WSW – Tuesday, September 14, 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

Wall Street Week – Monday, September 6, 2010

The Dollar has lined up for a ‘death cross’ where the 50 day Simple Moving Average crosses the 200 day SMA. Euro and metals spiked up, along with other commodities and agricultural goods.

In this 10 day hourly interval chart we can see just about every currency spiking up relative to the dollar.

Currencies - 10 Day Hourly Interval chart vs US Dollar

Currencies - 10 Day Hourly Interval chart vs US Dollar

Metals too:

10 Day Hourly Interval chart of Metals

10 Day Hourly Interval chart of Metals

And Ag commodities took a rise too, but with SGG Sugar doing a rocket ride while COW and NIB (cocoa) are being a bit slower.

Ag Commodities 10 day hourly interval chart

Ag Commodities 10 day hourly interval chart

Looks to me like the “Bugger The Dollar” trade is gaining some traction.

Weekly Running Stocks

The best and worst of the week?


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

  DJ US Electronic Office Equipment I...	6.57%  
  DJ US Aluminum Index	5.76%  
  DJ US Travel & Tourism Index	5.33%  
  DJ US Software Index	4.45%  
  DJ US Oil Equipment & Services Inde...	4.22%  
  DJ US Industrial Suppliers Index	4.11%  
  DJ US Oil Equipment, Services & Dis...	3.96%  
  DJ US Diversified Industrials Index	3.88%  
  DJ U.S. Industrial Metals & Mining...	3.83%  
  DJ US Media Agencies Index	3.77%  

OK, we’d ‘called the ball’ on oil services and oil majors last week, along with travel and tourism ( I bought into RCL / CCL ) and on the metals and mining. Missed the “Electronic Office Equipment” and “Software” but I think a lot of that is the merger mania going on with HP, Dell, and others bidding up random small companies. Hard to trade that.

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

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

  DJ US Consumer Finance Index	-3.80%  
  DJ US Airlines Index	-3.45%  
  DJ US Auto Parts Index	-1.57%  
  DJ US Residential REITs Index	-1.35%  
  DJ US Water Index	-1.13%  
  DJ US Distillers & Vintners Index	-1.00%  
  DJ US Retail REITs Index	-0.95%  
  DJ US Automobiles & Parts Index	-0.89%  
  DJ US Gold Mining Index	-0.69%  
  DJ US Insurance Brokers Index	-0.54%  

Dumping the ‘recession trade’ of auto parts, water, high yield in REITS, booze. Also leaving finance as the US Government has made it uninteresting. And Airlines. NEVER invest in an airline… Ever. It’s a lousy business.

The “odd duck” is gold mining. But Gold Mining tends to high weekly swings as gold moves, so one week does not define the gold miners trade. It’s best done on it’s own chart. That dip is more likely a buying opportunity than a signal to sell.

On this 6 month chart you can see GDX, the yellow line, taking a ‘dip’ and a buying opportunity then.

Gold, Silver, Copper and Related Metals miners

Gold, Silver, Copper and Related Metals miners

Also on the chart is a “bond short” which also shows how inflation is acting.

GLD  -  Gold
SWC  -  Stillwater Mining
PAL   -  Palladium Mining
JJC  -  Copper ETN
GDX  -  Gold Mining ETF
SCCO -  Souther Copper miner
TBT  -  SHORT of bonds
SLV  -  Silver 
JJN  -  Nickel ETN
FCX  -  Freeport McMoRan Copper and Gold miner

Also interesting is that that Retail news has been better than expected. I’ve got some retail races under the racing stocks tab up top. I’ll put one of the broader ones here.

Broad Retail Race

Broad Retail Race

Looks like Retail is back on an up trend. What about clothing in particular?

Apparel Retailers

Apparel Retailers

Also running up off a bottom. I’m in the major retailers (like Macy’s, Penny’s, Tiffany, etc.) and some specialty like HOTT Hot Topic (though not in size. Yet…)

There are so many retailers it would benefit from many more custom races, and from someone who knows fashion commenting on what’s selling and what’s not… but that person is not me, so you will get ‘the usual’ on the charts and trend following rather than trend predicting. But if you have a good eye for fashion and a hot hand at shopping, it can tell you months in advance who will have a good quarter. Yes, women especially can “make money shopping”… if they buy the stocks instead of the stockings…

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.

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

I’d called the top in bonds (even made a special posting about it). Last week I’d commented:

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:

https://chiefio.wordpress.com/2010/09/04/bonds-are-not-safe/

And that still stands. Watch the chart, though, as TBT sets up a bouncing ball pattern off the SMA stack. And remember that “one day does not a trend make”.

Last week I’d said:

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.

My pessimism about gold was not warranted. Up nicely today. In another special focus posting I’d pointed at Palladium and Silver as having more juice. That looks like it’s still the case now. Being OOTUS was a good call. (Out Of The US).

Notice that the SPY main ticker of the graph continues to show a clear “be in” 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 top, so we may be in a simple sideways market that will ‘roll’ between range bound limits. The low price range at the top of the present run looks like it’s getting a bit thin. I’d consult the 10 day hourly chart for a ‘trade out’ signal for day trading.

Trader Chart - Longs and Shorts of Index Funds  10 day hourly interval

Trader Chart - Longs and Shorts of Index Funds 10 day hourly interval

We’ve got RSI near 80 and weakening, with MACD crossover to the downside (but with weak slope) and DMI still saying “be in” with blue on top. So the trend is weaker, but not a full blown sell out signal yet. A weak swoon soon, but not a full blown rout most likely. So a buying opportunity in the next day or two, but not a time to short. The tickers here include ETNs that short the Nasdaq 100l, S&P 500, and the Russell 2000; some of them with leverage. Be careful with that leverage…

What about Brazil? Also India and China.

Brazil has rapidly taken a spike up. India, Mexico, China all taking a step up. The Emerging Markets trade is back on. Looks like BRIC is Back. (Brazil, Russia, India, China). But with a bit of Mexican Hot Sauce too…

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

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.

Brazil EWZ with Slow Stochastic, Williams %R and Momentum

Brazil EWZ with Slow Stochastic, Williams %R and Momentum

Slow stochastic has hit the top, dipped, and returned. As the ADX line on the above chart approaches 20-25, you swap from the Slow Stoch to MACD. During a steady run Slow Stoch will peg near the top and just wobble. Williams %R is still saying ‘be in’.

Last week I’d said:

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 from it, I’m staying in rather than risk trading out, then not having settle cash in time to get back on a new ride.

That was a good call with a bit of subtlety in it. Don’t know how to mechanize that part ;-)

OOTUS – Out Of The U.S.

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

Last week:

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.

That “for now” cautionary note was well placed. The Euro is spiking up as is just about every other currency and metal. I’ve already dumped my dollars, I hope you have too. That “uptick” has turned into a Rocket Ride. So we hang on, but start watching for air pockets…

Currencies race

Currencies race

Like that Swiss Franc too… Time to be out of the US Dollar, but not sure the Euro is where I’d put it…

Gold 1 year daily chart

Gold 1 year daily chart

Watch that RSI and watch for any signs of weakness to exit; but the news flow is all about gold and the hedge funds are buying into a ‘seasonal trend’ trade based on gold rising through new years.

Some Selected Emerging Markets

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.

Not in FXI or EWO (hey, can’t own everything ;-) but I’m in all the rest. Gotta love that chart…

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”.

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

As VIX drops, stocks rise, but as it gets very low, we are getting late in a given ‘run’ and you can expect reversal or flat days.

The Dollar

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

Dollar Trade -UP

Dollar Trade -UP

Last week I’d said: Indicators saying to be out of the dollar.

And this week we get:

UDN Dollar Down trade vs selected currencies and UUP a Dollar Up trade

UDN Dollar Down trade vs selected currencies and UUP a Dollar Up trade

Now THAT is a good call ;-)

Though the ‘step function’ character of the moves and of indicators like RSI leads me to think it is being driven by a major Whale hedge fund (or perhaps a country dumping a load of dollars… China?). That implies it may suddenly reverse if the trader steps out. Be careful. I’m staying Out Of The Dollar, but not shorting it.

Ideas of the Week

“Sit down, shut up, hang on, and Pray!” I’ll be looking at the defensive planning of stop loss orders and such. Maybe bit of rotation as opportunity presents. But mostly just enjoying the ride.

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.

10 Day Hourly Interval Broad Market

10 Day Hourly Interval Broad Market

Rising nicely and steadily. Last week I’d said:

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.

That swoon was all of one day. The day of / after the posting. Not a lot of time to react.

Comparison of 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

Same story we saw above. OOTUS and metals, goods.

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’d add to that that the recovery does not need to include the USA, it can be just in BRIC… The 10 day hourly chart gives us a warning of a short term dip coming ‘soon’, and that would be a good dip for longer term buying of oil.

USO Oil vs KOL Coal, UNG Natural Gas, and UGA Gasoline

USO Oil vs KOL Coal, UNG Natural Gas, and UGA Gasoline

This 10 day hourly tick chart shows Coal presently rising faster, though. Perhaps time to look at coal companies. China is buying up all it can get…

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

Notice how Slow Stochastic has ‘flatlined’ against the top? That’s what it looks like when a low momentum swing trade (based on Slow Stoch) turns into a trend trade with MACD (as ADX goes to higher values). So watch that black ADX line in the bottom panel, it ought to rise through 25 as this trend builds. Tech is back, as a trade at least. Partly this is based on the recent merger activity with “cheap” companies being bought out at hefty markups.

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

I’d said:

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.

That trade has worked, but it is worth noting that the chart says it’s not yet a confirmed trend. It could just have been a ‘reversion to the mean’ trade as the bond prices had gotten away from the SMA stack. So if you are trading this, you might want to be using a 10 day hourly chart. At least until we touch the SMA stack from the topside AND bounce off of it to the top side.

With the dollar tanking, foreign holders of US bonds will start to dump them. They are losing money in terms of their currency. On the other side we have The Fed with a $Trillion of portfolio that it said will be allowed to ‘run off’ and replaced with bonds. This will be a somewhat volatile trade and driven by Fed actions. I’d rather be in Brazil (on a beach, with a beer ;-) at least until this trade gets confirmed as a big unwind of large bond holders overruns the Fed…

What About Oils?

Some Selected Global Oils:

The Oil Majors Race

The Oil Majors Race

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).

That was a pretty good call on the trend, and several of these oils have gone up nicely. But the specific pick of PBR was a dud. News on PBR has a large secondary offering in the wings.

By Carla Mozee, MarketWatch
LOS ANGELES (MarketWatch) — Shares of Petroleo Brasileiro SA were among the top advancers in the Brazilian equity market Friday after the oil giant launched what’s poised to be the largest offering of stock on record.

Preferred shares of Petroleo Brasileiro, better known as Petrobras , rose 4.4% and ordinary shares climbed 4.7% after the company said it plans to raise about $64.5 billion in an effort to fund its five-year, $224 billion investment plan. In a filing with Brazil’s securities regulator, the company said it plans to sell 2.17 billion in new common shares, as well as 1.59 billion in new preferred shares.

So it rose on the first announcement (the quote is from about Sept 3) but didn’t ‘wear well’ as it filtered further out?

OK, the Canadians are looking a bit better until the overhang of the secondary is out of the way for PBR.

Some Near Oil and Oil Related Comparisions

What about oil service companies and Brazilian sugar / alcohol?

Oil Services and Oil Related

Oil Services and Oil Related

Last week I’d said:


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.

And didn’t get any of it done. OK, so sugar is on a rocket ride. That ought drag along CZZ as time passes. Oils we’ve looked at. And ag commodities above. So here is the rest of the Ag Trade, doing nicely in general:

Ag Trade 6 Month Daily Interval Mixed Players

Ag Trade 6 Month Daily Interval Mixed Players

As JJG (grains) rise, farmers have more money to spend on equipment, so DE Deer rises.

HOGS is a Chinese hog farming operation and MOO is a fund holding a variety of other tickers. POT has a take over offer on the table, so will likely be flat from here unless someone ups the bid. But clearly ag is ‘in play’.

SEE the SEA!

As economic recovery happens, the ‘bulk carriers’ will float to the top. DRYS and related. Baltic Dry Index drives them. For now it’s looking like a continued ‘flat roller’. At least until some kind of breakout forms.

Shipping Comparison

Shipping Comparison

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:

Royal Caribbean Cruise Lines, Carnival C.L., and SPY S&P 500

Royal Caribbean Cruise Lines, Carnival C.L., and SPY S&P 500

The cruise lines can have a lot of ‘juice’ but can juice you in either direction… And boy am I liking that “juice” right now ;-)

The REITS race – Real Estate Investment Trusts

Looks like the bottom is in. Good opportunities to get inflation hedge and dividends. Retail is recovering, so the retail REITS and health REITS are probably best.

REITS Race

REITS Race


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 

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 signal.

I’m suspicious of oil so will likely dump some of those positions and the metals miners like FCX are looking a bit like a short term trade out / buy back in possible.

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. I’ve moved it to the bottom as you really don’t need to look at it often.

Last time I’d said:

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.

Looks like were getting some of that run developing.

5 Years, NYSE

5 years, NYSE

Spiders (S&P 500) looks very similar.

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

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

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…

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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4 Responses to WSW – Tuesday, September 14, 2010

  1. P.G. Sharrow says:

    About 90% of the above is over my head. I feel like a 8th grader setting in on a graduate physics lesson.
    It is still useful to me as a short term view on the world economic conditions based on market moves. While I may not be able to read all the charts, I can still comprehend writing.:-) pg

  2. E.M.Smith says:

    @P.G. Sharrow: Start with the link at the bottom about “stock indicators”. It explains what all the Three Letter Acronyms are all about…

    The ‘short form’ is that they all pretty much combine price and volume data in different ways to emphasize one part of the movement or another. To let you see when things have gone on a long time, or are slowing down. Just formalized and set out for easier ‘visioning’. So, for example, MACD is Moving Average Convergence / Divergence. In the charts there is often a Simple Moving Average (the SMA stack) of price for different time periods. As those lines get closer to each other, you have a Moving Average Convergence. So the MACD just makes more formal “how close the different moving average lines are getting to each other”.

    As a stock slows, they converge, as it accelerates, they diverge. So separation upward is a growing trend to rising…

    So just start with one indicator at a time and learn what it does…

  3. E.M.Smith says:

    I should also probably add that most of the squiggly lines on the top of a chart are prices for particular stocks or funds. You generally want them rising from lower left to upper right, though having them V makes for a nice ‘bottom’ and a good entry point for a trade. And generally the one rising the most is the one doing the best (but there is some fine tuning on that one…)

    A bunch of the ‘detail’ is just formalizing things like:

    When is a V really a V and not the start of a W or M shape? So a ‘bottom’ starts with price crossing the Simple Moving averages from below. Then when it returns to them and bounces off to the upside, that’s a confirmed V and rise. (If you think about it, eventually the Simple Moving Average must touch price again, as no stock can grow perfectly smoothly forever. This just lets you easily track when to get in (new confirmed up run) vs when to be nervous. (Yeah, it rose, but did not cross the Moving Averages, so is likely to fall away to the downside…)

  4. P.G. Sharrow says:

    thank you for the clarification, that helps. pg

Comments are closed.