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ETF Global Opportunities

23 January 2018
     

Market Overview

 

Market sentiment is at an extreme, a dangerous level. The bull bear difference in our Advisors Sentiment Survey is at its highest level since 1986, indicating overwhelming bullishness. Other sentiment measures reflect a similar overbought condition and defensive action is necessary. 

We shall reduce our long exposure further today. 

 

 


 

This Week's Trades

  • Aerospace & Defence Fund (ITA) - close long
  • Dow Industrials (DIA) - close long

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

  


 

Analysis

 

US Equity Indices

 

The Dow Industrials fund extended to another all-time high yesterday. The P&F chart exhibits an uninterrupted rally since September last year, a pull-back is overdue. 

Breadth for the Dow Industrials, the % 30-week moving average indicator, is at its highest level since 2014. That too will soon need to unwind. 

We shall exit our long in the DIA.

 

 

 

US Sector Indices

 

The Aerospace & Defence Fund underperformed on Monday, lower on an up market. The fund is struggling at $200 resistance and a reversion towards the moving averages is necessary. Momentum is unwinding from overbought. 

With the relative ratio failing to make new highs since October last year, we shall exit our long in the ITA today. 

 

 

The Consumer Staples ETF has broken out to new all-time price highs the past week. The fund is now outperforming and that has enabled the relative ratio to turn up from just above its early November low. Clearing the early December relative high would activate a double-bottom, leading to further outperformance.

 

 

Other Developed Indices

 

The Taiwan Index ETF, like many of the equity index funds, has accelerated to record highs the past week. The move is looking overextended, with the 14-day RSI entering overbought, and entry is best sought on the next pull-back. 

 

 

Emerging Indices

 

The Russia ETF has made new 52-week highs the past week. Although a large base looks to be in place on the price chart, the P&F relative chart, versus the U.S. equity market, remains weak. Entry should only be considered should that relative chart recover.

 

 

Commodities

 

The Sugar fund is breaking down to new 52-week price and relative lows. Weakness likely to extend and longs should be avoided. 

 

 

Currencies

 

The British Pound Trust is extending its yearlong recovery. The next logical upside target is $140 and that may be visited over the next few weeks. Consider entry on weakness. 

 

 

Bonds

 

The US Investment Grade Bond fund dropped to a new 6 month low on Monday. A price top is in danger of activating. The P&F chart shows the long-term uptrend is under pressure.

The relative ratio, versus the equity market, has been trending down for the past year. 

 

MODEL PORTFOLIO

ETF Trading (Long/Short) Longs

Date Stock Code Type Open Price Current Price % P&L
12 Jul 2016 iShares Dow Jones US Aerospace & Defense Index Fund ITA Long 127.66 198 +55.10%
19 Jul 2016 Base Metals DBB Long 13.79 19.4 +40.68%
30 Aug 2016 iShares DJ US Broker-Dealers Index Fund IAI Long 41.8277 66.9 +59.94%
6 Sep 2016 iShares Japan Index EWJ Long 50.12 64.1 +27.89%
13 Sep 2016 DJ US Regional Banks Index Fund IAT Long 35.24 53.3 +51.25%
8 Nov 2016 streetTRACKS KBW Bank ETF KBE Long 34.94 51.01 +45.99%
29 Nov 2016 Diamond Trust- 1/100 DJIA DIA Long 191.19 261.98 +37.03%
10 Jan 2017 SPDR Sector Trst Health Care XLV Long 71.5 89.02 +24.50%
7 Mar 2017 SPDR Sector Trst Energy XLE Long 71.51 78.03 +9.12%
21 Mar 2017 iShares MSCI South Africa Index Fund EZA Long 59.73 73.49 +23.04%
9 May 2017 United States Oil Fund USO Long 9.57 12.78 +33.54%
5 Sep 2017 iShares Nasdaq Biotechnology IBB Long 110.974 115.52 +4.10%
25 Sep 2017 Market Vectors-Gold Miners GDX Long 23.83 23.71 -0.50%
23 Oct 2017 General Commodity ETF DBC Long 15.6 16.92 +8.46%
20 Nov 2017 iPath MSCI India Index ETN INP Long 84.011 92.605 +10.23%
16 Jan 2018 iShares MSCI Emerging EEM Long 49.32 50.73 +2.86%

ETF Trading (Long/Short) Shorts

Date Stock Code Type Open Price Current Price % P&L
14 Feb 2017 Livestock COW Short 22.16 23.91 -7.90%
10 Jul 2017 iShares Barclays US Treasury Inflation Protected Securities Fund TIP Short 112.41 113.14 -0.65%
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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