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II Insight 

Feb 2011

Global leaders in Technical Analysis since 1947

     
Time sure does fly! This month's II Insight is produced from the London office and it hardly seems like we have returned from the Christmas holidays - but already it's February.  2011 has already presented a fair selection of surprises and the volatility that we have seen in the markets over January is a guide to the year ahead. Subscribers will no doubt be glad that our Advisors Sentiment indicator and the Buy/Sell Climaxes have given good warning of the recent pullback.  
 
This months II Insight email gives a market call on gold, a review of the Nuclear Power Industry from Jackson Wong and some tips on using the website. I've also included a few bits and pieces that we hope will be of interest to our readers.
 
Mark Glowrey, Investors Intelligence, London

Investors IntelligenceThe Movie.  Now, we get some unusual calls to the office. With a reasonable internet presence and telephone contact numbers displayed for all to see, all sort of characters ring us up, generally pitching “Schemes For Great Advantage”. Thus, we greeted with some scepticism a request last year to utlise our research in a movie. However, a little due diligence showed that the request came from a well-known production company in Hollywood, who wanted to use various types of market data and analysis in an upcoming thriller about stock market trading.  Why not, we thought; there is no such thing as bad publicity.

We are glad to hear that the movie, titled Limitless , will be out this month, or perhaps March . It looks pretty good. The plot features a writer who discovers a new mind-enhancing drug. This enables our hero to read the market like a book. Money soon follows, and trouble shortly thereafter. The movie stars Robert DeNiro, Bradley Cooper and Abbie Cornish. We requested a walk-on part for Mike Burke, but sadly our offer was declined. 
 
You can see the trailer on the link here.  It looks good.

 
 
 
In the London office, we‘re planning a team outing with a prize available for the first member of staff to spot a copy of our Advisors Sentiment lying on a desk.
Trade with us
 
A new departure for the Investors Intelligence team -  for many years we have stuck to simply producing market timing and stock selection but this year we are teaming up with the Covestor platform to allow subscribers to follow a portfolio of selected trades from The Coe Report.
 
If you haven't seen the Covestor system, it's worth taking a look. The platform enables investors to directly track the trades and investments of selected advisors. How does it work? Like all good ideas it's simple – fund managers and advisors run a portfolio with real money and the investor “mirrors” the trades of his or her selected manager. So, when Tarquin Coe buys McDonalds, you will too. There are over 100 other managers offering portfolios and trading systems on the platform, many with excellent risk-adjusted results.  
 
Is it safe? Well, there is no guarantee of future performance, but the investor funds are kept in a segregated account (in the investor's name). The system uses the well-known Interactive Brokers as the execution/custody platform.  
 
The system is completely transparent and costs are reasonable for actively managed funds (and a lot less than most hedge funds!). We will be updating subscribers in due course on this development but if you would like to know more, drop us a line at analysis@investorsintelligence.com with the subject line “Covestor”.
   
A nuclear future?
 
One of the more promising long-term stories is the re-emergence of nuclear power. As we all know, demand for energy grows every year. Fossil fuels are expensive and alternative energy, whilst showing promise, struggles to really push out the megawattage we need. So what is the answer? A re-emergence of Nuclear power is the most practical solution . For many years, virtually no new stations have been built in the UK and the US. However, Russia, China and many other countries have been stepping up their programs. The west is following and the sector looks set for strong growth over the next decade or more. Uranium prices are the obvious beneficiary, but plant builders and operators should also profit.
 
This month, Jackson Wong has taken a look at the sector in one of his “Far from the crowd” reports. Here's an extract:
 
Rising Supply-Demand Imbalance - Do you know that the global uranium output in 2009 was barely higher than in 1959, 50 years ago? Since 1985, there was a wholesale collapse in uranium mine outpu . The nuclear market survived only because of the “Megatons to Megawatts” agreement - whereby USA and Russia released huge stockpiles of uranium into the market by dismantling 12,000 warheads. This agreement, however, is set to expire in 2013. Russia may not renew this agreement because of its own growing domestic nuclear demand, thus removing significant uranium supplies from the market. According to the World Nuclear Association (WNA), the world's 442 nuclear reactors require per year about 68,000 tonnes of uranium. This amount is set to increase to about 90,000 tonnes in 2015. Meanwhile, the total uranium mining output is about 50,500-55,000 tonnes.
 
You can read Jackson Wong's full report by downloading the pdf document here.
Changes to European Breadth taxonomy
 
In our European Universe, we maintain breadth indicators for the major indices such as the German DAX, the French CAC, the Swiss SMI, etc.  We also maintain breadth groups for the main sectors . Previously we have run this industry groups over “Euro” stocks, i.e. those stocks from countries participating in the single currency. The problem is, this excludes some important stocks on the fringe; for instance Nokia in Finland, the Swiss pharmaceutical companies and the UK miners.
 
In view of this, we have switched our sector breadth universe to “pan Euro” universe. Subscribers can view this (see snapshot below) under “Indicators” / “Industry Breadth”.   
 
The Europe Industry Bell Curve

      –AUTO –RETA   +BANK –CHEM –HEAL –PERS +UTIL +FINA –FOOD –INDU –BASI +CONS –ENER +INSU +MEDI –TECH –TELE –TRAV
10 %
20 %
30 %
40 %
50 %
60 %
70 %
80 %
 Oversold - below 32%
 Above 68% - Overbought 
 Blue indicates Bull status, Red indicates Bear status.
 Groups marked with a + are in an up column.
 Groups marked with a – are in a down column.
Updated through Feb 1, 2011 
Click on a box to see the chart. 
Hover over a box for more details

"My alerts” helps prevent missed opportunities
 
How many times have we all said “I'll buy that stock when it falls back a few dollars”. The problem is, there are a lot of things to do in life and it's so easy to miss such pullbacks. II subscribers can use the “Set alerts” function on the website – just select you stock ( or stocks), click on “Set Alerts” and fill in a price target ( higher than or lower than). The system will send an email after the market close as and when your price targets . You can also place alerts on the system to notify you when a stock posts a P&F breakout, KDR or other technical event. All alerts set can then be managed or cancelled through the “My Alerts” section on the Portfolio tab.

Gold correction

In the final of week of January Gold had dropped 8.4% from its December all-time high. The recent correction found support from the 150-day exponential moving average, a level that has successfully provided support on a number of occasions over the past two years. Momentum, the MACD, also fell last week to a level from where previous reassertions by the yellow metal have been fostered.

The primary trend looks to be reasserting and longs in the SPDR Gold Trust (GLD) should be considered. Use a sustained break beneath $125 as  a cue to exit, as that would violate both the 150 and 200-day EMAs. Initially target a trip up to the December high of  $139.54, though more bullish potential exists beyond there as there is no resistance to contend with.

We bought GLD in the Coe Report on the 1st of February, allocating a sizeable chunk of the portfolio given the favorable risk to reward ratio.    Tarquin Coe.

 

 

 

 

 

    
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