The two biggest bits of “news flow” are the Civil War in Libya (and the Muslim World in general) with threats to oil supplies and actual disruptions driving fuel costs “way high”. (There is a “Day of Rage” in the works for Saudi this Friday) Along with The Bernank (or “Uncle Ben Bernanke”) saying that there is no inflation because if you ignore the skyrocketing prices of food and fuel, your paycheck is not rising fast enough to keep up with the other price rises so it all averages out to no inflation. Not exactly the kind of thing to make you feel good. There is also ongoing talk of “QE-3” or more money printing. The Dollar is not your friend right now…
Frankly, the start of this year has been more chaotic than I like and we’re already in March. “Sell in May and Go Away” is only 2 months away… so I’m starting to think more about shorting opportunities than ‘going long and sitting’. Europe is a mess, the USA isn’t much better, China depends on us to sell stuff, and everyone else depends on some collection of us… (Australia and Canada, for example, sell resources to support Chinese industry and EU / USA consumption).
Then there is the fact that after 1929 came 1932… So lots of folks are nervous about a ‘double dip’ just about now. We’ll have to see if “this time is different” or not…
Along the way between last posting and now much has happened. One thing was that I was sick for a couple of weeks. One of my “rules” is “Never trade when you are sick” so I just stepped out. Then there is that whole “catch up and get re-engaged” cycle and I’ve been lax about it. It’s so nice to just do nothing sometimes… but it doesn’t pay the bills and some are “near”, so I need to suck it up and ‘re-engage’ even if I’d rather just sleep in.
With that in mind: To work.
Pointer To Other Topics
If you are expecting global warming stuff, it’s under the “AGW” categories in the right hand margin. Things specific to the NCDC data and GIStemp are under categories with those in their names.
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 Nature of the Charts Here
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, 7 March, 2011
The Dollar Lately
Time to measure our Rubber Ruler.
The dollar is dropping against everything else. Gold has picked up again, and the Swiss Franc and Japanese Yen are looking best over a one year period (though some others are rising faster than the yen recently). Heck, even the British Pound is rising in comparison.
We’ve got RSI not too close to 20, and both MACD and DMI are “red on top”. This is for the UUP “dollar UP” fund, so that says owning dollars is a losing idea right now.
TBT has ‘gone flat’ after a pretty good wobble around the Fed auction. Someone bought a load of 10 year notes and that’s soothed folks nerves, even as the dollar tanks. (My guess is that with the Saudis offering multi $Billion bribes to their people not to riot, and with dictators all over the Muslim world seeing the US freeze assets, they are hustling their $trillions off to other shores. That Uncle Ben is putting the dollar in the ‘print at will’ bucket is not going to encourage them either).
At this point it’s what is called “The Fear Trade”. Gold, Yen, Swiss Francs, Oil. Perhaps some other ‘commodity currencies’ like the Canadian and Australian dollar, but that is more tied to what China buys.
This chart has the “UDN” dollar DOWN bet fund as the main ticker. You can see it’s right in the middle of all the other currency bets. On this time scale, you can see the pronounced “wobble” in TBT but that even with that, it’s up nicely over the period. I’m going to ride it back to the SMA stack (for the part I still hold) then trade out for a pause while I think about it.
With RSI in a ‘rolling but not excessive’ band, MACD with “blue on top” and DMI with “blue on top” it’s a pretty clear “be short the dollar for a while” ongoing trend.
What happens if we zoom in on the last 2 weeks? Anything we can see happening “now”?
And here is the 10 day Euro chart, with BZF the Brazilian Real added.
So in the last 5 days, the “long Swiss Franc” and gold trades have gone flat. Hmmm… losing momentum?
Over 10 days, the TBT has “whipsawed” and ended up about nowhere. I think that dip in the middle was the “good” 10 year bond auction. This is problematic as things HAVE been on an established trend (see above) but this argues for a bit of a pause. Then again, a rising trend is supposed to be “stair steps up” with “up flat up flat” so there OUGHT to be flats. Just not down much. DMI stays “blue on top” and while MACD is bobbing up and down, it’s staying above the zero line. Together those say “trend continuing, but we’ve got tradable days”.
Last time I said:
I’d made a ‘be out of base metals’ call. Looks like only Tin has survived. Wonder what the deal is with tin… Something to investigate as a potential.
And I notice that now Tin has rolled over too. Just a bit later to the party. Gold and Platinum have resumed their rise, but the spectacular one here is Silver.
Two postings ago I’d said:
Silver has been a nice ride, but I’d step out until it’s resolved what’s going on.
Which was good then, as we got that “dip” but I never made a “reentry” call. I’m sorry for that.
There have been folks “hyping” the idea of a Silver Squeeze based on there being something like 130% of total silver sold or committed. Frankly, I’d stay out of it if you can’t take physical delivery of the silver. Why? The folks who have ‘bought more than there is’ are the very ETF vehicles that you can easily trade… They are supposed to take physical delivery of the metal to back their claims. The story goes that a syndicate is buying the (something like 50,000 units) shares needed to be able to demand that they deliver silver to you on redemption.
If that IS the play, then I don’t want to be the guy left holding SLV at the moment the vault runs too empty and they fold the shop and liquidate (leaving ME without delivery). So I’m fairly sure a lot of folks are jumping on the Silver Bubble via the SLV ETF and related and not realizing that that makes them part of the “marks” of the syndicates. Yeah, there is money available, but at what risk? Bubbles usually end fast and sharp, and Silver moves faster and sharper than most. So I’d be in gold at this point, rather than silver, unless I could take physical possession of the silver. If someone wanted to put the time into it to find out WHICH silver funds were in trouble, and which not, it could be a great trade, but I’m just not that energized right now.
Ag Commodities have been where all the action is located. There looks to be a modestly strong “spike and drop” pattern that could be played, especially in things like Cotton and Sugar.
But first blush looks like wood, cocoa and cattle are still early cycle (i.e. we’re not building a lot of houses yet and the feed costs have folks selling cattle). Long term investors could look at PCL a timber REIT with a nice looking chart at the moment.
Well, cotton (BAL) is just on a rocket ride. Cotton is a water loving and heat loving crop, so I would expect it is having supply problems in a cold dry time. Demand is not all that high right now. My guess is the drought in China that’s hit their wheat is also hitting their cotton…
According to the latest data provided by the U.S. Department of Agriculture, U.S. export sales of upland cotton soared 56% to 403,341 bales in the week ended February 24 from a week earlier as shipments increased to China, Turkey and Bangladesh.
The political turmoil in Egypt, the world’s 15th largest exporter of cotton, certainly isn’t helping to reduce prices either.
Turkey, as we saw in the AGW research, has a real cooling trend when all the thermometers are used, not just the GHCN ones (and now you know why I care about such minutia… ) so we can project that they will have cotton under production in the cooler weather. We’ve got China with drought and I’d be hard pressed to plant cotton in China with folks wanting food instead…
Further down, that same source says:
On Friday, food and agribusiness financial service provider Rabobank said in a report that “export commitments out of the U.S. continue at record pace, and due to the razor-thin expected ending stocks, demand must be rationed as there is not enough cotton.”
Late last week, the Australian Cotton Shippers Association said that “buyers have already purchased more than 80% of the nation’s coming cotton harvest in advanced sales.” Phill Ryan, director of the industry group, added: “The amount of so-called forward sales compared with usual levels are 50% to 60% higher this season.”
“The U.S. is the biggest exporter in the world and they are sold out.” Ryan concluded. “It’s a worldwide scramble for limited supplies.”
So looks to me like this will likely continue until ‘the next harvest’. Furthermore, if the thesis about an ongoing cold drought in China is correct and that things will be this way for some time to come, added to the USA growing more field corn for fuel, it looks to me like “ag related” will be a great trade for quite a while. So during harvest, this BAL ticker will likely drop (“buy the rumor, sell the news”) and I’d have in on my shopping list for a repeat next year. For now, it’s a cyclical trade on those dip moments.
That BAL biases the chart (squashes down the other tickers) so here is the same thing minus cotton (the colors will have changed):
JO (coffee) and NIB (cocoa) have the best look to them (those ITCZ floods and “issues” in Ivory Coast) while sugar looks like a ‘failure to advance’ as does FUD (food basket) and WOOD. FUE (bio-Fuels Index) looks toppy too. The “basket” fund DBA has RSI “surfing down” with MACD looking like it might “cross over upside” but also that same pattern can be “chopping down” or “stairsteps down” with Down Flat Down Flat showing loss of momentum. That ADX is at 22 or so and falling looks like it’s “Late in the trade time to start easing out”.
So, my take on it, is this: It was a nice cold run. Spring is coming. It’s going to be a “Whole New Season” soon, and it’s time to start edging to the exits. IFF you want to continue in this space, I’d move to “what the farmers buy in spring”. Fertilizers companies, seed companies, tractor makers and maybe those JO and NIB funds as long as the ITCZ is dumping floods on them.
Monthly Running Stocks
So what “won” and “lost” over the last months? (though remember, they may not be the winners next month… it’s just to provide ‘context’).
First up, a ‘3 month trend’. Longer than I usually look at, but I’ve been slow lately and need to pick up the context a bit better. So, December, January, February. Winter.
10 Best Performing Industries Industry Name Percent Change (over time selected) DJ US Pipelines Index 27.42% DJ US Tires Index 25.48% DJ US Integrated Oil & Gas Index 21.43% DJ US Real Estate Services Index 21.40% DJ US Oil & Gas Producers Index 19.64% DJ US Oil & Gas Index 19.00% DJ U.S. Iron & Steel Index 18.50% DJ US Real Estate Investment & Services Index 18.28% DJ US Heavy Construction Index 17.97% DJ US Insurance Brokers Index 17.90%
OK, lots of money made and I didn’t get any of it as I was being a lazy bones. Sloth, a deadly sin…
So what was it?
Pipelines… A nice safe “eat well sleep well” choice. Need to look deeper into those as an “investable” sector.
A load of “oil & gas” somethings. Obama actually let ONE lease go through and everyone is in happy city. Then we get $100 / bbl oil and folks figure it will be loads of money for drilling. Maybe, but it can be a hard fall if the revolts sputter out. I’d bet on more drilling, but on companies with significant “OOTUS” exposure (Out Of The U.S.).
Tires. I just can’t get excited about tires. YES, every single recovery all the folks who just got a job buys new tires as the old ones are threadbare. I wish I was more greedy, then I wouldn’t care that it’s just tires…
Iron & Steel, Heavy Construction, Real Estate Services. Someone is thinking there will be a recovery in major construction of industrial plant and facilities along with urban core. QE-3 or what? Yeah, we had a ‘good’ jobs report in that we’re “only” 8.9% officially unemployed. But this isn’t any boom yet…
Insurance Brokers? WUWT? Who’s buying insurance? Maybe it’s just a “we won’t nationalize you nor drive your assets to zero value” play?
A “click under the covers” shows:
Best Performing Stocks Symbol Company Name Percent Change Charts AON Aon Corp 20.29% WSH Willis Group Holdings PLC 17.49% MMC Marsh & McLennan Companies Inc 15.91% INSW InsWeb Corp 9.21% LPHI Life Partners Holdings Inc -52.55%
So #5 on the “best” list has lost 1/2 it’s value. Most all the gain is in the top 3 companies and I’m not familiar with them. This is some small subset of the insurance industry. I’m not real interested…
So what about the bottom?
10 Worst Performing Industries Industry Name Percent Change (over time selected) DJ US Airlines Index -18.60% DJ US Distillers & Vintners Index -10.55% DJ US Brewers Index -10.37% DJ US Automobiles Index -8.76% DJ US Gold Mining Index -7.49% DJ US Electronic Office Equipment Index -6.83% DJ US Nonferrous Metals Index -3.87% DJ US Platinum & Precious Metals Index -3.62% DJ US Recreational Services Index -3.56% DJ US Specialty Retailers Index -3.37%
Airlines? Never own an airline, especially when fuel is rising.
Booze? Christmas is over or just fuel costs? HOOK and SAM are winning but TAP (Molsen Coors) and ABV (Ambev Bud) are losing. Maybe folks have started to develop “good taste” in beer :-)
Cars? Where’s our next “stimulus”?? Oh, you have to make it on your own…
Gold Mining, non-ferrous, Platinum etc. Looks like a ripple from that down dip in gold mid month.
Office equipment and recreational services? So we’re not going to be working or playing? … hmmm
Specialty Retailers? A “click through” shows a whole bunch of strange little odd companies going every which way. Not interested, especially as many of the ones that are up have “China” in the name…
So the “bets” seem to be for “recovery cycle” in industry but NOT in “folks buying the products”? How’s that going to work? Export led due to low dollar? This just isn’t speaking to me much.
10 Best Performing Industries Industry Name Percent Change (over time selected) DJ US Pipelines Index 12.63% DJ US Tires Index 10.99% DJ US Platinum & Precious Metals Index 9.76% DJ US Consumer Electronics Index 9.40% DJ US Apparel Retailers Index 9.15% DJ US Footwear Index 8.73% DJ US Tobacco Index 8.69% DJ US Clothing & Accessories Index 8.42% DJ US Insurance Brokers Index 8.14% DJ US Broadcasting & Entertainment Index 7.74%
Still with the pipelines…
LGOV Largo Vista Group Ltd 213.33% EP El Paso Corp 32.25% WMB Williams Companies Inc 30.02% SEMG Semgroup Corp 25.71% DEP Duncan Energy Partners LP 25.66% HEP Holly energy Partners LP 19.52% XTEX Crosstex Energy LP 19.34% BKEP Blueknight Energy Partners LP 18.57% AHD Atlas Energy LP 18.51% TCLP TC PipeLines LP 16.40%
I know EP, WMB, HEP, XTEX all as good. The others I don’t know so well. HEP has a 5.6% yield, but EP and WMP are nearly nothing. I wonder where the yield went, they used to have decent dividends… XTEX is 6%…
Smells like a bump on a takeover or takeover rumor to me… but I don’t remember any news flow.
OK, Precious Metals making a comeback recently, apparel sales doing well along with shoes, smokes, and accessories. So the consumer isn’t completely dead. Tires (again with the tires Moriarty…) consumer electronics and TV / movies. OK, consumer not dead. So retail might be investable even if the Christmas Trade is over. Watch for a ‘reentry’ marker.
10 Worst Performing industries Industry Name Percent Change (over time selected) DJ US Recreational Services Index -8.06% DJ US Nonferrous Metals Index -7.86% DJ US Brewers Index -7.27% DJ US Forestry & Paper Index -7.12% DJ US Paper Index -7.12% DJ US Airlines Index -6.98% DJ US Automobiles Index -6.45% DJ US Hotel & Lodging REITs Index -6.18% DJ US Home Construction Index -5.64% DJ US Gambling Index -5.05%
Things that need power. Airlines, paper, brewers, cars. Or things you drive to. Hotels, gambling.
OK, got that. Likely to reverse if oil drops, not likely to be much trade left if oil stabilizes high. Not interesting.
Weekly Running Stocks
The best and worst of the week? Do they tell a different story on the short term trade?
10 Best Performing Industries Industry Name Percent Change (over time selected) DJ US Coal Index 5.50% DJ US Mining Index 3.96% DJ US Heavy Construction Index 3.57% DJ US Health Care Providers Index 2.85% DJ US Gold Mining Index 2.78% DJ US Pharmaceuticals Index 2.64% DJ US Pharmaceuticals & Biotechnology Index 2.45% DJ US Health Care Index 2.35% DJ US Computer Hardware Index 2.21% DJ US Health Care Equipment & Services Index 2.20%
So the expectation is we’ll use coal after all, or sell more to China with oil this expensive. Maybe that CTL play has some ‘legs’ after all.
More mining and gold mining and Heavy Construction. The “China buys from Banana Republic” trade ;-)
Pharma, Health Care: So maybe Obama Care will die on the vine and they can avoid being nationalized…
Computer hardware? Really?
Best Performing Stocks Symbol Company Name Percent Change Charts USATZ USA Technologies Inc 209.07% USAT USA Technologies Inc 131.78% SGI Silicon Graphics International Corporation 121.94% QTMI Quantum Telecom Inc 101.12% OCZ Ocz Technology Group Inc 99.49% TDSC 3D Systems Corp 76.92% SCLD SteelCloud Inc 63.93% HILL Dot Hill Systems Corp 55.80% SED SED International Holdings Inc 47.94% SSYS Stratasys Inc 43.61%
SGI I know, but I’d not call them highly investable. The rest I’ve never heard of. In the losers in that segment are another bunch of companies I’ve not heard of plus a couple of disk drive makers I do know. I’m not feeling the love here… If someone wanted to spend a day each finding out who these companies are, what they make, and what their prospects might be, it could be a winning place to trade, but I don’t have that time right now.
10 Worst Performing Industries Industry Name Percent Change (over time selected) DJ US Distillers & Vintners Index -6.25% DJ US Platinum & Precious Metals Index -6.21% DJ US Airlines Index -5.31% DJ US Recreational Services Index -4.40% DJ US Automobiles Index -3.72% DJ US Forestry & Paper Index -3.46% DJ US Paper Index -3.45% DJ US Hotel & Lodging REITs Index -3.25% DJ US Specialized Consumer Services Index -2.90% DJ US Full Line Insurance Index
Nothing new here either. Looks to me like some metals whipsaw action and fuel price driven jitters. That, and odd little sectors doing strange things. We’ll have to look elsewhere for inspiration.
This is just a parting farewell to the retail trade and a look at “did I call the exit right”?
time before that:
To that I’d add that even the high end retail is starting to look a bit tired as we end the Christmas Retail trade. Coach and Tiffany are still climbing, the it’s starting to look like a flattening trend. I’d not dump it yet, but watch it more closely and use stop loss orders or protective puts.
Probably could have been more forceful about ‘time to exit’, OTOH, using stop losses or puts would have gotten you out with a nice clean profit.
So this is just a “keep an eye on it” double check. Yup, the exit was a good one. JC Penny, TIF and COH are continuing to hold up OK, but not much gain happening. Nice sideways “roller” trades available. LTD too. Macy’s has dipped but looks like it’s flattened to a ‘local bottom’. HOTT (the main ticker) looks to be making a nice bottom. “Failure to advance” to the downside. RSI rising off the bottom. MACD “blue on top” and rising, though still below the zero line. ADX below 20 (in the ‘trendless’ zone, that’s good on a bottoming stock) and with “blue on top” though not moving much yet. Even what looks like a “short cover” spike in prices at the start of last month and this month.
If you think there will always be young folks wanting “edgy” stuff to annoy their parents, these folks have what looks to me like a bottom established. Yield at 5% is kind of outrageous for a retailer. News flow has sales off 2% for the quarter and they are bringing in a consultant to give them advice. IMHO, being off 2% in a major recession where young folks unemployment rate is about 25% is not too shabby. As long as they don’t decide to do something stupid from their “consultant” they ought to do well as the economy picks up. But it will be a bit of a crap shoot.
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 Australia ETF WOOD A wood and paper products fund
Oil and US Stocks winning, WOOD and Australia EWA too. And the Silver Bubble we’ve already talked about.
Last time I’d said:
Most interesting thing on the chart is “WOOD” (a basket with some of those paper product folks in it too).
Got WOOD? Wouldn’t hurt to get some…
It’s nice when you say to ‘get wood’ and it goes up.. even if it’s gone flat lately.
The time before last time I’d also said:
At the start of December, the SPY main ticker gave an “entry” with MACD crossover to “blue on top” and DMI+ (blue) over DMI- (red). So as of now, stocks are OK. BUT notice that RSI touched 80 at the last top and is now lower at the inflection point. The main thrust of the run is over. We’re most likely going into a ‘sideways roller’ with swing trades, though there could be a minor up trend to it. Just not a lot of “rocket ride”.
And that is where we have been. “Steady up” but not dramatic. It did the ‘sideways roller’ to the end of the year, and we’ve got that uptrend now.
So we rose into the end of January, with some roll to it, and from February 1st to Now have gone about nowhere. 2% gain by my read of the chart (easier if you take SLV off of it…).
Most interesting thing on the chart to me is the return of FXE and Gold as rising lines.
10 Day Hourly Fast Trader Chart
What a sack of worms. About as close to “trendless wobble” as you can get. Everything periodically returning to the zero line. These are all “long and short stock funds” so it’s just saying that the markets are trading together and going nowhere while they bounce.
What about Brazil? Also India and China.
EWZ - Brazil BZF - Brazilian Real currency FXI - China EWA - Australia EPI - India - WIsdom Tree fund EWC - Canada EWW - Mexico GUR - Middle East Fund
Brazil continues to “surf down”. There was a brief “reversion to trend” moment or “counter trend rally” trade, but we’re back at the SMA lines from the bottom, so if you were in that fast trade, it’s time to exit and if you are looking at it with lust, remember that the time to reenter is AFTER it crosses the SMA stack then returns to it from the topside. A “retest”. As of now, it’s just a “RTFM” Reversion To The “friendly” Mean on an ongoing downtrend. BZF, their currency, has a bit of a rise, but that is most likely just the ‘dollar drop’ in reverse. Not net inflow of money to Brazil.
Notice that FXI China is moving in lock step with it. Hedge funds keeping them locked?
EPI, India, is a lot lower, and looks more like it’s trying to make a bottom to me. We’ve got “failure to advance” to the downside and RSI starting to make ‘up steps’ from ‘near 20’. MACD is “blue on top” so all we need is DMI to be “blue on top” and / or MACD to cross over zero and it’s looking decent for an entry. HOWEVER, price is back at the SMA stack in a chart of it alone, and that’s the ‘danger zone’ when approached from below, so not an entry yet.
Australia and Mexico a bit “topped to flat”. Not that interesting. But GUR, the “Middle East Fund” is rising, of all things. Folks are betting that there will be MORE money made in Egypt going forward. Might be worth a “tiny” with “mad money”.
The real winner on the chart is Canada, though. EWC. With all those loverly oil and gas trusts and tar sands operations. In a random comment on some other posting during the thick of the Egypt Thing I’d commented to ‘buy Canadian oils and oil and gas trusts”. I ought to have added “or just the EWC fund”. Looking at a chart of it, alone, shows RSI ‘near 80’ for a couple of bumps, price above the SMA stack a ways, with MACD and DMI both “Blue on top” and ADX at about 30, so a strong trend. I’d expect about a 5% drop back to the SMA stack at some point, if troubles in oil continue, that would be an entry. If peace breaks out in Libya and the Middle East, then sell.
Closeup on Gold
Last time I’d said:
We’ll be saying goodby to the Gold Trade for a while. Yes, I’ll keep the chart in, but don’t expect me to do much other than sneer at it. There are Gold Short ETFs, and I might try one just to get more ‘short time’ under my belt, but it”s not high on my ‘must do’ styles. The biggy is that the chart is your friend, and the trend is your friend, and both the chart and the friend are saying gold is not your friend right now.
And that was modestly good advice, as gold then spiked down in a selloff. What I then blew was not watching the chart for a ‘reentry’ and especially on the Egypt revolution. I let sloth overcome greed. You need them in balance…
So the chart called a ‘reentry’ at the start of February and I was busy counting my toes or something. Blue on top for MACD and DMI. RSI only about 1/2 way to 20, but “news flow” was the trigger here. At this point, were RSI nearing 80 and with prices away from the SMA stack to the topside. The MACD top blue line is flattening a bit, and our price is just about the same as the last “3 wise peaks”. Yeah, it’s a touch above, so will likely go a bit higher to test, but I’d not toss new money at it now. That boat is sailed too far from boarding for my tastes. You have to enter on an ‘entry indication’ and this just isn’t one.
VIX the Volatility Index
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
After a drop of volatility, it’s risen lately. Gee, war breaks out in oil land and stocks get more volatile… no surprise there. The chart is looking to me, though, like there is a slight “kink” downward in the stock funds right as the volatility rises a bit. This is hard to see as that big spike in the start of the cart dampens it too much, but it’s there. If we tighten in to a 6 month view it’s easier to see:
To me that says “Caution” And “edge toward the exits on US Stocks”.
Ideas of the Week
None other than putting some more money into Swiss Francs and running some automated reminder programs.
Looking at Ag, but when the whole market heads down, they all go together when they go. It looks more like “watchful waiting” time to me.
Oh, and a cup of Jo and Nib too, but small ones ;-)
Comparison of Broader Mixed 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 Silver Bubble continues to inflate. Bad news when it busts…
Oil is rising, but over $100 / bbl it kills demand and you are one Saudi Spigot away from a drop (or Obama opening the Strategic Petroleum Reserve).
EEM has a bit of lift at the end, but we know Brazil and China didn’t look good, so maybe some other emergings have some “juice”.
DBA is nice, but flattening and spring is in the air…
Copper has rolled down implying a lot of industrial / housing demand isn’t there.
Just not getting the inspiration…
Oil And Fuels?
Coal keeping up with Gold, Gasoline spiking with Oil, and Natural Gas as cheap as can be. Only inspiration here is the folks who make CNG kits for cars and trucks ought to be doing well. I’ll look for tickers on them. CLNE is one IIRC but the chart is not inspiring. Looks like a ‘bottom’ but without much momentum. Low fuel prices ought to make for more profit at chemical companies DD and DOW along with electricity generators (but they have Sovereign Risk from Obama on a jihad against power generation). Charts on DD, DOW and EMN (Eastman who use coal to make ‘petro’chemical) all look good, rising lower left to upper right. Guess that’s the place to dig around… Export chemicals made from our cheap
energy carbon supply…
The fast trade chart looks like you can day trade the oils, even at these prices, with a ‘entry at the RSI 50’ and exit at near 80. I’d add slow stochastic to that too…
So what happened in the Tech Market relative to world markets?
They were running, now they’ve paused. We’ve got DMI “Red on top” and MACD “Red on top’ … time to be out. ADX is 15 and flat, so weak ‘trend’ and slow stochastic has made an attempt at up, that’s faltering. Even the fast trades are ‘no joy’. “Manage the risk” says “sit out now”. You might miss a nice entry, but after the long run we’ve had and with the SMA stack ‘flattening’ it’s just not worth it. It could be like 4 months back where the “breakdown” turned into a new run, so watch MACD for a new “Blue on top” to enter, but “late in early out” applies here. Don’t be a hero.
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
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:
Notice that TLT the long term bond fund has lost you 10%. THAT is why I’ve been saying to get out of your bonds for a while now. TIP the “inflation protected US bond fund” has preserved value, but not made a bundle. It’s an OK and reasonably safe investment for folks who just want to put some money away and not worry much. But the more interesting one here is WIP the “World Inflation Protected” securities. Rising nicely as the dollar loses some value. For a real “no think, sleep well” basket, I’d put my ‘bond money’ 1/2 and 1/2 in TIP and WIP…
I’ve been more of a gambler and playing in TBT, but with DMI “red on top” that trend is busted. It’s now a ‘day trade’ or ‘swing trade’ only and you ought to shift to faster charts or indicators for that. The best exit was most likely at that last “MACD Crossover to Red On Top” but almost as good is an exit at the “return to SMA stack from below”. A good example of a ‘work out’ when you screw up and don’t pay attention and discover you are out of phase on a timed trade. Catch the next wave …
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
Man oh man are you getting ripped off at the gas station, and Exxon and Total are loving it. Petrobras not so much…
And we see it’s still where the money is… At this point, though XOM is showing RSI at 80 then falling, with MACD “red on top”. DMI is saying there is still a trend here but ADX has a “kink” downward. More interesting to me is the Canadian tar sands folks. IMO, SU. And for unknown reasons, Conoco is on a tear COP.
PBR, Petrobras in Brazil, is showing signs of life off a bottom here. New entry indication as of mid last month with a MACD crossover to “blue on top” and DMI “blue on top” too. I’d go for it here, but with a modest position as we find out what the new Socialists in Brazil think of foreign money now…
So, those other comments with “Canadians” in them look like it was good “on the fly” stock picking… CVX Chevron is still looking good too.
Last time I’d said:
If you are in, stay in until we have the ‘failure to advance’ topping motion. I don’t see gas prices dropping any time soon, so this trade will likely cruise for a while.
Just as true now. XOM is showing a bit of a kink, but that is likely just money rolling into PBR on a valuation swap.
What about oil service companies and Brazilian sugar / alcohol?
Last time: “Oil Services are doing OK and with higher oil prices ought to stay OK for a while.”
Still true. That DMI is just cruising…
Ag and Ag support / Input companies
Very volatile movements. Right now, POT, MON, and MOS all show “be out” on their individual charts. DMI with “red on top”, MACD headed down ‘red on top’ etc. Could that trade be over already? Or is it just a RTFM moment as they are a ways above the SMA stack.
If you want to trade this space I think you need to pick one target company and watch the chart very closely.
SEE the SEA!
before Last time:
Looks like shipping has topped out for the Cruise Lines and like the rest of shipping isn’t moving much yet.
RCL and CCL did a ‘step up’ about mid-month. Probably right after I made that statement. My bad. Don’t know why. I’d speculate some kind of bookings or earnings announcement. Still not enthusiastic about them though.
And here we see them rolled over into a power dive… But VLCCF is rising nicely and with almost an 8% dividend too. They ship crude oil. I’ve liked them for quite a while and own them on and off. I think I put some in the spousal account for ‘long term investment’ IIRC. My NAT is just being “dead money” though…
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. You can also see how after RSI touched 80, forward progress on RCL came to a halt. HOWEVER, it then resumed for one “last hurrah” and as RSI almost but not quite touched 80, we have the final roll over. Individual stocks are more likely to do that than funds. I’m happy to be out early rather than try to catch the last hurrah and get whacked when it rolls over.
Last time I’d said:
OK, these are looking good. If shopping for long term dividends and some asset appreciation in an inflationary cycle, I’d look here. FFO (Funds From Operations) is what you want, and not a lot of debt.
And looking at the chart, that was a decent call! Pretty much across the board running and with nice “blue on top” charts. Toss a dart to pick one… They are a bit far from the SMA stack for an entry now, and have a ‘kink’ in phase with the general stock market “kink” so I’d watch for a return to the SMA stack for a new entry.
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
Homework. Tech. REITS. Integrated Oils with gas stations…
I didn’t do the homework, tech has gone flat, REITS were a good call as were the oils.
At this point the list stays the same for me, minus tech, and I really do need to do that homework…
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.
Spiders (S&P 500) looks very similar. Again, the indicators are “be in, be cautious”.
Those stocks are a LONG ways away from that SMA stack. MACD is flat, ADX is flat with DMI+ crossed over to below it. Slow Stochastic has had the ‘bottom going spikes’ step ever higher to a flat trend, now the end bit has turned down. For SPY the RSI was “near 80”, that’s your warning shot. As Williams %R or MACD heads down (for W%R the midline cross is the call) it’s the confirmation to be out.
OK, keeping in mind that this IS a very slow chart, those are things you see just before a “correction”. It’s still a “bull market” with “blue on top” for MACD and DMI, but it’s not time to toss a lot of new money in. That happens on a pull back to the SMA lines like you see last August. For long term investors, I’d be looking at selling stocks now, not buying, and putting that money in Swiss Francs or WIP / TIP until the next stock buying opportunity. For traders, it’s a different world, though. But is this exactly the moment? Given that the 1 year chart is also looking “toppy”, it’s ‘close enough’, but there is always the simple choice of putting a stop loss behind your positions and letting the market decide when to sell… Being “upward sticky” and moving it up from time to time, but never down, is all it really takes.
Automated Stock Screens
OK, nobody ever said anything one way or the other about the software based stock ticker selection, so I deleting it. Now I’m figuring I can use it as part of an “investors corner” so I’m off to tune it up and bring it back up to speed…
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.