It’s been a while since I’ve done a WSW posting. Partly due to the family member with a kidney stone being a distraction, partly due to other news driven events (Osama and Obama) and partly just because things were mostly just going nowhere and no real change of trends was evident.
I’d also wanted to try doing financial stuff as “specific topics” rather than the “one big smorgasbord” and see how that worked. (I think more folks read them, but there were also more folks who complained about the method and conclusions – and that leads me to think they were folks who had not been following these larger postings so didn’t have the “context” of historical chart and process explanations). I’d be interested in knowing if folks like those postings more, or these large combined ones better, or a mix of both.
At any rate, it’s likely time for another. “Sell in May and go away” is a well worn Market Aphorisim, and, well, this is May… So time to “rebalance and reevaluate”
The commodity trade looks to be coming off, fairly hard, with metals and oil both falling. Silver and oil both after margin requirements were raised. Folks new to those markets were surprised. Those who’ve been around a while remember the hundred and one other times they’ve done it too…
It also looks like in the last week the US Dollar has started a touch of a rise (or perhaps just a Dead Cat Bounce?) as rumors wandered around that Greece might abandon the Euro and as speculators dumped their commodities trades (and when you sell, you end up in a currency).
So, does ANYTHING look good right now? Well, REITS have done well lately. What about the future? Well…
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 – Saturday 14 May, 2011
The Dollar Lately
Time to measure our Rubber Ruler.
The real winner here has been the Swiss Franc. (With the Yen having nuclear issues, the US Dollar being buggered by every congress critter and half the executive staff, and with the Euro “in doubt” over Greece, well, it’s the clear “go to” currency).
But that “kink” in the “Dollar Down” ticker is pretty strong. We’ve got MACD with a clear “be out of the short of the dollar” indication and with RSI coming off “near 20” rather hard. Add to that DMI with “blue on top” and it’s pretty clear that for at least a little while holding US Dollars is an OK thing to do. It’s not yet in a ‘bull run’ of positive uplift, but at a minimum the short side needs to take a break. You can see that as the May 1 “kink” downward in ALL the alternative currencies.
This chart has the “UDN” dollar DOWN bet fund as the main ticker. In this chart you can see who all these tickers are in the losing side at the moment.
RSI near 80, MACD with “red on top” and “mouth down” headed through zero. DMI “red on top”, The Dollar Down trade is over for now. Probably on hold until congress decides to raise the debt limit (when, depending on size, the trade may well return).
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.
Yup, Dollar Rising. Everything else falling. Classical action when oil and commodities trades “come off”.
First, just an “honorable mention” for the warning about the Silver Bubble. I’m going to commit the tiny little sin of having a bit of pride on calling that one ;-) Hopefully SLV will now stop messing up my charts with its crazy out of alignment gyrations ;-)
Last time I’d said:
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.
We’re still waiting for a reason to be back in. So far it’s just uninspiring.
Here you can see the dramatic plunge in SLV (the blue line). Roughly cut in half. Looks like it’s had a tiny “dead cat bounce” at the end. Wait for it to cross the Simple Moving Average stack and return to it (but not go through) from the top side before expecting a new run up… Until then, it’s day trade or at most swing trade on a 10 day hourly or fast chart only. It’s not yet “resolved” to the upside and can just be pausing in the plunge. (Though highest odds are for a long flat wobble).
Looks like the whole complex has taken a turn for th worse. The Miners have been hit too:
This trade, too, has ended and rolled down. Markets always run to excess, then “correct” back to something more sane. (That how you make money trading. Seeing the overshoot and riding it, but never too long…)
The question, of course, is with commodity prices coming off, think the retailers will roll back the price rises? Nah, me neither…
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 Tires Index 20.99% DJ US Tobacco Index 15.60% DJ US Biotechnology Index 15.21% DJ US Travel & Tourism Index 13.75% DJ US Health Care Providers Index 12.95% DJ US Pharmaceuticals & Biotechnology Index 12.82% DJ US Furnishings Index 12.48% DJ US Pharmaceuticals Index 12.05% DJ US Health Care Index 11.98% DJ US Food Retailers & Wholesalers Index 11.87%
Tires, tobacco, Health Care, Drugs, Food? This is a list of “defensive and consumer goods”. As the commodity trade comes off, the retail guys who have / can jack up the price win on the lower input costs.
How about the losers?
10 Worst Performing Industries DJ US Platinum & Precious Metals Index -14.68% DJ US Internet Index -11.56% DJ US Recreational Services Index -11.19% DJ US Banks Index -10.97% DJ US Nonferrous Metals Index -10.75% DJ US Investment Services Index -10.39% DJ US Hotel & Lodging REITs Index -10.38% DJ US Full Line Insurance Index -9.99% DJ US Automobiles Index -8.94% DJ US Business Training & Employment Agencies Index -8.14%
Large capital goods like cars, precious metals, optional things like Recreational Services and Investment Services. Hotels and Lodging. Looks like “hard times on the business budget” and cutting corporate travel along with fewer bookings for big summer vacations (what a surprise. Broke, flooded, frozen, and with gas over $4 a gallon and with the “TSI Feelup Grope” on any airline flight? Yeah, that “Staycation and a Movie” is sounding good right now… And the commodities trade came off so the Nonferrous Metals took a dive too.
OK, the up/down ratio is about 2% in your favor. Not horrible, but a wrong guess on sector and you get nothing.
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 DJ US Food Retailers & Wholesalers Index 6.26% DJ US Consumer Electronics Index 5.60% DJ US Food & Drug Retailers Index 4.44% DJ US Forestry & Paper Index 4.37% DJ US Paper Index 4.37% DJ US Furnishings Index 4.05% DJ US Containers & Packaging Index 4.05% DJ US Heavy Construction Index 4.00% DJ US Drug Retailers Index 3.72% DJ US Apparel Retailers Index 3.55%
“The Consumer Isn’t Dead Yet” trade. Add in a bit of “heavy construction” (mostly companies I’ve never heard off, probably getting overseas contracts with a cheap US Dollar cost base and Euro payments).
Minus them, I’d expect the same kind of “lower input commodity costs” play to hold up a bit longer. We’ll see.
10 Worst Performing Industries DJ US Home Construction Index -3.77% DJ US Gold Mining Index -2.74% DJ US Mining Index -2.05% DJ US Nonferrous Metals Index -2.00% DJ US Coal Index -1.92% DJ US Real Estate Services Index -1.63% DJ US Banks Index -1.27% DJ US Travel & Tourism Index -1.20% DJ US Real Estate Investment & Services Index -1.03% DJ US Integrated Oil & Gas Index -0.95%
Mining, commodity related (like oil and metals), homes continue to be a non-starter, and banks that own the mortgages on the homes. Yeah, a commodity sell off and a ‘stimulus? what stimulus?’ issue for housing.
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. I’ve temporarily taken SLV off of this chart so the other tickers are more clearly visible.
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
TLT is showing signs of life again as folks bet that the USA will not implode, congress may put away the Chinese Credit Card, and maybe that Silver investment wasn’t such a great “store of value” after all… So US Bonds need a bit of a closer look. (But we knew that last time when we said TBT was done as a trade, they are inverses of each other)
You can really see how oil tends to collapse in price when it goes on this chart.
10 Day Hourly Fast Trader Chart
A day traders dream, everyone else gets a nightmare. Bouncing up and down and largely going nowhere. Slightly positive for leveraged shorts (note that QQQQ dropped on the week by 1% while QID the “utra short” rose about 3% – but had bounces of that much each day. Range trading it on a day trade basis would work, but most anything else you end up needing to pick your entry and exit on a day trade basis anyway to make any money.
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
Last time I’d said:
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.
And things DID have a minor pop, followed by a bigger drop, and it’s still looking sick to me and like the drop is not done.
I’d also said:
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.
So true! I really do need to start shorting more. I seem to have a decent “eye” for those opportunities.
Closeup on Gold
Last time I’d said:
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.
That was early by about $100 an ounce. Gold ran on up to over $1500 after that, but has since had a bit of a rollover. With RSI at an ’80 touch”, MACD “red on top” and “mouth down”, and with DMI “confused” while ADX at 20 and falling calling for a weak trend, I’m still not seeing a reason to hold gold right now. Dollar strengthening, commodities traders backing off, margin requirements being raised… Just not a good time, IMHO.
Technically the chart is not at a “trend is over” indication. For that, price must cut below the SMA lines and return from below them with a failure to cross through again. We have a “parabolic rise” as you get into a “blow off top” but have not yet had a ‘failure to advance’. So the “rules” say to “buy the dip”. For me, I’m just not interested in gold at those prices and with commodities taking a tumble.
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
A close up on the last 6 months:
A more mixed reading. Some spikes of volatility driven by news, but generally low volatility. Often that comes before a sag…
Ideas of the Week
Sit in cash, TIPs. Maybe a bond trade to the long side. Maybe… Watch for a shorting opportunity in stocks (if we see a high volume big price down day like we saw in SLV when the short hit it…)
Oil And Fuels?
We know oil rolled off, did that take everything else with it?
Pretty much. Natural Gas is showing some minor signs of life. Gasoline is trying desperately not to follow oil down. How about on the 10 day?
GLD (Gold, the gold line) held up better than energy commodities, and they all look like they are starting to flatten. Still early in the rollover, though.
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
Better than many, but the MDY Mid Caps and RUT Russel-2000 did even better. But all of them have gone flat for now as everyone waits for what Congress does with the debt. With ADX at near 15 and dropping, it’s pretty trendless.
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 made a bit. But the big story here is how WIP has rolled over (as they are NOT in US Dollars and the $ has had some strength).
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
Last time I’d said:
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.
And I’m sticking with that. It was “Perp Walk To The Capitol” day again as the Oil Executives were vilified by Congress Critters looking for a photo op. So somewhere between $80 and $90 oil I’d watch the chart really closely for an entry… (If it won’t go below $90, it means these guys will be selling cheaply).
What about oil service companies?
Last time I’d said:
“I’d make that time to leave the drillers and support companies, along with the related stuff.”
Looks like that, too, was a good call. The are “wobbling sideways” but with a decided downtrend to some…
Ag and Ag support / Input companies
From last time:
It’s looking a lot more like “be out” than anything else…
Yeah, I’m “good with that”… ;-)
SEE the SEA!
NAT is giving a fairly classic “ok to buy now” indication. RSI is up from “near 20” with the latest dip higher than the one before. MACD is “blue on top” and with “opening upward” and even “crossing zero to positive”. DMI is “blue on top”. I note that VLCCF is similar and with an 8.7% dividend now. (Though for it, DMI is more “flat with a low ADX” but I’m OK with a ‘flat stock’ that’s paying me 8.7% …)
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.
Both the RCL and CCL charts look like “buy” signals. Not yet a full “cross the SMA stack and return from the other side”, but with the other indicators at least saying the shorts are getting out and the price is near a bottom. They often rise on the “summer vacation cruise” business and can position ships to take advantage of currency differences.
REITS have been doing nicely. They have nice dividends and with some inflation protection. I’d nibble my way in, but not in big bites. Look at FFO Funds From Operations and make sure they can cover the dividends…
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
Last time I’d said:
Swiss Francs. Watch the news. Some TIP & WIP. Not much… maybe some day trades on the short side in ETF Index funds.
All of which was good (modulo the need to jump out of WIP when the dollar turned). At this point, it looks like some shipping and a bit of bonds. “Sell stocks in May and go away”, but on an ocean cruise this time ;-)
Just not seeing a whole lot of things I like here in the broad market…
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.
MACD has a shallow dip, but with “Red on top”. DMI / ADX have gone flat. Slow stochastic saying ‘be out’, and with the “little stars” look to the price bars that you tend to get near tops. Not a lot of reason to be in, and significant reason to sell. Not a buy point for sure.
Spiders (S&P 500) looks very similar. Again, the indicators are “be out”. RSI has “near 80” and then “not as close”. Very “not good.”
The SPY is continuing a very slow drift upward, but I just don’t see the return as worth the risk. It’s far from the SMA stack, it’s weak, and at some point all the hedge funds who were Long Commodities are going to look to be Short Something Else. They can’t be “long commodities short dollar” so they will likely be “long dollar short stocks” or “long bonds short stocks”. If they do that, stocks will tumble.
Yes, right now W%R and DMI both say “hang in there” but look how Rate Of Change has just died to near nothing. You are taking all the risk for none of the gains. Better to step out and buy back in if it starts a new run up. At a minimum, put some ‘protective puts’ behind your ‘long stock’ positions for a month or so.
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.