WSW, Saturday, 25 February 2012

General Comment

About a month ago I made a ‘quick posting’ that said it’s a risk on world and time to be in, but was not followed up with what OUGHT to have happened, a full on WSW analysis. OK, Kudos for saying ‘get in’ and wrist slap for not being very complete about’in what’? That posting covered a lot of ground:

but buried down in the guts of it was:

I’ll be cooking up a longer posting over the weekend, but for now what all this means in summary is: Look at metals and minerals (all of them), oils and energy stocks, land and REITS, and ANYTHING with a large and stable dividend. “Resource Currencies” such as the Canadian and Australian Dollar have an advantage (though you still have to watch out for home grown stupidity by THEIR governments – so pick Canada over Australia right now) as will more out of the way places like New Zealand (that has risen from 50 cents / $NZ to 80 cents (US) per $NZ already). It also argues for Russia doing better (modulo THEIR “sovereign risk” issues – and that they have a ‘flaky customer base’ in the Euro zone right now…) and for places that are producers of resources in general to benefit (so Chile has a nice future, as does Brazil – if THEY can reduce their urge to Socialism and their new more socialist President can be limited).

At any rate, the summary is “risk on world” and “assets & dividends”. Stocks tend to rise then (though often not enough to overcome the incipient inflation) but I’m expecting the “real stuff” to do better. With Treasuries at fractional percents for the foreseeable future, expect things like utilities and tobaccos with high dividends to benefit. Wisdom Tree has a nice line of ETFs with a dividend focus and that would be a reasonable place to start looking.

A bit slap dash, but it does say be in energy, minerals, ‘risk on’ positions in stocks. BUT, I didn’t get back to making that longer posting over the weekend. I got distracted by “fun stuff”. Also, the ‘pick Canada over Australia’ was wrong. In the time since, both the Aussie Dollar and stocks have beaten Canadian. I don’t feel TOO bad about that, as even the Pros on Fast Money were puzzled by it. With oil going up so much, the Canadian energy demand ought to have raised the currency and their markets. So “something happened”, but what is a bit unclear. Perhaps Australian Politics looked better to others, or perhaps Canadian energy stocks are not as interesting to the Chinese right now as Australian minerals… But it’s an “oopsy” so needs a “dig here” to figure out why.

OK, going forward, where are we now?

I’ve just put up a “gee, broad market indicators are toppy” posting:

So we’ve got a bit of a ‘risk off’ moment likely ‘soon’. Time to “bank” some of the gains and protect positions.

Ideas of the Week

In the last WSW posting, I’d said:

REITS, Oils, Oil Services, Tech Sector, broad market. All looking good to go. Palladium and selected base metals too.

Right now my “idea of the week” is to protect gains, start raising some cash, and positioning to take advantage of a “dip” on bad news.

We also have oil refiners and service companies moving, a fresh bottom in nuclear stocks, and new rise.

Then there are very interesting moves in WIP and other non-US bond funds. US Bonds are flat, but it looks like folks are going “risk on” into other higher yielding funds.

News Flow

News flow has been ‘Euro Positive’ with Yet Another Bailout of Greece, even as they riot. Italy is looking like it would like some money too, but that will be for later…

There are strong indications of some kind of Military Adventure likely in Syria and / or Iran (that is driving oil on a parabolic spike). Nice as a quick trade, but it can collapse quickly too.

US Politics are continuing to ‘muddle along’ with not much changing. Obama is acting ever more like he wishes to raise fuel prices to the point that the economy stalls, at that same time that oil / gas traders are saying they see “$5 / gallon gasoline as the next target”. That’s a ‘deal killer’ for both Obama getting elected and for the US Economy ‘taking off’. Disposable income tanks, investment slows, demand for other goods slow, folks don’t go to movies or dinner out, and it’s generally not good.

Expect Obama to demagogue this as Evil Big Oil and Oil Speculators. (It isn’t, other than their ability to get Obama to have policies that curtail oil production to raise prices. Speculators can change WHEN a price change hits by accelerating the trend, but they can not MAKE a price trend in commodities. They can spot a supply / demand imbalance coming and get in front of it, but the can not MAKE that supply / demand imbalance. And any ‘risk premium’ is from Obama and mishandling of the Middle East.)

So, news flow is not particularly good. Next week the Euro Zone bankers talk about ways to hide the debt and third party the risk (packaged as ‘fixing the problem’) while The Bernanke is scheduled to talk (that is likely to spook folks, IMHO. “Good Fed News” is already in, so all he can do is “no change or bad”. Not good odds on news flow…)

Job growth is happening, sort of, but tepid. Overseas tech sales are good, so Apple has shot up along with some ‘hot IPOs’; but you can’t make a market out of a hot sector. South America is continuing it’s trend to Socialism and Integration, though Chavez went back for “round two” of cancer surgery, so Venezuela is likely to destabilize “soon”. Unresponsive to chemo AND recurring? I give him a year… as a guess.

So what have we got? Europe is whistling past the financial grave yard, the USA is digging their grave deeper (though some are questioning the wisdom of bigger shovels), Asia is waiting for their two biggest customers to come back, and South America is patting each other on the back looking all all the nice Yankee Dollars China has given them for ‘future resources’. One only hopes that China knows how to assure that Latin Socialist don’t just nationalize those purchases and ask for more money…

So we’re left with Canada and Australia. Selling “real stuff” to China, so likely to continue to do well, but Australia with a political overhang AND a “Cap and Tax” moment coming. Yet Canada not moving as much as it ought on the energy spike.

Frankly, it looks like a mess to me. But metals and “stuff stocks” and real estate are likely safe longer term. Maybe.

Conclusions and Likely Actions

Going to a ‘hedged’ position with gains covered and protection in place. Exiting high beta (volatile) stocks and putting more in place to ‘buy a dip’ or short a drop. Hanging on to high dividend payers or things in ‘real assets’, but putting protection around them (with leveraged short ETFs or buying puts or buying ‘natural hedges’ – like an OIL ETF when you own a transport). Moving to more “risk off” and a bit more “ready to move fast”.

Yet many markets have relatively recent “entry configurations”, expect to hop back in as soon as any ‘dip’ fails to have “lower lows”.

Pointer To Other Topics

Some general comments on how long term investing differs from trading and my thoughts on things to do for the long term investor, start with this page:

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 “Infrastructure Charts” for stocks, bonds, commodities, etc are in the Stock Charts category:

That is a bit of a play on words as “stock” can mean stock in a company, stock of goods, or as in photography, a set of standard images. To that extent, a chart of ‘the usual bond ETFs’ is something like a stock of goods, and a stock picture… ;-)

The Nature of the Charts Here

The charts in this posting, or the linked infrastructure postings, 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 label 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:

Or change the particular indicators or tickers of interest. I strongly recommend learning to make your own charts for your particular holdings.

Wall Street Week –
Saturday, 25 Febrary, 2012

Long Term Context

I’m promoting this chart to the top for a while, as it is now in control. Look closely at what it’s saying.

This is a very long duration chart (5 years) of NYSE. It will not change much from week to week (just one tick mark) so guides longer term attitude. During a new bull market, it can lag so much that you miss the best bits, so a ‘trend trade’ positive can be done until this one confirms.

(Oddly, the NYSE ticker symbol stopped working, but using this saved link with the SecurityID in it does still work. I’ve added other USA Indexs for comparison)

5 Years, NYSE

5 years, NYSE

Right now, the chart has “be in” from DMI and MACD, but “dip soon” from Slow Stochastic. DMI at “below 20” (about 12 now) says to use the Slow Stochastic (or move to a faster chart). Basically, ‘direction and momentum’ are slowing and muddling, so you move to faster time scales to get some action. The “trend” is very low now on this time scale.

Last time, at the very start of January, I’d said:

Price is still below the SMA lines. Bear Market, be out of stocks. For traders, you can trade-in and buy the dips, then ride them back up. At this point, that ‘dip’ has reached the SMA stack. Time for traders to step out, too. (At least on this time scale).

And that was not a very good call. Prices did not ‘fall away’ from the SMA stack, but crept on through. This is one of the ‘hard bits’ of trading a system. MOST of the time, return to the SMA stack from below ‘falls away’, but at some point it WILL punch through. That, alone, is not too bad. Failure to keep an eye on it, and update the guidance, was an error (even if I did make other more recent ‘be in now’ postings) I ought to have put a comment here, too.

At least I also said to “go to a faster chart” to trade…

We still have a ‘trade in swing trade’ indication, but in an overall bear market configuration. A ‘hard way’ trade (but can make money). Only do that trade on a faster chart. 1 year daily interval or even 10 day hourly interval charts.

OK, so I was right to say trade on a faster chart and be in, but missed that NYSE was more pessimistic than the other indexes and completely ignored the QQQQ rocket ride. (In the prior WSW format I had a specific section on Tech vs others and can only figure that I need to keep a marker link here to remind me. So QQQQ is now on this chart too.)

Bonds vs Stocks

This next chart is TLT vs SPY, as the S&P 500 is the basic investment vehicle for most folks (unless you really want to pick sectors or individual stocks, you ought to start with a “SPY / Bond” oscillator, as on this long term chart. TLT is long term US Treasuries, so gives a good view of the major alternative where cash runs during times of doubt. If you plotted a line 1/2 between those two, you would get the performance of a portfolio that was 1/2 in each. A pretty good basic strategy for times that are hard to judge. They form a natural hedge pair during spikes, for example.

TLT vs SPY (20 year Treasury Bonds vs Stocks) with RSI, MACD and DMI

TLT vs SPY (20 year Treasury Bonds vs Stocks) with RSI, MACD and DMI

Last time I’d said:

This chart continues to warn that Treasuries are a bit long in the tooth now and look to be hitting a lid on price rise. With $7 Trillion of ‘rollover’ coming, I’d step out.

If not stocks and not bonds, then what? (Note that on the 1 year chart stocks are having a ‘buy’ indicate for a ‘trend trade’ – just not yet in ‘buy and hold for years’ territory.)

Well, there are times when the right place to be is in cash, minimizing risk and preserving buying power. You can also look to early entry into depressed commodities and some commodity stocks. Also simply move to faster time scale trades. On the one year chart we have some “go ahead and buy” indications:

Which was much better advice than from the longer term NYSE chart. Also, I’ve added QQQQ, SPY, and DIA ot the NYSE chart where we can see that the NYSE was not at all indicative of the Tech market and much weaker than the other indexes.

So, moving to that faster time scale and doing a shorter term (few weeks trend) buy did work. Nice, but I ought to have stressed it more and been less ‘tepid’ about it.

OK given this bonds chart, I’d be getting out of them. No upward momentum. The Fed can’t cut rates much or at all from here, if the economy DOES pick up, and rates start to rise, bonds will tank, hard. Only thing left is the “Fear Trade” and if the Euro looks like it might survive, expect money to start flowing back that direction (or to other curencies). Indicators are for a ‘dip’ with RSI making ‘lower highs’ after a ‘near 80’ and MACD ‘red on top’ (though still above zero, so not a time to short, yet…) and DMI / ADX+ have inflected as well (though still ‘blue on top’ so again not a time to short – yet).

General Stock Markets Overview

The broad stock markets charts are here:

Last time I’d said:

SPY is in a ‘bull market’ posture on this time scale. So a ‘trend trade’ until the longer term chart also swaps to positive. You can be in for weeks to months, but be ready to leave as soon as the trend leaves. Some of the ‘variety markets’ around the world also look like they are reversing, but from a lower base point.

That was a good call… and now the ‘trend’ looks to be softening. Not a ‘rush for the exits’, but an ease to the head of the line and pack up some of your stuff into a bugout bag…

The SPY, in particular, has a configuration that CAN be a slow steady uptrend. MACD sideways weaving. RSI can ‘roll’ between ‘near 80 and near 50’ in a persistent rise. Until a DMI crossover, you can just have blue on top wobbling closer and further from red. So it’s not YET a “Get Out”, so much as it’s a “worry and prepare”. Each market has it’s own character right now, so that SPY reading is not transferable to other markets. You will also need to “race” candidate markets (such as the NYSE vs RUT vs QQQQ above) to find which markets are working and which are higher risk.

That the RUT has ‘gone flat’ is a bit of a worry, though. It says that ‘risky small stocks’ have already gone to ‘all risk, no reward’. They will often move down first, then the others follow, so watch for that… If they suddenly start running back up, there’s no fear about the Big Boys…

Currently XRT the Retail ETF is at the top of the stack. It also has RSI at 80 and DMI (black line) inflected to sideways. I would watch out for ‘sector rotation’ moving out of retail. But it’s not YET saying “just be out”.

The EZU European Markets fund has ADX+ “blue on top and above the DMI black line”, a positive configuration. It has underperformed the SPY, so could easily have a ‘catch up’. Most likely a bit of a ‘bottom fishing’ can still be done in European stocks. As long as the PIIGS don’t ask for too much more money…

UK vs other rising stock tickers

UK vs other rising stock tickers

SPY  -  S&P 500 Benchmark ETF
EWJ  -  Japan ETF
EWL  -  Swiss ETF

EWJ and EWL are trending nicely and not yet at RSI near 80… Japan has had “some issues” and the currency had a recent sudden drop, yet in USD the stocks are rising. Hmmm… Folks who had run to Yen, selling them to buy… something. I’d guess Japanese stocks, from the chart. A partial holding in Japan is likely worth it.

As Swiss are unlikely to be involved in any “Dynamic Action” in the Middle East, putting some into Swiss stocks would likely be a good idea too. Looks like plenty of ‘upside’ to both before reaching prior highs.

10 Day Hourly Fast Trader Chart

You can see the “pop” up at the open today. Not a big trend yet, but holidays are like this…

Eventually I’ll put this in a linked chart as well.

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

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

The Dollar Lately

Time to measure our Rubber Ruler.

The currency charts are now on the Bonds and Currencies chart here:

The Yen had a 5% drop at the end ( BOJ intervention or traders cashing out?…) while the Swiss Frank has started a new rise (Central Bank intervention over?). OK, I’d do more Swiss than Yen for now. Euro is significantly down, but showing a bit of bounce off of the Greek Bailout (part 2? 3? 4?) so likely little downside left. Gold doing better than the lot of them. FXA the Australian Dollar is surprisingly high, but flattens at the end. Looks risky to me, and while Australians will enjoy buying stuff cheap, vacationers will start choosing somewhere else to go and exports are now going to be harder to sell at a premium. OTOH, with South America being a growing Socialist Club, I suppose it looks ‘safe’ in comparison…

Were Bonds a good idea?

The bonds charts are now on the Bonds and Currencies chart here:

The major good bonds have gone flat (and at low yields, too) while MUB (municipal bonds) and JNK Junk Bonds are rising. Somebody is willing to take more risk for yield. A good indication of folks being comfortable with risk, but not so good that so many folks are trading to more risk in chasing yield… I’d generally slide out of bonds rather than take the higher risks.
Last time I’d said:

WIP “World Inflation Protected” bonds fund looks like it’s bottoming. Present yield is 10.73% on the fund and prices are down. Nice bottom fish / value play from the looks of it. Has a nice mix of UK, France, Japan, S. Korea, Turkey, South Africa bonds (with an inflation ‘kicker’). I’d not bet big on it, but it looks like a reasonable place for 1/10 a portfolio or less.

and from the looks of this chart, that was a very good call. With an SMA stack crossover and a touch and resume rising from the topside, it’s now a confirmed positive run. Several other minor market bond tickers in that Bonds Link are also on nice runs. So for bonds, it’s OOTUS (Out Of The US) and into the rest of the world… (Perhaps that is where those Yen are moving as well…)

World Inflation Protected Securities - 1 year daily

World Inflation Protected Securities - 1 year daily

Base Metals vs. Precious Metals

Precious metals:

The precious metals now have confirmed runs higher. Reasonable diversification at this point.

SLV Silver ETF

SLV Silver ETF

Base Metals infrastructure chart posting is here:

Platinum moving nicely (and at present prices, I’d rather buy a bit more platinum than gold) but some others are still in ‘rising but still cheap’ land. IF ANY economy in the world recovers, metals ought to rise from here. China had some weak numbers, but Nickel has held at the SMA stack from the top. Good to go at a near the bottom price. Only real risk is a renewed global recession and that’s not very likely right now.

PALL Paladium vs JJC Copper, JJN Nickel, JJT Tin

PALL Paladium vs JJC Copper, JJN Nickel, JJT Tin

So some industrial metals pickup, with more to come. That implies economic improvement and stocks to pick up ‘soon’.

What about Brazil? Also India and China.

Brazil (and some of the others) has had a nice run up. Right now, the price bars are very short (compressed) and the price is about the same as the last top. I’d reduce risk and move out. It’s higher beta than other countries, so when it’s “risk on” be in, but when it’s “risk off” or even “risk worry” I slide out.

Brazil the EWZ ETF vs the BZF currency ETF

Brazil ETF vs Currency Race

EWZ  - Brazil
GLD  - Gold fund
BZF  - Brazilian Real currency
IDX  - Indonesia
FXI  - China
EWA  - Australia
EPI  - India - WIsdom Tree fund
EWC  - Canada
EWW  - Mexico
GUR  - Middle East Fund


ETFs with Dividends

Several of these are in nice gentle rises and with good dividends (for the Utility Funds). The Cell Phone funds are less interesting. PCS had a “pop” on a takeover attempt, but news is done on that. Yet the “telecom ETFs” that are broader than Cell Phones has several that are trending nicely. Internet stocks, too, moving nicely.

Even the Preferred Share funds are rising. You can pick up nice dividends with upside that way.

Ag Commodities & Ag Related Companies

Same as last time:

“FUD” a food basket and “JJG” a grain basket have both moved into positive indications and an ‘off the bottom’ movement.

Not a dramatic trade, but workable.

FUD "food" and JJG "gain" vs DBA an agriculture basket benchmark

FUD "food" and JJG "gain" vs DBA an agriculture basket benchmark

Last time I’d said:

“CZZ as a bottom fishing opportunity in Brazil looks OK for small sizes.”

And it has had a nice run up.

TNH has continued to run up, and has that dividend…
TSCO Tractor Supply Company has had a nice run too. Perhaps a bit late, but the chart indicators are still good.
The other “inputs” companies have slower rises, but likely more rise left to go.


After a small run up, most transports got whacked on the recent oil spike. Canadian rails, like CP, the exception (perhaps as they haul all that Canadian oil and coal… but rail is more competitive when oil prices rise.)

Oil And Fuels?

The charts are here:

Gasoline is rising much faster than oil, so the refiners are pocketing the excess… Oil has spiked to near the prior high and has RSI at 80, so likely to go a little further (it tends to overshoot, especially on war in the middle east news) before the inevitable drop back. I’d not buy it at this point. The oil COMPANIES look much better.

Flowtech FTK and Parker Drilling PKD look to be running hard and fast. At these kinds of prices and with supply in the USA dropping, global drilling service will make money. XES is a basket of them, and while it’s playing “catch up” with SPY it also has a steeper slope up right now.

US Coal is just laying there as the competition from cheap natural gas puts a lid on it. CLNE that converts trucks to natural gas is on a rocket ride.

And, surprise surprise, CCJ that does Uranium fuel production has a new bottom / entry and is rising nicely. LTBR LightBridge, the Thorium Fuel folks at $3.14 has had a bottom and short cover pop. But it’s very speculative.

Looks to me like some speculation in small nuclear positions could be done (especially as some more nuclear power plants are actually being built).


Last time I’d said:

Real Estate Investment Trusts look like they are all in nice upward runs, with dividends too ;-)

But now the indicators say the run is ending. Still can get nice dividends and long term appreciation, but it’s not a momentum trade anymore. So make sure “FFO Funds From Operations” covers the dividend if you will be doing a longer term hold.



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 

Monthly Running Stocks

Well, the “up / down ratio” is OK, but not great.

So what “won” and “lost” over the last month? (though remember, they may not be the winners next month… it’s just to provide ‘context’).

One Month

10 Best Performing IndustriesIndustry
Dow Jones U.S. Computer Hardware Index	17.16%
Dow Jones U.S. Platinum & Precious Metals Index	16.18%
Dow Jones U.S. Consumer Electronics Index	15.18%
Dow Jones U.S. Mobile Telecommunications Index	13.55%
Dow Jones U.S. Consumer Finance Index	11.08%
Dow Jones U.S. Clothing & Accessories Index	10.82%
Dow Jones U.S. Exploration & Production Index	10.63%
Dow Jones U.S. Gold Mining Index	10.24%
Dow Jones U.S. Durable Household Products Index	9.82%
Dow Jones U.S. Travel & Tourism Index	9.47%

OK, “Computers” will be alot of QQQQ and Apple. Precious Metals we got already. And consumers are buying gadgets and cloths. Oil is in demand, so needs finding, and folks went somewhere for New Years… Unlikely the retail and gadgets will power the next month, though, as Spring is usually a retail slowdown. Tourism is the spring / summer play. Mining and oil services has probably got legs.

How about the losers?

10 Worst Performing IndustriesIndustry
Dow Jones U.S. Steel Index	-5.01%
Dow Jones U.S. Electronic Office Equipment Index	-4.80%
Dow Jones U.S. Tires Index	-2.59%
Dow Jones U.S. Industrial Metals Index	-2.43%
Dow Jones U.S. Food Retailers & Wholesalers Index	-2.03%
Dow Jones U.S. Mortgage Finance Index	-1.99%
Dow Jones U.S. Railroads Index	-1.64%
Dow Jones U.S. Business Training & Employment Agencies Index	-1.54%
Dow Jones U.S. Hotel & Lodging REIT Index	-1.17%
Dow Jones U.S. Nonferrous Metals Index	-1

Heavy industries. And, at last, Tires has rolled over. Companies not buying new office stuff yet. We’re being more choosy about expensive food, and not doing a lot of new mortgages. Rails in the USA are down a bit (as Obama throttles back coal shipments and goods) and the Hotels trade is ramping down post holidays. No surprises.

Now, we’d LIKE to see some of those metals show a ramp up shorter term as an indicator of new demand and growth…

Many more chances to win than to lose, so it was a good time to be in.

Weekly Wining and Losing Sectors

The best and worst of the week? Do they tell a different story on the short term trade?

Up/Down ratio still positive, but not as much. A bit tricky to get the right mix.

10 Best Performing IndustriesIndustry Name	
Dow Jones U.S. Platinum & Precious Metals Index	7.57%
Dow Jones U.S. Gold Mining Index	5.05%
Dow Jones U.S. Heavy Construction Index	3.92%
Dow Jones U.S. Mobile Telecommunications Index	3.35%
Dow Jones U.S. Oil Equipment & Services Index	3.05%
Dow Jones U.S. Oil Equipment Services & Distribution Index	2.59%
Dow Jones U.S. Travel & Tourism Index	2.52%
Dow Jones U.S. Waste & Disposal Services Index	2.39%
Dow Jones U.S. Integrated Oil & Gas Index	2.02%
Dow Jones U.S. Railroads Index	1.97%

The run to precious metals, oil and “stuff” is underway. Some heavy construction (that might involve those mines… and roads to them). Mobil Telecom showing life (probably that PCS takeover bump). Rails on the Oil Spike. Then some garbage utilities and a bit of Travel. Less likely to continue as oil spikes.


10 Worst Performing IndustriesIndustry Name	
Dow Jones U.S. Airlines Index	-11.25%
Dow Jones U.S. Biotechnology Index	-4.28%
Dow Jones U.S. Coal Index	-3.62%
Dow Jones U.S. Home Construction Index	-2.70%
Dow Jones U.S. Steel Index	-2.51%
Dow Jones U.S. Auto Parts Index	-2.34%
Dow Jones U.S. Real Estate Services Index	-2.07%
Dow Jones U.S. Real Estate Holding & Development	-1.95%
Dow Jones U.S. Toys Index	-1.94%
Dow Jones U.S. Semiconductors Index	-1.93%

Airlines (on oil spike), coal (on cheap nat gas), Toys (Christmas is over), then a very bothersome set of homebuilders, steel, Real Estate services and holdings (that REIT roll off?) and then the perplexing Semiconductors and Biotech. So, perhaps that drop in Office Equipment reflecting in semis and Obamacare unlikely to ‘pay up’ for new Biotech wonderdrugs?

Not seeing a lot of theme here other than oils… and US continued weak.

Momentum Trades

First off, the caveat page. Know how to exit before you enter a momentum trade:

This is NOT buy and hold investing, OK?

The general approach is to find lists of stocks going up, then look at their chart for ‘what is in a good configuration and likely to continue’, then wait for an entry. That last part can be particularly frustrating in stocks with a strong momentum as the ‘dips’ either never come, or come at the eventual blow off top of an exhausted big momentum run. So sometimes I’ll just ‘scale in’ to momentum stocks. Buy some each dip, and exit all of it on a topping indication.

This posting gives an overview of the method of picking:

A trial using the default days length setting didn’t return much of benefit. A nearly random result over a month or two. I’m working on the 6 month and 1 month screens now.

These were picked a couple of months ago, and we’re going to stick with the same list to see how well it holds up. At some point I’ll re-visit the selection for a new batch, but for now this ‘pick’ looks like it’s still running OK.

FINVIZ 6 month Bubbles chart provides a list of stocks that moved up over a 6 month period. I’ve selected some of them, randomly selecting from the top group and tossing out those with a big step up and flat or otherwise looking more ‘news driven’ to the chart.

Generally this set has held up well. WMT and BMY have had a bit of a roll down (Walmart and Bristol Meyers Squib), so a likely exit. The others still are holding up with nice trends.

FINVIZ Bubbles Momentum Chart 6 mos

FINVIZ Bubbles Momentum Chart

ARG  -  AirGas
VZ   -  Verizon
ISRG -  Intuitive Surgical
FAST -  Fastenal Corp
KLAC -  KLA - Tencor
BMY  -  Bristol Meyers Squib
AAPL -  Apple Computers
WMT  -  WalMart
XOM  -  Exxon Mobile

I also tended to pick larger bubbles (as size does matter) and those on top of a pile. We’ll keep this chart here for a few postings and see how the 6 month screen does.

How did the 3 month version do?

I’m going to leave this chart up a while so we can watch how the 3 month chart did. These were picked about November(ish) so we’ll watch them for a few more months and see if a 3 month screen was predictive. Two of these tickers have the “shoot up mostly flat” of “merger news” and I’d screen those out if doing it again.

RedHat and Tesoro had breaks, but look to have recovered at the SMA line area. Generally good, but not as steady as the 6 month screen.

FINVIZ 3 Month Chart

FINVIZ 3 Month bubbles stocks

FINVIZ 3 Month bubbles stocks

GR   - Goodrich Corp
FFIV - F5 Networks
SNDK - Sandisk
RHT  - Red Hat
TSO  - Tesoro
EP   - El Paso
GWW  - WW Granger
KLAC - KLA Tencor
ORLY - O'Reilly Automotive Parts
FAST - Fastenal

One Month Screen

A one month scale.

Well, a somewhat more interesting set. Finding those quick off the bottom lately.

Oddly, it is more ‘steady’ than the 3 month screen. At this point, I’ll likely drop to a 6 month / 1 month set in future selections. Still, the “method” is holding up nicely. It will be interesting to see if they do better or worse than the broader market if we have a pause of dip. ( i.e. did we find “High Beta” or “High Alpha” – tendency to volatility up and down, or tendency to upward sticky…)

FINVIZ 1 mo screen on 3 Jan 2011

FINVIZ 1 mo screen on 3 Jan 2011

GCI  -  Gannet Company
VMC  -  Vulcan Materials
CTAS -  Cintas Corp (Uniforms and entrance mats and such)
GE   -  General Electric
AMP  -  Ameriprise Financial
BBT  -  BB&T Corp (Branch Banking & Trust)
MAS  -  Masco
JPM  -  J.P.Morgan Chase Bank
WFC  -  Wells Fargo Bank
TAP  -  Molsen Coors Beer

Not sure financials would have been high on my list of things to look at, so this may be good for catching early turnarounds. A couple of building materials / construction companies too. Well, well see how it does. Chart looks interesting anyway.

Barchart Top 100 did?

How about the Barchart Top 100?

The top of their list last November, selected to a few and charted:

Looks like we got about 2 months out of it, then a roll-off. OK, so better for fast trades, not so good for finding once a quarter buys… The “early rollover” could be a useful indicator of market weakness “soon” though… Need to watch some more for that. Top 100 top 10 Top 100 top 10

From the mid-December list, I selected 10 stocks. I started with the top, and took every tenth name, but skipping those that were already charted (two on the prior chart and FTK that we already picked on the Oils chart). They look to have held up a bit better. Perhaps what’s needed is an ‘age on chart’ or ‘time in grade’ metric? Hmmm…

Barchart Top 100 December 2011 - 10 scaled picks

Barchart Top 100 December 2011 - 10 scaled picks

Sym 	Name 	                Weighted
                                Alpha 	        Last 	Change 	Percent High 	Low 	Time 	   
QCOR 	Questcor Pharmaceuti 	+176.54 	43.33 	-1.28 	-2.87% 	45.51 	42.84 	12/21/11 	   	   
PZZI 	Pizza Inn       	+149.30 	5.62 	+0.26 	+4.85% 	5.74 	5.39 	12/21/11	   
DPZ 	Domino's Pizza Inc 	+107.70 	33.60 	+0.12 	+0.36% 	33.72 	33.05 	12/21/11 	   	   
SPSC 	Sps Commerce     	+97.10 	26.86 	+0.62 	+2.36% 	27.89 	26.39 	12/21/11 	      
CONN 	Conn's          	+81.60 	10.26 	-0.93 	-8.31% 	11.12 	10.23 	12/21/11 	   	   
SURG 	Synergetics Usa 	+76.00 	7.24 	+0.12 	+1.69% 	7.27 	6.68 	12/21/11 	   	   
STMP 	Stamps.Com Inc. 	+68.80 	25.63 	-0.75 	-2.84% 	26.42 	24.95 	12/21/11 	   	   
ULTA 	Ulta Salon Cosmetics 	+64.00 	65.87 	-1.10 	-1.64% 	67.64 	65.04 	12/21/11 	      
USLM 	United States Lime 	+59.30 	59.63 	-0.44 	-0.73% 	60.30 	59.30 	12/21/11 	   
FEIC 	Fei Company     	+52.60 	40.86 	-0.18 	-0.44% 	41.26 	39.40 	12/21/11 	   

OK, that’s all the Mo’-MO I can do in this posting. Folks ought to mine the lists at those sites and chart up the candidates, then ‘vet’ them for things like, oh, over $2 price and not having flaky financials. Basically start with the bigger names that you know and avoid the strange names with penny stock pump and plunge behaviours. In any case, it does look like a good way to find individual names with some momentum behind them, and for the FINVIZ daily to find some bottoming reversals.

The Long Term Context

Here is another interesting chart where you can see how volatility spikes at market bottoms and drops lower during times of topping actions. It also has “momentum” on it which can act as a reminder of how much force a trend has, and which way. Slow Stochastic is better for a faster trade behaviour when ADX (of the DMI / ADX indicator above) is below 20 or so.

If this all looks like “too much”, just remember that you don’t need to look at more than the one basic chart. The rest of these indicators give more depth of insight into “why”, but not better answers as to when to be in stocks vs bonds.

SPY vs TLT with Slow Stochastic, Volatility (fast) and Momentum

SPY vs TLT with Slow Stochastic, Volatility (fast) and Momentum

Momentum saying to be ‘traded in’, while volatility is dropping low enough to be a worry “soon” and Slow Stochastic near a top (where it usually inflects) so still looking more like a ‘trade long – quick exit soon” than a ‘bias to in’.

VIX the Volatility Index

Volatility continues to drop off. Good in general, but can happen at market tops. We’re so low now that it is a worry that we have a short term top. Using options will be getting cheaper, but ETFs that hold options will be losing ‘volatility premium’.

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
Volatility Index and Related

Volatility Index and Related

You could make some money on volatility trades, but it’s a dicey fast trade. A 6 month ‘close up’ shows recent trends.

Stock Indicators – what and how

When the long duration charts say “maybe making a top, but perhaps a ‘buy the dip’ moment”, I look at the faster charts and faster indicators and move to a faster time scale with faster trades. But I’m a trader.

For long term investors, you just ride the ride until the chart says “top is definitely in” and “buy the dip” until proven otherwise by a confirmed roll over (price below SMA stack). In general, I’d put very long term bias as “be in”. Trend is up, dip happened. Be in. But you just can’t ignore that the price plot looks very “rolled flat” at least… and we’re all waiting for DC and Germany to “make their moves”… So you must WATCH the chart each week, even if not acting to be out of the market yet.

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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3 Responses to WSW, Saturday, 25 February 2012

  1. Tim Clark says:

    Good review.

  2. E.M.Smith says:

    @Tim Clark:

    Glad you liked it!

    The WSW postings rarely get many comments. Hard to tell if it is because it is uninteresting to most folks, or “so complete it doesn’t need a comment”… ;-)

    I had kind of hoped that a community of commenters would develop, contributing other insights, ideas, and opportunities. But I guess that it’s a ‘someday thing’ ;-)

  3. Pascvaks says:

    Only speaking for myself of course, as always. Ref your cmts – a.) it’s interesting, b.) it’s complete, c.) it’s complex, d.) it’s way beyond my paygrade, e.) it’s hard to discuss, like sticking a tail on an electron (a little harder than on the average donkey;-) I use your brain, words, and hard work on these updates to check my ‘balance’ –so to speak– see if I’m still in sync (or in touch) with this part of the environment. That is, of course, to the extent that “my criteria” for “balance” (and definition of “balance” mean anything a’tall –so far I don’t think you’ve ever really surprised me). I’ve lived these many years pretty much ignoring “The Market”. I guess I’ve been remiss, no argument about that, but I’ve done sort’a OK just being tight with money and spending (thank’s to my better half;-).

    I guess I’m not smart enough to ask for something because I don’t know what to ask for and just use all your tireless efforts the way my inner ear senses the line of gravity between my ass and my head.

Comments are closed.