada EWW - Mexico GUR - Middle East Fund
This next chart has a couple of the other ‘trade’ indicators on it. Slow Stochastic (that isn’t very slow), Williams %R (that usually tells you the same thing as MACD, but sometimes more clearly), and “momentum” that is like Rate Of Change, but sometimes seems to move a bit faster.
Slow stochastic has hit the top, meaning that the run may be getting old. But in new hot runs, it can also signal a ‘get out’ too soon. Williams %R is still saying ‘be in’. Given the context with MACD, I’m biased for staying in. At least a couple of more days while things clarify. Formally, the DMI at below 20 says to ignore the MACD and go with the Slow Stochastic (that would be to trade out today and reenter in a few days as slow stochastic makes another cycle. Given the holiday and the longer settlement times form it, I’m staying in rather than risk trading out, then not having settle cash in time to get back on a new ride.
OOTUS – Out Of The U.S.
The Euro looks like a ‘flat weave’ sideways. Not much force to the movements and gently rolling. For now. The British Pound has soundly trounced it, despite a bit of weakness against the dollar lately. Yet, at the end, even the Pound is showing a touch of a rise. The important bit, for me, is how many of these currencies have beaten the dollar (above the zero line) and how they mostly have an uptick in the last week.
Like that Swiss Franc too… Time to be out of the US Dollar, but not sure the Euro is where I’d put it…
Last week, in an update, I’d said:
Technically the chart says to still be in Gold, but if a lot of the hedge funds who are in gold start selling to move into moving stocks, this could drop fast. I still like silver and copper better, and even platinum and palladium as they are both precious metals and industrial metals.
That’s still my position. I was putting together a ‘precious metals’ posting when the run started and I got sucked into active trading of stocks, but it’s still in progress. When platinum starts to move, it does so for the duration of the recovery. Plenty of time.
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 has managed to break above that old ‘double top’ so I’m back in. MACD is weaving sideways (that means ‘steady’) above zero (that means steady up). And DMI is back to ‘blue on top’. I’m back in Indonesia, though not with a large position.
VIX the Volatility Index
Vix has plunged. Very bullish for stocks. If it gets a bit lower, you can buy options with some safety. Time to “sell volatility”.
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.
Indicators saying to be out of the dollar.
Ideas of the Week
Looking to optimize my positions. This upside move happened so fast I got ‘bought in’ to a lot of ‘the usual’ rather than selecting what was moving best. So I’m enjoying the holiday and doing some homework.
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.
Well, with RSI nearing 80, we can expect a minor correction ‘soon’. If you missed this run, that would be the time to buy in.
It’s interesting to note how EWA Australia lead this charge with a spike up, then more or less flat. Also odd that Brazil faded a bit toward the end of the day Friday. I also like the way RUT (Russel 2000) kept on rising. I bought some RUT (via UWM the leveraged ETF) and I’m loving it ;-) One of my “go to” tickers when a market run starts to get away from me.
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
EEM is a general emerging market basket. It’s rising nicely. Metals are up, and I note that green DBA Ag line rising sharply. There is a lot of ‘talk’ on the financial shows about ag lately, so I’ll be putting up a special ag posting Real Soon Now. Oil does look like a low point for a good time to get an entry. IF we have an economic recovery, oil will rise. I always hold some oil and gas trusts as a hedge against my natural consumption, but add more when it’s cheap. Probably time to revisit a special oil posting as a bottom fishing guide… Oil usually drops in September (with sporadic hurricane spikes). So wait for a hurricane scare, then on the “relaxation” after the miss, buy oil. Sell on the next hurricane… At the end of the season, hold through the winter heating spike.
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
Starting to show some leadership again. Chart says to be in. QQQQ or QLD for leverage. But remember our longer term context. We’re not in a bull market yet. This is TRADE in, and be ready to exit on bad news and indicator reversal.
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:
It looks to me like bonds have had a ‘double top’ failure to advance and are now trading down. TBT is looking like a nice, if slighlty risky, trade to ‘short bonds’ ahead of the rush.
Some Selected Global 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
We’ve got buy indications on the oil majors. I’ll be easing out of my oil trusts and into more leveraged oils like the majors (and PBR in Brazil).
What about oil service companies and Brazilian sugar / alcohol?
Oil services and related doing nicely. I need to do a chart of SGG, sugar, vs USO, oil; and deciding how best to allocate between ag and oil. So much to do, and only one holiday day.
SEE the SEA!
As economic recovery happens, the ‘bulk carriers’ will float to the top. DRYS and related. Baltic Dry Index drives them.
I’ve taken an early and small position in the cruise lines RCL CCL along with a ‘tiny’ marker position in a shipper and a modest position in TeeKay Tanker Shipping TNK with a 10% dividend (even though the chart says to be out of it, I’m playing a ‘dip’ on price action). Yeah, a bit early, but I sometimes need the ‘nibble buys’ to remind me to keep an eye on a sector… Of them, I like the cruise lines more.
Here is the RCL / CCL cruise lines chart. You can see how these have much more range (or “beta”) that the S&P 500 SPY fund:
The cruise lines can have a lot of ‘juice’ but can juice you in either direction…
Looks like the bottom is in. They are starting to rise. RSI is stair steps up from near 20. MACD is blue on top and crossing to positive. DMI is blue on top. Looks like “good to go” from the indicators.
UPDATE: [ I’ve got a ‘tiny’ in PLD Prologis a logistics REIT and some small Mall REIT positions now. The Healthcare REITS are probably ‘good to go’ but for emotional reasons I’m not in them. Never trade something where you have emotional baggage…]
PEI Pennsylvania Real Estate - Mall REIT (REMOVED to make better graph) 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
IF you look at the 3 month performance, REITS have been doing nicely.
3 month Top Performer DJ US Travel & Tourism Index (5759) 10 Best Performing Industries Industry Name Percent Change (over time selected) DJ US Travel & Tourism Index 45.26% DJ US Nonferrous Metals Index 22.50% DJ US Tobacco Index 19.12% DJ US Real Estate Services Index 18.93% DJ US Diversified REITs Index 18.69% DJ US Commercial Vehicles & Trucks... 17.58% DJ US Residential REITs Index 17.26% DJ US Retail REITs Index 16.96% DJ US Platinum & Precious Metals In... 16.52% DJ US Speciality REITs Index 16.48%
Notice how many of those lines have REIT in them. I need to search those groups and pick out the good ones…
Conclusions and Likely Actions
Tuning up what I bought to more closely match what is moving fastest. (Some “rotation”). Watching for either a confirmation signal on the run, or a ‘trade out – it was just a short week flash’ signal. Probably more REITS and more Shipping, with a bit less Brazil. But the charts will tell me. Also some more ‘recovery’ play planning. For now it’s mostly just “metals”, but some industrials like CAT and DE would help. Oh, and I need to revisit the Ag play.
Automated Stock Screens
OK, nobody ever said anything one way or the other about the software based stock ticker selection, so I’m deleting it. Maybe I’ll make a special posting out of it from time to time…
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.