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ETF Global Opportunities
Weekly analysis on US stocks, sectors, commodities and global indices.
7 October 2014
     

Market Overview

Since last week's report our short-term-composite has reversed up from deeply oversold. That starts basing action on the indicator and is a warning that attention needs to be paid to bearish trades, as the general equity market could soon reassert to the upside. Today we cover two shorts and open two new longs in reassertion candidates, both of which are medium-term outperformers.

 

 


This Week's Trades

  • Medical Devices Fund (IHI) - buying, stoploss at $99
  • India Index (INP) - buying, stoploss at $66
  • Canada (EWC) - covering short
  • Emerging Markets Bond (EMB) - covering short

Note - Trades will be executed on today's close.


Other ETF Highlights

 

US Equity Indices

  • NASDAQ 100 (QQQ) - buy

US Sector Indices

  • Utilities (XLU) - buy

Other Developed Indices

  • Hong Kong (EWH) - cover shorts

Emerging Indices

  • see trades

Commodities

  • Gold (GLD) - trading buy
  • United States Oil Fund (USO) - cover shorts

Bonds

  • see trades


Analysis

 

US Equity Indices

 

The correction by the NASDAQ 100 (QQQ) fund looks complete, getting as far as the 100-day exponential moving average. With the subsequent bounce from just above that line, the uptrend is attempting a reassertion. Momentum is certainly well positioned to allow that given that the MACD has unwound to neutral. The outperformance trend since May has been undamaged by the recent rout.

 

 

US Sector Indices

 

The Medical Devices Fund (IHI) is reasserting its long-term uptrend following a visit to the 100-day exponential moving average. With the MACD turning up from near oversold, just as it did in May, record price highs are imminent.

We shall open a long in the IHI on the close today. The stoploss will be at $99.

 

 

The Utilities (XLU) fund has risen impressively the past week resulting in outperformance versus the S&P 500. That relative ratio shows a base attempt since the start of August. Anymore relative strength would activate that bottom, resulting in further outperformance. The yield is one of the best amongst the sector ETFs at 3.54%.

 

 

Other Developed Indices

 

The Canada (EWC) fund is oversold and stabilizing just beneath the 200-day exponential moving average, as per February. The relative chart is down to support from the start of 2014 and could stage an oversold rally from here. We shall take the profit on our short today.

 

 

The Hong Kong (EWH) fund has turned around sharply the past couple of sessions. The move follows the 14-day RSI reaching an oversold condition and the relative chart finding support from the March low. The ETF is starting to outperform again and we would cover shorts if held.

 

 

Emerging Indices

 

The India Index (INP) has found support across the $67 level, just as it did in June through to August. Additional support is provided by the 100-day exponential moving average. With the MACD down to just under neutral and turning up, the potential is there for an upside resumption from here. The 2014 trend of outperformance is also well positioned to reassert.

We shall buy the fund on the close today. The stoploss will be at $66.

 

 

 

Commodities

 

Gold (GLD) is finding support from the lows of July 2013 and January of this year, across $115. With the 14-day RSI turning up from oversold, the potential is there for a bounce back towards the top of the yearlong range at $135.

 

 

The sell-off in the United States Oil Fund (USO) looks to be tiring. A bullish momentum divergence is building on the 14-day RSI and yesterday's price action saw a strong recovery off intraday lows. The relative ratio versus the equity market is attempting a floor.

If short, we would look to cover positions ahead of a potential short squeeze.

 

 

Bonds

 

The Emerging Markets Bond (EMB) is likely finding support from its 200-day exponential moving average, with the break of the early August low being a potential bear trap. The 14-day RSI is close to oversold and also shows a bullish divergence. The technicals are lined up here for an upside reassertion attempt.

We shall cover our short on the close today.

 

 

MODEL PORTFOLIO

ETF Trading (Long/Short) Longs

Date Stock Code Type Open Price Current Price % P&L Stop
29 Jan 2014 iShares S&P National Municipal Bond Fund MUB Long 106.11 109.71 +3.39% 107.25
6 Aug 2014 SPDR Consumer Staples XLP Long 43.79 45.46 +3.81% 42
6 Aug 2014 iShares Germany Index EWG Long 28.35 26.97 -4.87% 25
6 Aug 2014 iShares United Kingdom Index EWU Long 20.165 19.13 -5.13% 18.50
19 Aug 2014 SPDR Sector Trst Health Care XLV Long 62.85 64.11 +2.00% 60
16 Sep 2014 DJ US Pharmaceuticals Index Fund IHE Long 140.31 140.88 +0.41% 135
1 Oct 2014 iShares DJ Select Dividend Index DVY Long 73.21 73.63 +0.57% 71.90
ETF Trading (Long/Short) Shorts
Date Stock Code Type Open Price Current Price % P&L Stop
2 Jul 2014 Agriculture DBA Short 27.47 26.44 +3.75% 28.50
9 Jul 2014 streetTRACKS KBW Bank ETF KBE Short 33.2 31.75 +4.37% 34.25
16 Sep 2014 Emerging Markets Bond EMB Short 113.58 113.1 +0.42% 115.50
23 Sep 2014 ISHR S&P Small Cap 600 Index IJR Short 105.99 103.58 +2.27% 111
23 Sep 2014 iShares Dow Jones US Aerospace & Defense Index Fund ITA Short 107.96 105.72 +2.07% 112
23 Sep 2014 SPDR Oil & Gas Exp & Prod ETF XOP Short 70.1 65.08 +7.16% 74.50
23 Sep 2014 iShares GS Semiconductor Index SOXX Short 87.2 84 +3.67% 90.50
23 Sep 2014 iShares Italy Index EWI Short 15.61 15.13 +3.07% 16.75
23 Sep 2014 iShares Canada Index EWC Short 31.46 30.47 +3.15% 33
1 Oct 2014 WisdomTree Dreyfus Brazilian Real Fund BZF Short 17.67 18.18 -2.89% 19

 

Model Portfolio Rules
Allocation – The maximum number of trades is limited to 20 (including longs and shorts).
 
Opening of positions – Positions are opened at the immediate close following the report, using the closing price.  
 

Closure of positions – The Analyst may close a position to take profits or exit early to prevent a loss if the outlook has changed. Positions will only be closed if there has been prior mention in the newsletter. The closing price will be at the next close following the report.

Stops – Stop levels are given for each model portfolio position.

 
Note - When positions are stopped/closed out they will not appear as closures immediately but we plan to update the portfolio table with in 24 hours.
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