We now have a full blown war in Libya, and Japan got walloped with the quake, tsunami, and nuke failures. Collateral damage to industry is rippling out to places that depend on parts from Japan. This will be with us for a while. Uranium and uranium miners are out of favor, and anything that depends on Japanese car parts or semiconductors is starting to slow or in some cases stop production. Oil is an ongoing major concern.
The Yen shot UP in value (it seems the Whale-sized traders decided that Japan would need to repatriate a few dozen $Billion from the USA so bid the dollar down and yen up). Japan denied this. Then a large group of central banks all agreed to take action to sell yen and buy dollars. Now it’s a pissing match between the large hedge funds and the central bankers. Time not to be a mouse under the feet of dancing elephants…
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 – Sunday, 20 March, 2011
The Dollar Lately
Time to measure our Rubber Ruler.
The dollar is dropping against everything else. XAU is an interesting ticker. It is the “Gold and Silver Index” and it is looking like a topping roll start to me, but we’ll take a close up look below. The chart right now says “be out”, but we need to compare it to Gold, Silver, and others to get an idea exactly which parts are moving. For now it’s just bouncing up and down, not making a trend. I suspect the central bankers, in addition to fooling around with the Yen, may be trading some things against gold, or the stocks in that index are “having issues”. At any rate, it’s a ‘worry point’ to check on.
Last time I’d said:
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.
Still looks the same to me. A “steady trending downward” with occasional rolls, but just not a very interesting place to bet. Even the central bank intervention has not done much.
TBT has had a “failure to advance change of trend”. No joy there, either. Fear trade drives folks into bonds, so the bond short is not a place to be (and right now there is a lot of fear about the Arab / Muslim wars, oil, and Japan).
What I said last time:
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.
Still holds. Though if you’ve made some money on this you would likely want to take some “off the table”… though that raises the question of “where to put it”… and you end up back at “The Fear Trade”… Looks to me like Swiss Francs have been winning, and the Yen move is a bit unexpected (but once bankers and hedge funds are dancing who knows what will happen). I’d stay out of yen right now, and out of gold, that sort of leaves Swiss Francs (which may be what everyone else has done too…)
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 clearly that TBT has “rolled over” and we’ve stepped out.
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.
Well, you can clearly see the combined central bankers action where the Yen takes a tumble on Thursday last. Only currency that was a good bet was the Swiss Franc and a little bit the Euro. So short trend trades were counter to the longer term dollar down trend. That’s a bit of a worry. (As it means turbulent difficult trading days… well Duh… nukes blowing up and wars and bombs and all…)
Silver looks like it’s had a pronounced “dip” in its rocket ride. Glad I wasn’t buying in at that moment… The other base metals look like a nice “entry” setting up after a pronounced sell off. Folks will be dumping and shorting industrial metals on the Japan industrial impact. Time to make a shopping list. Tin had good action before, so ought to have it again. Copper too. SLV has “MacD red on top with crossover downside” and is pulled away from the upper Bollinger band. RSI has touched “near 80” too. Be out. The copper chart is not yet calling an “in” but does have the look of something stalled in an up run, maybe going for another hurrah. I’d watch it, but be careful. The tin JJT chart looks very much like it did last Dec at that run up. Probably good for a fast trade on the return of good news in Japan.
If you look at the various ways of buying gold and silver, there is an odd disconnect:
We’ve got a clear “Silver Bubble” in progress. Gold and Silver Index includes silver miners with gold miners. GDX is gold miners. GLD is just gold. GLD is coming off an RSI near 80 (but not had a retrace / retest) and with MACD Red on top with DMI “unenthusiastic”. I’m seeing much the same in the miners.
Why are the miners NOT going up when the silver ETF is?
While SLW Silver Wheaton, a trader, is going up, this actual miner is not. Just smells like hedge funds gone wild and speculative bubble. If folks thought the price would hold, they would be bidding up the folks with silver in the ground, instead they are bidding up the trader company.
Looks like everything took a hit when Japan and Libya both rumbled.
That BAL biases the chart (squashes down the other tickers) so here is the same thing minus cotton (the colors will have changed):
Last time I’d said:
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”.
Well, that was a pretty good call. Yes, Jo held up ok, but NIB tumbled along with the “failure to advance” ones listed. I didn’t put on a NIB trade, even though I thought about it. Now I’m glad for my sloth…
My comment last time still holds, but you could possibly get a ‘return to the mean’ bounce trade on a very fast chart. More chaotic than I like, though…
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.
I hope you did not buy NIB (Cocoa) as it got whacked hard. I’m also glad I had a “maybe” on it… Looking at MON, MOS, POT, DE (stuff farmers buy) it’s not yet ready for an entry. Watch for now, but wait.
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’).
10 Best Performing Industries DJ US Pipelines Index 3.82% DJ US Coal Index 2.34% DJ US Tobacco Index 2.07% DJ US Real Estate Services Index 1.25% DJ US Mortgage REITs Index 1.08% DJ US Residential REITs Index 0.87% DJ US Food Products Index 0.87% DJ US Exploration & Production Index 0.59% DJ US Oil & Gas Producers Index -0.03% DJ US Food Producers Index -0.27%
Still with the pipelines… plus coal and tobacco. I note that 2 of the “top ten” had losses… Not a time to be in the market. I was mostly sitting out (but not sitting in Francs… dang it…) Real Estate holding up implies folks are gearing for inflation. This is just not a list to bring joy.
How about the losers?
10 Worst Performing industries DJ US Gambling Index -16.64% DJ US Platinum & Precious Metals Index -16.52% DJ US Full Line Insurance Index -14.15% DJ US Recreational Services Index -12.80% DJ US Business Training & Employment Agencies Index -11.18% DJ US Forestry & Paper Index -10.27% DJ US Paper Index -10.27% DJ US Automobiles Index -10.09% DJ US Internet Index -10.06% DJ US Semiconductors Index -10.06%
Things that US folks do with “spare money”, and things businesses use when business picks up (paper goods). Insurance takes a hit on Japan (folks risk share…) and Platinum is down as it’s used in cat converters in cars and car production is taking a hit on Japanese parts shortages.
OK, the up/down ratio is also against you. 10% down risks to 1% upside gains. Is it shorting time again so soon? It’s not even May yet…
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 7.85% DJ US Mining Index 3.89% DJ US Nonferrous Metals Index 3.42% DJ US Commercial Vehicles & Trucks Index 2.77% DJ US Specialty Chemicals Index 2.08% DJ US Basic Resources Index 2.02% DJ US Exploration & Production Index 1.97% DJ US Paper Index 1.74% DJ US Forestry & Paper Index 1.74% DJ US Industrial Engineering Index 1.54%
Things we export and sell to China… Coal (the only real alternative to nukes), metals and mining, chemicals. A little bump in “Industrial Engineering” as I suspect someone thinks Japan will be buying some of those services soon… Paper goods showing a bit of a turn. Still, meagre gains.
Not much different from last time:
More mining and gold mining and Heavy Construction. The “China buys from Banana Republic” trade ;-)
10 Worst Performing Industries Industry Name Percent Change (over time selected) DJ US Footwear Index -9.72% DJ US Clothing & Accessories Index -7.90% DJ US Platinum & Precious Metals Index -7.33% DJ US Full Line Insurance Index -6.38% DJ US Gambling Index -6.07% DJ US Personal Goods Index -5.33% DJ US Airlines Index -5.22% DJ US Conventional Electricity Index -4.43% DJ US Electricity Index -4.41% DJ US Computer Hardware Index -4.32%
There are times I’m happy to have been lazy and missed a market move… ‘The consumer is dead’ trade seems to be back in force. Added to that is the “If it takes oil it’s hosed” trade and the Japan collateral damage trade. Also, US electrical producers with Nuke plants can expect an ObamaProctoscopy Real Soon Now, so “Conventional Electricity” takes a hit along with general “Electricity”.
If you want some long term utilities with dividends, now would be the time to go shopping. I usually just buy my local utility (on the theory that if they screw me on rates it will show up in my dividend… a natural hedge). Right now you can probably get nuke rich utilities on the cheap; but you will be rolling the dice on Soverign Risk that Obama and the EPA will shut down all GE Mark I reactors on a political whim.
Personally, I’d stick with more western companies with lower Soveriegn Risk profiles. Texas is probably a good place to go shopping ;-)
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, Gold, Euros, and the Silver Bubble. OK, we already knew that. TLT is rising, someone is buying bonds. (I think they are silly… but that’s just me). The Brazilian Real seems to have stablized and is now mostly reflecting the dollar drop. Brazil might have some interest. We’ll check it too.
WOOD looks to have become an S&P Match so not much reason to ‘go there’. Not much home building, so prices can’t hold high, but perhaps a future bounce on inflation and Japan demand. Nibbling into PCL over time to build a long term “inflation adjusting” holding would be a nice long term investment.
10 Day Hourly Fast Trader Chart
The “Index Shorts” tickers are what’s rising. The SPY main ticker is ‘pausing’ but looks to be setting up a ‘stairsteps down’ pattern. Might be a rally on Monday, but I’d not expect it to hold. Looks like just a ‘close shorts and go home on Friday” and if things are still bad, I’d expect the traders to reenter shorts this coming week. Watch the news flow. Bad news it will be shorts heaven. On good news: If it rises, we’re starting a new run, if it’s flat and ignores the good news, it’s a “head fake” before another short.
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
Everything looks pretty sick to me. India might be making a bottom. Watch EPI / IIF / IFN as they have a ‘failure to advance to the downside’. Maybe setting up for a reentry.
EWC has made a nice dip, it has not yet had a ‘failure to advance’ so the rules say to ‘buy the dip’. I’d only buy a tiny, though. With everything going wobbly, I can’t see it climbing a whole lot. Oil is already over $100, so the trade is nearer to the end than the beginning.
Even the tar sands stocks like SU and IMO have pulled away from the Bollinger Band and are showing exit indicators. I’m not liking what I’m seeing… Unless you really love those Canadian Oils, I think the trade in them is ending, for now. (I hold some for long term dividends and as a ‘natural hedge’ against my oil use most of the time, but if oil drops, their price will drop too).
Closeup on Gold
Having trouble with that $1400 line. MACD red on top, DMI too and ADX weak, so the trend is over.
Just not seeing a reason to be holding gold right now.
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
Same as last time:
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:
Here is a 6 month chart. Volatility rising as stocks roll off a top is “not good”.
Same thing as last time:
To me that says “Caution” And “edge toward the exits on US Stocks”.
Though by now you ought to be pretty much out the door…
Ideas of the Week
Well, the two week ago idea was a pretty good one:
“None other than putting some more money into Swiss Francs and running some automated reminder programs.”
Except I didn’t get the Unix box running again as some family issues demanded my time. “This time for sure!”…
I would only add that I’ll likely trade some “short index funds” on a 10 day hourly chart.
Oil And Fuels?
Looks like coal has topped, and even UGA Gasoline looks to have hit a lid. I’d say Nat Gas was looking like a bottom, but it also looks like it’s just laying on a bottom. There is a reasonable chance that if Obama and Soverign Risk start whacking Nukes Nat Gas would take a big bump, and your downside is pretty slim. I’d be willing to just park some money in it (rather than dropping dollars…) between other idea. You could wake up to news that our GE Mark I reactors were all shut down and find a nice bonanza for a week as all the gas turbines spin up for base load…
On the 10 day chart, it shows a plunge in UGA that must be a data error artifact. It doesn’t show up on the one month chart. In a couple of days it will ‘roll off the edge’.
So what happened in the Tech Market relative to world markets?
Last time I’d said:
They were running, now they’ve paused. We’ve got DMI “Red on top” and MACD “Red on top’ … time to be out.
And they have dutifully rolled over to play dead… Gotta love a call like that… If they run up to touch the SMA stack from the bottom side, it’s time for “short, out, short, out” surfing down. If they punch through the SMA stack, cover the shorts and reevaluate based on news flow. Looks like a news and event driven market to me right now.
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:
OK, the “Flight To Safety Fear Trade” is back. Bonds made some money. This will fade as the Libya war winds down and Japan gets back on it’s feet. Don’t expect this to hold in the face of rampant money printing. It is a chance to ‘set up’ for the next short opportunity and / or exit bonds if you were not able to get out before.
With the same exceptions as last time:
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…
“Safety” with inflation protection.
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
The oils have rolled over with the general stock market. Not as much, but still, XOM has “DMI Red On Top” and it’s just not a good idea to try to fight a sinking market. For very long term investing, putting a ‘buy if touched’ order above present prices, then ratcheting it down until the market turns up, will get some nice oils at a recent discount. Personally, I’d wait to see if oil heads back down to $80 as folks just say “to hell with it” and stop driving places with $4 gas.
What about oil service companies and Brazilian sugar / alcohol?
Looks like a ‘failure to advance’ setting up and with DMI “Red on top”, momentum fading, and on a chart not stuck in here, RSI dropping from “near 80″ and MACD ‘red on top” I’d make that time to leave the drillers and support companies, allong with the related stuff.
Ag and Ag support / Input companies
From last time:
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.
It’s looking a lot more like “be out” than anything else…
SEE the SEA!
Last time I’d said:
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…
NAT is technically calling an ‘entry’ but it’s not got much play to it. I’m watching VLCCF for a chance to pick up very fat dividends on the cheap. At present, the chart is saying that the trade ‘run’ is over, but if this puppy drops in a general market sell off, you can pick up some nice dividends…
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.
Continuing to lead the market down. They will likely call any upturn in advance, too.
Looking a bit “topped” at the moment. If it doesn’t have a large, protected, dividend and good, secure properties, I’d not buy it right now. These will sell down with a general market fall, buy them then.
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
Swiss Francs. Watch the news. Some TIP & WIP. Not much… maybe some day trades on the short side in ETF Index funds.
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.
Incipient “Red On Top” for DMI and Slow Stochastic clearly saying “be out right now” with it headed down. When it turns up again from near the bottom, then the market will be good for a few weeks again. MACD looks like a ‘crossover to red on top’ SOON, and prices are way far from the center of the SMA stack. I smell a ‘correction’ in progress. Not waiting for “sell in May and go away”…
Spiders (S&P 500) looks very similar. Again, the indicators are “be out”.
Last time I’d said:
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.
I’m very happy I said that… At this point, I think our “just before” has become a “right now”.
We’ve got a market set for a tumble longer term, and we’ve got really bad news flow. Not feeling the love from the long side… Short Stocks / Long Francs&Wip look best to me for a while.
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.