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Weekly analysis on US stocks, sectors, commodities and global indices.
21 June 2016
     

Market Overview

 

This week the most important ETF chart is that of the British Pound Sterling Trust. The result of the EU referendum by the British people will be known on Friday's open and British Pound volatility is inevitable, with pinball action across the ETF universe. Following the volatility the dust will settle, with normality likely returning towards the end of this month.

Since the start of this year the chart has been gyrating in and around the $140 level as it feels out the lows from 2009. A BREXIT should see a spike down through those lows.

The long-term trend is clearly down, so longs are best avoided, even if the vote was to go the way of a BREMAIN.

 

 


 

This Week's Trades

  •  None.

 


 

Other ETF Highlights

 

  • Midcap Index Trust (MDY) - Buy
  • DJ Select Dividend Index (DVY) - Buy
  • Materials (XLB) - Buy
  • Oil Service (OIH) - Buy 
  • Aerospace & Defense - (PPA) - Buy Reiterated
  • United Kingdom Index (EWU) - Avoid
  • India Index (INP) - Buy
  • Euro Trust (FXE) - Avoid
  • Commodity (DBC) - Buy
  •  7-10 year T-Bond (IEF) - Sell

 


 

Analysis

 

US Equity Indices

 

The Midcap Index Trust has strengthened this month on a price and relative basis. Long-term uptrends have reasserted, with new all-time price highs possible over the next few weeks. Longs worth considering ahead of that strength. 

 

A more defensive long idea going into the Brexit vote is the DJ Select Dividend Index. This month has seen the P&F price chart move to a new all-time high plus the fund pays a dividend of 3.16%. 

The relative ratio versus the S&P 500 sits at a 52-week high. 

 

 

US Sector Indices

 

The Materials fund has just found support from its rising 50-day exponential moving average to resume the uptrend off the January low. The 14-day RSI is only at neutral, offering plenty of slack to allow new 2016 highs over the short-term. The sector fund remains a strong outperformer for 2016.

 

 

The Oil Service fund sports a similar chart to the XLB above. Steady price and relative uptrends off the January lows. Support is being provided by the 50-day exponential moving average and momentum is well positioned to allow further strength.

 

 

The Aerospace & Defense fund recorded a new all-time price high in the first half of June. Slight retreat over the past week and we see that as another entry opportunity in this long-term outperformer.

 

 

Other Developed Indices

 

The United Kingdom Index ETF is testing the underside of its 200-day exponential moving average going into the BREXIT vote. The general trend is down and therefore we would respect that direction for the time being. The fund also maintains a long-term downtrend against the S&P 500.

 

 

 

Emerging Indices

 

The India Index remains one of the stronger emerging market funds. The P&F price chart shows a breakout attempt underway this month through the 2015 down channel.

The P&F relative chart versus the S&P 500 also strengthened this month, extending its move off the February low with a box fill.

 

 

 

Currencies

 

The Euro Trust is consolidating across its 200-day exponential moving average, towards the top end of a yearlong range. It remains to be seen whether the range is a bottom or a continuation pattern of the prior downtrend. That conundrum may be answered at the end of the week with the BREXIT result as it may cause a directional break from the range.

 

 

 

Commodities

 

The Commodity fund is resuming its steady price uptrend off the January low. The move is expected to continue given that the 14-day RSI has only just reversed up from neutral.

A further positive is the 50-day exponential moving average rising through the 200-day to print a golden-cross.

 

 

 

Bonds

 

The 7-10 year T-Bond fund may have just printed a bull-trap at the February high. Trading has been rejected by the $112 level, with the 14-day RSI turning down, resulting in a bearish divergence to the February momentum peak. 

Longs should be avoided given the poor long-term performance versus the equity market as evident from the P&F relative chart.

 

MODEL PORTFOLIO

ETF Trading (Long/Short) Longs

Date Stock Code Type Open Price Current Price % P&L
27 Aug 2015 PowerShares QQQ QQQ Long 105.64 107.16 +1.44%
3 Sep 2015 SPDR Sector Trst Technology XLK Long 39.91 43.23 +8.32%
3 Nov 2015 iShares Japan Index EWJ Long 12.4 11.69 -5.73%
22 Dec 2015 SPDR Consumer Staples XLP Long 50.55 53.64 +6.11%
30 Dec 2015 iShares DJ US Medical Devices Fund IHI Long 123.56 132.71 +7.41%
10 Feb 2016 Diamond Trust- 1/100 DJIA DIA Long 159.39 177.8 +11.55%
17 Feb 2016 PowerShares Aerospace & Defense PPA Long 32.89 37.33 +13.50%
2 Mar 2016 Market Vectors Russia ETF RSX Long 15.12 17.51 +15.81%
17 Mar 2016 SPDR S&P Metals and Mining ETF XME Long 20.73 24.25 +16.98%
17 Mar 2016 CurrencyShares Canadian Dollar Trust FXC Long 76.3 77.32 +1.34%
17 Mar 2016 United States Oil Fund USO Long 10.55 11.91 +12.89%
22 Mar 2016 DJ US Pharmaceuticals Index Fund IHE Long 138.19 142.37 +3.02%
29 Mar 2016 SPDR Consumer Discretionary XLY Long 78.69 78.63 -0.08%
29 Mar 2016 iShares DJ Transportation Average IYT Long 142.47 138.16 -3.03%
5 Apr 2016 iShares Nasdaq Biotechnology IBB Long 269.64 258.7 -4.06%
5 Apr 2016 SPDR Sector Trst Health Care XLV Long 68.47 70.5 +2.96%
12 Apr 2016 SPDR Sector Trst Energy XLE Long 63.96 67.47 +5.49%
21 Apr 2016 SPDR Sector Trst Financial XLF Long 23.33 22.74 -2.53%
21 Apr 2016 SPDR Sector Trst Industrial XLI Long 56.27 56.24 -0.05%
21 Apr 2016 Base Metals DBB Long 12.97 12.97 0.00%
26 Apr 2016 Sugar SGG Long 36.46 45.2 +23.97%
10 May 2016 iShares S&P Global Energy Index IXC Long 31.08 32.35 +4.09%
7 Jun 2016 ISHS Russell 2000 Index IWM Long 117.56 115.3 -1.92%
7 Jun 2016 iShares Canada Index EWC Long 25.65 24.92 -2.85%

ETF Trading (Long/Short) Shorts

Date Stock Code Type Open Price Current Price % P&L
3 Feb 2016 Natural Gas UNG Short 7.55 8.18 -8.34%
3 Feb 2016 US 20+yrs TLT Short 127.95 134.16 -4.85%
17 May 2016 SPDR Sector Trst Utilities XLU Short 48.6108 50.36 -3.60%
Model Portfolio Notes
Opening of positions – Positions are opened on the immediate closing price following the report.
 
Stops - Two flash crashes (2010, 2015) and occasional bad prices have forced us to drop strict stops. Positons will no longer be stopped out but we shall suggest a region as to where we MAY exit. 
 
Closures - With positions not being stopped out, we shall only exit positions via advice in the report. When we exit a trade, the next closing price is used. 
 
Allocation – Each trade is allocated 5% of the portfolio.
 
 
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