WSW Wednesday, June 8, 2011

General Comment

Well, a lot has happened in the last 3 weeks (that’s about how long it’s been since the last one of these) and yet nothing much has changed. The Bernank has spoken; and said “more of the same”. OPEC has met (as of today) and had a bunch of backbiting and infighting over political issues and quotas (yawn…); the “Arab Spring” came to a stalemate when the first petty tyrant said “no” and has been stuck ever since. (Especially so since the Egyptians decided to put Mubarak on trial… and NATO has said they want Kadaffies Head… what self respecting petty dictator will step down knowing that all their loot will be taken, they will be tried and tossed in prison, and their kids will be hunted down. Better to “roll the dice and hope”; after all, it’s working in Libya…)

Then there is The Economy. The same old myths being bandied about, and followed, and with the same old non-results. Sometimes I wonder if people are able to learn anything long term…

I still have no feedback on folks prefrences for “a few short notes” vs this longer one on longer periods, so I guess I’ll just keep doing whatever I feel like doing ;-)

So, what’s happening now?

Summary Points

Things are mostly stagnating, but with a general market downturn.

The economic data were horrible (unemployment still over 9%, “growth” in the fictional band of “near 1-2%” that basically says “about the same as inflation” (that is also fictionally low in terms of the typical person and what they need to live).

The only “good news” is that Europe is on the edge of a Euro implosion and folks have begun to notice that their Funny Money is way overpriced compared to OUR Funny Money… Oh, and Greece has returned to the trough for a “late lunch” while Protugal has decided to try tossing out the socialists and see what changes.

As noted last time, The Silver Bubble has popped (and I think I was on top of it pretty accurately, despite the nay-sayers) and we had Japan put a spike in Nuclear power. So it’s a good time to recheck those charts. Odds are there was an entry for Silver just after the “Pop”, but frankly, I was more interested in Platinum so didn’t even look. (The live charts were in the prior postings and I’ve given enough instruction in how to read them that folks ought to have been able to pick the ‘reentry’ if they wanted to play that game).

All in all, it’s looking mostly like “summer doldrums” with a touch of “Double Dip” in the air… Oh, and a lot of places are having “issues” with crops. Welcome to the more volatile half of the PDO cycle… As the PDO shifted in about 1998, and the AMO follows about a decade later, we ought to start seeing the same “issues” showing up in European and Asian farming as well. (Though I’m not all that familar with things like how the Indian Ocean gets into the act, so the whole “Africa / India / Southeast Asia” part is a bit vague for me.)

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:

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 usually 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. If I capture a “static image” I usually lable it as such. You can tell by looking at the date bars on the bottom of a graph. I typically use the live charts 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

Wall Street Week – Wednesday 8 June, 2011

The Dollar Lately

Time to measure our Rubber Ruler.

One Year Daily of UUP Dollar UP, with TBT and selected currencies

One Year Daily of UUP Dollar UP, with TBT and selected currencies

Notice that “failure to advance to the downside”? The “low the same or higher than the prior low”? (May 1 vs now). That says that the dollar slide is likely over, at least for now. Why? Because, IMHO, the bulk of this index is “Dollar vs Euro” (with a bit of ‘others’) and the Euro is now seen as overvalued. Notice that the Swiss Franc FXF is still rising nicely… (It looks to me like a ‘local peak’, so best ‘new entry’ is likely a couple of weeks from now, but using a 10 day hourly chart for timing would be ‘a good thing’…). To me, it looks like the Euro and the $US are taking turns with the “bugger the currency” process and now it’s the Euro’s turn for a while.

Last time I’d said:

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).

Whlie for now that continues to be the case (and has done nicely so far ;-), I’d watch for a ‘failure to advance’ as even the Swiss have a limit to how expensive their watches and chocolates can become and still sell abroad…

OK, to the technical indicators.

RSI has had a “near 20” moment, and now is “higher” on this price dip that dips back to “not quite as low”. The “down run” momentum is gone. MACD is still below zero, but looks like it is setting up for a “crossover to blue on top” and while DMI is “red on top”, it too is looking like a crossover setup might be forming. At this point I’d take off any “dollar short” bets and “go neutral” on the dollar. (This also implies that many of the “dollar alternatives” can have a weaker trend as folks return to the dollar…)

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.

6 Month Currencies and TBT the US Treasury "Bond Short" fund

6 Month Currencies and TBT the US Treasury "Bond Short" fund

Again we see that the “rise” of the “short the dollar” ticker has had a “failure to advance” with this peak a bit lower than the last peak. That the congress looks to be in a stalemate on raising the debt limit is, IMHO, being seen as “A Good Thing”.

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.

The interesting bits here are the fall of the Canadian Looney and the Mexican Peso and the flat line of Gold. For the main ticker, the Euro, note that DMI is now “red on top” and MACD is “mouth down” while we’ve got RSI dropping away from a “near 80” area. I’d not hang about in the Euro right now. It was a nice “swing trade” for a week or so, but the trade is over. Also of interest is that Raspberry FXY Yen line. Maybe time to see if the Japan panic is over…

Currencies - 10 Day Hourly Interval chart vs US Dollar

Currencies - 10 Day Hourly Interval chart vs US Dollar

Base Metals

On the longer term charts, we still have a “hump” from the Silver Bubble. It will take a while for that to work off the left edge… You can see the “dead cat bounce” after the plunge, and how now it’s back to a more normal “reversion to the mean” trend line.

Metals 6 month chart

Metals 6 month chart

Generally, you can see that the other base metals “came off” about the same time as folks ran for the doors. The last couple of weeks have had a bit of a ‘dead cat bounce’ for them, too. I’d not rush in as the latest economic data showed US consumers leaving the plastic at home and not buying. If we don’t buy Chinese Junk, China doesn’t need metals. You can day trade or swing trade on fast charts, but until there is a positive economic trend, it’s just a ‘counter dollar hedge’ trade; and as we saw above, that “Dollar Down” trade is over for now…

Gold vs Gold Miners vs Silver vs "Gold and Sliver Index"

Gold vs Gold Miners vs Silver vs "Gold and Sliver Index"

Here we see that the ADX line (on the bottom) is about 15 for GLD. That’s very flat. Not much motion in any direction. Use Slow Stochastic and day trade territory. Not a trend in sight. That RSI has gone from “near 80” to “much lower” implies this trade is over too.

The Miners have been hit too, only harder:

PAAS is Pan American Silver, a silver miner

PAAS is Pan American Silver, a silver miner

Remember that they are a leveraged play on the metals.

Ag Commodities

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…)

Ag Commodities 6 month chart

Ag Commodities 6 month chart

The interesting bit to me is that upturn at the end for SGG. Sugar. Perhaps time to revisit CZZ as a “swing trade”. It’s been in a “sovereign risk” driven downtrend on the resurgence of Socialism in Brazil, but at some point, it will return…

CZZ Cosan - Brazilian Sugar vs BZF Real,  EWZ Brazil and SPY S&P 500,

CZZ Cosan - Brazilian Sugar vs BZF Real, EWZ Brazil and SPY S&P 500,

Looks like a potential “short cover” to me. RSI has a big rise, MACD called a “be in”. DMI is “blue on top”. Only thing I don’t like is the “return to the SMA lines” on the price. This could just be a ‘counter trend rally” in a falling stock. (To get a confirmed reversal, prices cross the SMA stack, return from the top and “touch” them, then head up again as the slope of the SMA lines turns positive. So this would be an ‘early entry’…).

Given that the Real is rising just a bit (after that step function down when they decided to “control” what you could do with your money…) but the overall Brazil market is basically still flat (that EWZ ticker); I’d be cautious. It still looks like a “stay out” to me, just that the “short” is over. So I’d swing trade CZZ, but not invest in it. You simply can not invest in a country where the government thinks your property is for them to “redistribute”.

I do note that there is a fairly nice monthly “wobble” you could likely trade. Looks like the “Market Maker” is getting lazy about letting the stock price show how he makes his money ;-) When enough folks jump on that, he’ll have to change up the periodicity…

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’).

I’m going to make just a tiny “horn toot” here… Last time I’d pointed to REITS as a likely good anti-dollar trade… Watch for REIT in this list ;-)

One Month

10 Best Performing Industries

Dow Jones U.S. Residential REIT Index	2.99%
Dow Jones U.S. Restaurants & Bars Index	1.35%
Dow Jones U.S. Diversified REIT Index	1.01%
Dow Jones U.S. Pipelines Index	0.97%
Dow Jones U.S. Insurance Brokers Index	0.77%
Dow Jones U.S. Mortgage REIT Index	0.67%
Dow Jones U.S. Drug Retailers Index	0.62%
Dow Jones U.S. Oil Equipment Services & Distribution Index	0.22%
Dow Jones U.S. Oil Equipment & Services Index	0.15%
Dow Jones U.S. Industrial & Office REIT Index	0.09%

Well… REITS. Who knew? ;-)

Overall, though, notice how enemic the ‘gains’ are? Fractional percents for most of them, and only low single digits for the rest. Overall, “Sell in May and Go Away” has been right so far.

How about the losers?

10 Worst Performing Industries

Dow Jones U.S. Airlines Index	-11.75%
Dow Jones U.S. Business Training & Employment Agencies Index	-11.02%
Dow Jones U.S. Investment Services Index	-10.44%
Dow Jones U.S. Tires Index	-10.03%
Dow Jones U.S. Commercial Vehicles & Trucks Index	-9.92%
Dow Jones U.S. Banks Index	-9.91%
Dow Jones U.S. Durable Household Products Index	-9.24%
Dow Jones U.S. Life Insurance Index	-9.01%
Dow Jones U.S. Furnishings Index	-8.98%
Dow Jones U.S. Home Improvement Retailers Index	-8.35%

Whoa! Double Digits… Things having to do with fuel use, and things in the areas where the Government is “helping” you the most. Financials, Home related. Yeah, that “bank and homes” bailout is sure working wonders…

OK, the up/down ratio is about 1:20 against you. Just horrible.

I guess my just sitting on my thubs was “a good thing” and I wasn’t just being lazy ;-)

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	

Dow Jones U.S. Mortgage REIT Index	-0.57%
Dow Jones U.S. Insurance Brokers Index	-0.59%
Dow Jones U.S. Residential REIT Index	-1.32%
Dow Jones U.S. Restaurants & Bars Index	-1.90%
Dow Jones U.S. Specialized Consumer Services Index	-2.00%
Dow Jones U.S. Drug Retailers Index	-2.34%
Dow Jones U.S. Conventional Electricity Index	-2.46%
Dow Jones U.S. Electricity Index	-2.47%
Dow Jones U.S. Biotechnology Index	-2.55%
Dow Jones U.S. Soft Drinks Index	-2.61%

Oh, gee. Negative…. So the Best you can do is lose more slowly (though I’d not call losing 1% / week “slow”…)

But it does say we are expected to continue buying soda pop, electricity, hitting the bar, having an appartment, buying some drugs if we are sick. Gee, we’re not yet ready to commit suicide… That’s comforting… I guess…

10 Worst Performing Industries
Dow Jones U.S. Tires Index	-9.64%
Dow Jones U.S. Furnishings Index	-9.54%
Dow Jones U.S. Recreational Products Index	-9.51%
Dow Jones U.S. Platinum & Precious Metals Index	-8.95%
Dow Jones U.S. Home Construction Index	-8.52%
Dow Jones U.S. Durable Household Products Index	-8.51%
Dow Jones U.S. Banks Index	-7.37%
Dow Jones U.S. Coal Index	-7.14%
Dow Jones U.S. Investment Services Index	-7.01%
Dow Jones U.S. Transportation Services Index	-7.00%

Here we see the “not going anywhere and not doing anything optional” impact. Tires? Not driving at $5 gas… Furnishings? For what? That new downsized apartment after the forclosure finished? “Durable” household goods? Furniture? Who’s buying that? Then we have the “Government Help” sector of Finance and Banks again… Only thing of interest is the Platinum and Precious Metals ticker. As an economy slows, demand for catalysts slows too… but when you look inside that group, you find that Silver is in it too…

Best Performing Stocks
BORK	Bourque Industries Inc.	1,575%	
NBRI	North Bay Resources Inc.	230.51%	
PAWEF	Pacific North West Capital Corp.	28.29%	
CWET	Clean Wind Energy Tower Inc.	12.00%	
SDRG	Silver Dragon Resources Inc.	8.49%	
SRLMQ	Sterling Mining Co.		
HL.PB	Hecla Mining Co. Cum. Conv. Pfd. B		
IMPUY	Impala Platinum Holdings Ltd. ADS	-4.31%	
EXK	Endeavour Silver Corp.	-6.84%	
SSRI	Silver Standard Resources Inc.	-7.47%	

Worst Performing Stocks
CRMXF	Cream Minerals Ltd.	-53.45%	
PAL	North American Palladium Ltd.	-46.50%	
MGN	Mines Management Inc.	-33.66%	
ANO	Anooraq Resources Corp.	-29.82%	
MVG	MAG Silver Corp.	-29.57%	
SLW	Silver Wheaton Corp.	-22.33%	
AUMN	Golden Minerals Co.	-20.08%	
PAAS	Pan American Silver Corp.	-16.75%	
HL	Hecla Mining Co.	-16.07%	
SWC	Stillwater Mining Co.	-13.92%

Platinum itself is also presently in a down trend, but the silver stocks were the worst.

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.

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       Australia ETF
WOOD      A wood and paper products fund

Last time I’d said:

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)

And now we can see how TLT is one of the few lines rising against the sinking set. The Yen FXY is doing a nice recovery too.

Notice that SPY has a “MACD Red On Top” as of the start of May, while the ADX line went low (below 20) well before that, saying the “trend” was ended. It’s now started rising again and is about to cross 20, but with “red on top”. We’re in a “bear market trend”. MACD is ‘below zero’ and ‘red on top’ and we have price below the SMA stack (where things are ‘weaving’ but getting ready to resolve to the downside order). All in all, time to be out of the market. In a clasical top reversal, price will return to the SMA stack from below, touch the midline, then fall away to the downside again. So there might be a chance for a ‘counter trend rally day trade’ on that basis, but that’s a tricky trade to pull off… 10 day hourly charts or faster and stop loss orders are your friends for that one…

Also notice that big red price bar on the start of June. That’s a signature Short Seller marker IMHO. They WANT to “scare the rabbits” so make as big a splash as they can.

FWIW, I “stepped out” about last February and have been just ‘watching the show’ mostly since. As you can see from this chart, I’ve avoided a lot of heartache and risk as the market went nowhere, violently… Yes, I could have done some “swing trades” on those ‘back and forth’ swings. But I’ve had some other issues to deal with…

Now that we are resolving into a direction, it’s likely I’ll be doing some index shorts.

This is a chart of TWM, the “double short” of the Russel 2000 (RUT). Notice that it has a fairly classical “bottom” formation. RSI is rising from near 20. MACD is crossing zero to the positive. Price has crossed the SMA stack, which is inverting the order back to positive trend. Even DMI is “blue on top”…

TWM Ultrashort Russel vs RUT Russel 2000 and S&P 500

TWM Ultrashort Russel vs RUT Russel 2000 and S&P 500

10 Day Hourly Fast Trader Chart

Notice that the “short” tickers are the ones on top…

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

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

What about Brazil? Also India and China.

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

Everything going flat or down. Not a good time to be jumping into those “Emerging Markets”. When the American Consumer is “tapped out” the rest of the world has no customers…

Closeup on Gold

Gold 1 year daily chart

Gold 1 year daily chart

Long term holding value against the dollar. IMHO, a hard trade to time / make, though. You have to catch the 2 months in 6 where it rises and avoid the 1 in 6 where it falls. Just a pain.

VIX the Volatility Index

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

A close up on the last 6 months:

Volatility Index and Related

Volatility Index and Related

Last time I’d said:

A more mixed reading. Some spikes of volatility driven by news, but generally low volatility. Often that comes before a sag…

And we’ve got our “sag”. Now we get increasing volatility until it gets VERY spikey in the bottoms.

Ideas of the Week

Last time I’d said”

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…)

Which was great… except I was “playing nurse” and learning about kidney stones and trying to sleep in whatever time was available and…

So what about NOW? Looks to me like “swing trade short side” and “long bonds” going forward from here. Maybe some “buy volatility” with options…

Oil And Fuels?

We know oil rolled off, did that take everything else with it?

USO Oil, KOL coal, UNG Nat Gas, UGA Gasoline with a Golden ruler

USO Oil, KOL coal, UNG Nat Gas, UGA Gasoline with a Golden ruler

Finally, gasoline taking a tiny move down to follow oil, and KOL Coal rolling over a bit too. Yup, kill the economy and you too can get prices to fall a bit. Natural gas having a tiny rise (A/C demand for hurricane season coming…) but not enough strength to really be a decent trade on a long term basis. But on a 10 day hourly day trade basis, it was a killer. Beating GLD Gold by a long shot:

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

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

Watch natural gas and the related stocks. If it actually starts a run the companies related to it can make some progress. I suspect all the “Greens” agitating about fracking are likely to get the prices to rise some as they stop current projects.

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

And they all go together when they go…

“When the Cops come, they take the good girls out with the bad” is the old market saying…

That’s what a classic top looks like, BTW. Twin peaks with some wobbles in between. Prices ending in a drop below an inverting SMA stack. DMI / ADX going “confused with low trend” then resolving to “red on top” with increasing ADX Trend. MACD dipping just a bit below zero, the last hurrah, then the drop more below zero…

Study that image. Save a copy. Dream about it…. it will save you from nightmares later.

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

Yup. Bonds have been good. There is a classical trade that is “Long bonds, short stocks” and it’s inverse “short bonds, long stocks”. Expect bonds to continue good as the stocks come off a bit.

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
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

Time before 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 last time was:

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).

Still not not seeing any reason to change. OPEC just had a ‘dust up’ so I’d expect a bit of chaotic activity. Short fast trades only for a while.

Some Near Oil and Oil Related Comparisions

What about oil service companies? Or that Sugar and CZZ?

Oil Services and Oil Related

Oil Services and Oil Related

Only thing looking interesting to me is that Sugar trade and maybe CZZ if Brazil gets a clue.

Ag and Ag support / Input companies

Ag Trade 6 Month Daily Interval Mixed Players

Ag Trade 6 Month Daily Interval Mixed Players

For a while now I’ve been saying “be out of these”. Other than TNH (that has be volatile) that’s been the right move. Not seeing a reason to change that… Still waiting for that good weather that’s going to lead to extra planting, more seeds and fertilzers demand. Not seeing it.

SEE the SEA!

Last time I’d said:

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% …)

Well, it was a good swing trade, but lousy as an investment entry point, rapidly swapping back to “be out” indications. When “calling a bottom” always watch for a ‘failure to do as expected’ and return back to the bottom. Sometimes they will just lay there for months… Then shoot up in a week. So I usually ‘scale in’ a bit at a time. “Bottom Fishing” is a patient art… As crude oil “came off” the crude carriers get sold. Never mind if they have long term contracts and lots of dividends, it’s what they do. Usually a good time to get more high dividends on the cheap for the patient bottom fisher. Like catching a string of small catfish instead of one big bass… Lots of small buys. Nothing spectacular. Takes a long time, it’s stinky (catfish bait is often called ‘stink bait’) and take a heck of a lot of patience as you just sit there. Waiting…

Shipping Comparison

Shipping Comparison

The bigger losers are the ships that haul cargo. If the USA isn’t buying, containers are not shipping, nor is the bulk raw material to China…

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

Last time I’d said:

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.

I ought to have said “look like ‘buy’ signals may be forming soon, but not yet”. At least I did say “Not yet a full”… Now you know why. Prices can return to the SMA stack, even giving a short term trading buy (as that “blue on top” for DMI and MACD did at the start of May, then “fail to make it” through the stack. Bad news came out, they sold off, the “drop” trend is back in force.

I didn’t “buy early”, and I hope nobody else did either. (IFF you ever do “buy early”, always watch the chart daily until the price crosses the SMA stack, returns from the top side to touch it, THEN heads away higher to confirm the “bottom reversal”. I usually by a “tiny” early, then a larger full position on the confirmation reversal.

At any rate, a “stop loss” order at that “gone flat at the SMA stack” would have kept any damage from being done. For now, we’re back to “waiting for an entry”…

The REITS race – Real Estate Investment Trusts

Last time I’d said:

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…

Decent, but not spectacular. They are one of the few things that HAVE gone up nicely. Ought to have been more aggressive about getting in… For some reason, PLD has had “issues” with the chart. Perhaps some kind of share reshuffle. At any rate, I’ve swapped BXP Boston Properties to the main ticker.



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 

As you can see, generally rising nicely. Realestate does that in times of inflation.

Conclusions and Likely Actions

Last time I’d said:

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 ;-)

Cute, but 1/2 wrong. The ships sank… But the sell stocks and buy bonds part was right…

At this point I’m swapping to “short stocks” and long bonds. With some added REITS.

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.

5 Years, NYSE

5 years, NYSE

All the indicators are in the “be out” mode. “Red on top” for MACD and DMI. Even Slow Stochastic has a droop to it. (Notice how it nicely called the “get out” moment with that inflection down). Now, on the bottom at near 20, if it inflects up, watch for a short, shallow rise, then a new inflection down. That’s the “counter trend rally” behaviour in a falling market. Easier to trade the “short side” when that inflection up turns into an inflection down… Though I’d make that trade from MACD on a faster chart rather than Slow Stochastic on a slow chart (but the two are in fact interchanable in many ways).

Also note that as MACD is still “above zero” this long duration chart is not yet saying “Bear Market”. It is just saying “this run is over”. It could easily be like that last “peak and drop” where we just take a 6 month ‘time out’ and the bull market resumes. For now, be out, but be ready to get back in on that “dip” (is what this chart is saying).

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.” And now we add Williams %R is below the midline while Rate Of Change has a tiny black pip below zero.

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

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

Last time I’d said:

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.

Now we have W%R saying be out too and DMI with a tepid trend rate but as red on top. Yeah, beach time…

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…

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.

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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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20 Responses to WSW Wednesday, June 8, 2011

  1. Level_Head says:

    I’m a futures person, rather than equities, and strictly technical. But I enjoy your analyses, and the fundamentals are always fascinating. Thanks for putting these together.

    You mention Brazil a number of times, and they’ve just acquired a new “follower” government as a result of Peru’s election. Humala does not take office until July 28th, but there is much speculation that this disciple of Chavez will be Salvador Allende all over again.

    This article makes him seem “moderate”:

    Of course; it is the leftist LA Times. But this one (which will expire soon) hits a little closer, and has a bit more market reaction:

    Best wishes!

    ===|==============/ Level Head

  2. E.M.Smith says:

    At Level_Head:

    Sometimes I wonder, as there are so few comments on the WSW postings… but I need them for my own trading anyway… Still, it’s nice to know folks care ;-)

    You know, I watched the events in Peru, and watched SCCO (Souther Copper) drop faster than FCX or JCC (the copper metal) and then forgot to talk about it…

    Guess I just kind of “Marked off Peru” and moved on mentally…

    But yes, South America is 30 years on from the last time they danced with the devil, so they are having a bit of a return to The Socialsm Shiny Thing…

    It will be fun to watch. Just don’t loan them any money…

  3. R. Shearer says:

    Just FYI, VTR went ex-dividend today.

    I really like the idea of dividend paying equities, like reits, that are trending up against the grain. I read somewhere that shorts on the US dollar outnumber longs by almost 10:1. A rising dollar and falling rates don’t make much sense fundamentally but that is what they’re doing; long TLT still looks good but I think one needs to be ready to change outlook at almost any time.

  4. KevinM says:

    “Sometimes I wonder, as there are so few comments on the WSW postings…”

    They’re what brings me back here. I found your BLOG in an anti AGW phase, but now that the warmist threat is sufficiently beaten down I still enjoy reading the economic and human interest pieces.

  5. George says:

    Exxon has announced a huge new oil discovery in the Gulf of Mexico.

    May temperatures according to NCDC were cooler than May last year to about 1F below the 20th century average. For the most recent 12-month period, continental US temperatures are falling at a rate of about 0.8F/decade. Winter+spring temperatures (December through May) are down a whopping -1.8F/decade. At this rate we will be in an ice age in about 20 years if it continues.

  6. Tim Clark says:

    I read these pieces. Thanks for posting them.

  7. John F. Hultquist says:

    You should have used a RED font today. Suitable and gets attention.
    The local station had lowered its gas price by about 10 cents per gallon although it has been 3 days since I’ve gone by so I don’t know which day this happened. Nevertheless, that also seems to be a sign of bad economic news rather than good news. In contrast to Peru the election in Portugal went right. Meanwhile, US politicians seem as loony as ever — Anthony Weiner being the most recent to distract congress from doing something constructive.

    I feel unprepared and uncomfortable dealing in any big way with the economic world. It seems like an individual trying to out-think teams of smart folks will end badly. Then today I read that Bill Gross made a bad bet on Lehman bonds. The difference is that regardless of whether his fund does well or not – he’s still rich. Not so most folks.

    So having more or less said I’m not doing much with the information you are providing in these summaries I do enjoy them. Thanks. And to your other commenters also.

  8. John F. Hultquist says:

    Question. From where does the time stamp on the comments get inserted? My submit above was at 10:21 PM on 8 June. Returned is 9 June at 5:21 am. The server must be in Reykjavik?

  9. George says:

    10pm + 7hrs = 5am looks like GMT to me.

  10. Gene Nemetz says:

    I know this is completely off topic, completely, but you don’t have a Tips page(at least I don’t think you do).

    Do you think this is possibly true Mr. E.M.? :

    Paul Irey, a retired professional typographer with 50 years experience…….. “My analysis proves beyond a doubt that it would be impossible for the different letters that appear in the Obama birth certificate to have been typed by one typewriter. Typewriters in 1961 could not change the size and shape of a letter on the fly like that…… This document is definitely a forgery”…… an IBM Selectric typewriter could have produced different typefaces in a given document, but only if the Selectric ball was changed every time a different typeface letter was struck……..”This would have been a cumbersome procedure and the average hospital clerk typist would have no reason to change typeface with each individual letter in preparing a birth certificate”

    Can you say “Reminiscent of RatherGate”? You must read this article and see it for yourself:

  11. Jay says:

    Please keep this long form WSW; one of the main reasons I come here. Last fall several of us expressed a interest in a long term holding corner. Any progress in that?

  12. pyromancer76 says:

    Yes, please keep the information (data) and your unique perspective in analyzing it coming — on all subjects — even if there aren’t many comments. “Now we have W%R saying be out too and DMI with a tepid trend rate but as red on top. Yeah, beach time…” From everything I read, your comment is the most positive that can be made at this time. Glad you can have such a “positive” take on the current market. I very much enjoy multiple posts per day — and the discussion your commenters enable. (Personally, I have not been able to comment much for some time, but I always read — and learn. Thank you. )

    George, glad EXXon has found a “huge new discovery” in the Gulf. Hope “they” are not so favored by government regulators (e.g., BP, huge donations to Obama-people) that they do not have to follow safe and prudent procedures in drilling. Once “we” side-line all the rent-takers from the private sphere — including at very the least corporations (for so-called profit and non-profit/ NGOs), the academy, government-funded scientists, all bureaucratic elitists — the U.S. is poised for a new era of affluence with abundant natural resources to fuel it.

    Imagine how many countries of the world, and “malevolent” individuals, are looking at our resources with dripping envy. I believe this reality is some of the motivation for the fraud addressed below. I also believe that we are in a titanic battle (like the one fought politically known as the Populist and Progressive Movements) about this new reality. I hope your readers don’t confuse the Progressives of the late-19th and early 20th Cs with the elitists attempting to enforce radical leftist/socialist/marxist policies under the guise of being “liberalis” or “progressives”.

    The topic Gene Nemitz is addressing is one I have been following, from many perspectives, since 2007. Lots and lots and lots of evidence for fraud. Few takers for investigative journalism (the scientific method; the truths according to the data; a “fourth estate” to make possible representative democracy — regret reference to Fr Revolution).

    E.M., one of your comments I enjoyed the most is that the Democratic Party used to represent the working American in this country. The huge battle that libertarians seem historically blind to was that in the late 19th century the corporation was made an equal “citizen” to individuals with no responsibilities to their workers to share the profit. It was a massive battle to make the government as the agent that could represent “the people” in the face of the massive ownership of resources and productivity by Robber Barons. Unfortunately the government as agent of “the people” and refereeing for equality of opportunity and free competition for profit has been transformed into ownership of the three branchesby elitists (those without any productive contributions to the country) spinning webs of authoritarian control. I see the earthquake change taking place in the 1970s.

    Anyway, glad for the opportunity to be verbose. Keep ’em coming from all the areas of your amazing interests.

  13. P.G. Sharrow says:

    To the ChiefIO;
    While I rarely comment on WSW, I read it and the comments. Very valuable information and insight. To those that ask me, I recommend horde cash and cash like things. This is a very iffy period. As bad as our government is damaging our economy, the others are worse, even China has wasted a huge amount of wealth on non productive construction to keep its population busy. This is always the mark of the peak of a civilization and is followed by collapse. Those that say that China is the face of the future are fools. The same thing was said of the USSR in the 1970s and Japan in the 80s. When you are doing catch up with the U.S., Every thing is fancy and new, but you exhaust real wealth and must impovorish the population to maintain those creations and support the bureaucracies that were created.

    Bureaucracy always destroys the civilization that it controls. pg

  14. E.M.Smith says:


    Thanks for letting me know that even silence can mean value…


    Now if only the Obamanation will let them produce the oil in time for the cold…

    @John F. Hultquist:

    A few months back I swapped to GMT. As all the Quake data are in GMT, and many folk are in the UK or Europe, and markets time off of Europe… it seemed like a reasonable thing to do…

    Yes, oil / gas prices are often the inverse of economic activity / news…

    @Gene Nimitz:

    Thereis a “tips” tab at the very top right:

    I’ll look at the article, but the level of evidence hurdle is higher than just type fonts. As a bored clerk on an IBM Selectric back in the ’70s I sometimes swapped type balls just to have a bit of fun and look at how the different fonts “presented”. I’ve also typed part of a form on one typewriter, set it aside, and when the rest of the info came in, finished it – and not on the same make, model, or even brand of typewriter.

    For my money, you will need to show that the typeface was one not in use then. Fonts do change over time, but if they are all “period or before” it can just be a bored or lazy clerk.

    BUT, if you find even one character with a font from a typewriter made “too late”, well, that’s a smoking howitzer…


    While I was glad for the opportunity to state a bit about why Robber Barrons and Free Markets are not such a great idea, I’ve now got folks tossing rocks at me from both sides… part of the peril of aguing for the “balanced middle” ;-)

    But at least now all the folks who were accusing me of being a Rabid Republican or Free Market Libertarian can see that I’m not. While I generally lean their way (especially the libertarians on most issues of liberty); the fact is that we “ran that experiment” and it turns out badly. What is needed is “countervailing power”. Unfortunately, as you pointed out, “regulatory agencies” tend to end up “captured by the industry” and it devolves into a tool to protect the vested interests.

    Even the Democrats have forgotten whom they ought to represent…


    There are now 14 Chinese stocks traded on the NYSE that are suspended pending information… Something is starting to crack there, but it’s very opaque…

    Also, when the “one child policy” generation is left supporting all the old folks, it’s going to be a bit of a mess too. They hit the “demographic bomb” faster and harder than we do.


    I ought to have put, under “ideas”:

    Rapid swing trades of the rolling motion if we stay in a sidways roller market. Use a 10 day hourly chart to time swaps, or just ‘bounds’ of above / below trend. (Draw trend lines from peak to peak and trade when you get near them…)

  15. NZ Willy says:

    On currency, don’t overlook our New Zealand dollar, been rising as fast as the Swiss Franc. So all these “experts” here are bemoaning how it hurts exports — when in fact we’ve just had a record export year!

    As for silver, I’ll bet you’re just a teensy bit sorry, Chiefio, that it hasn’t fallen further. It even looks like it’s rising again. Don’t turn your back on it or it might bite you in the bum! Cheers.

  16. E.M.Smith says:

    @NZ Willy:

    I have no emotion about silver at all. In trading, the less you feel about anything the better.

    It was in a bubble. It fell. It’s had the “dead cat bounce” after that, and it is back on the trend line. All I care about is that it acts as expected, and it has. I’m planning a revisit of the silver charts sometime today. We’ll see if I get to it. I’d expect it to follow a line connecting all the bottoms of the curve. It is just when spikes run up from the trend that it’s a bubble, and then it must return to trend…

    Per the NZ$: I’ve traded it from time to time. When ag commodities rise it gets a nice lift. But it’s a thin market and not a lot of volume to play with for the ETFs. I keep thinking some day I ought to get a real ForEx account, but then lazy wins ;-)

    Here is a chart of BNZ vs GLD vs SLV vs FXF:

    Looks to me like SLV is back “on trend” and probably an OK buy now (but I need to do more detail look before I’d actually do the buy) and that FXF is beating the other two over the year… BUT…

    That 3 month chart shows it running faster than FXF recently. (Beating gold, too…)

    Hmmm…. Nice tip. I need to dig out some NZ stock tickers and plot them, too. ( I like to get rising stocks in a rising currency as then you get a ‘two fer” ;-)

  17. NZ Willy says:

    Wow, very impressive with the charts, Chiefio! It’s like they dance for you when you perform the right incantation. Or just that a sufficiently advanced technology seems like magic to the rubes — which I suddenly feel like, published and all. ;-)

  18. E.M.Smith says:


    I”ve been remiss in making a “long term” corner. Partly as the market was doing this “go flat” thing and so it was not a good time to be getting in. How to say “just sit for a while” in 20 pages ;-)

    For now, I’d be mostly in WIP and stable currencies like FXF with a wary eye on bonds. Eventually The Fed will have to start raising rates, and when that happens bonds will tank. (There is a ‘possible’ of them doing a Japan Model on it and just trying to get to zero interest rates for decades, but that depends on not over borrowing, and we need $1.4 T per year to just pay the bills, so I don’t see that option on the cards…)

    IMHO, it’s mostly “rig for stagflation” time and best thing to do is pick up things that preserve value longer term. Some of those REITS, for example. And the Inflation Protected bond funds. (TIP and WIP).

    As we have a “mini dip” in the economy, commodities will take a drop. That’s a good time to buy into commodity stocks.

    Unfortunately, there can be these multiple month long times where the best thing you can do is “do nothing much”…

  19. Scarlet Pumpernickel says:

    Gold next to pop?

  20. E.M.Smith says:

    @Scarlet Pumpernickel:

    Gold is largely driven by the central banks of the world buying or selling it in carload sized lots. When they were dumping gold, it rand down to 250 / oz. Then they decided that was not so bright, and it rose to $600. Then they decided to buy some and went to $1400 (as other folks jumped on the bandwagon it was driven to $1500).

    So the question is:

    What will central banks do next?

    As nobody knows, not even them, the best you can do is “trend follow” and watch for indications of large buys / sells.

    It’s not nearly as thin a market as silver, so less prone to manipulation. Basically, the “small guys” are nothing compared to Fort Knox and the Euro Banks…

    Where I to speculate, I’d speculate that it will hang out about here, with slow drift upward that is directly tied to the US Dollar inflation rate. Basically, a plot of the Swiss Franc vs Gold doesn’t show much difference…

    So, personally, I’d go with the FXF and avoid all the central bank issues… but that’s just me.

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