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

Market Overview

Geopolitical tensions have lingered since last week's report, further weighing on equity funds. That weakness in equities has pulled our short-term-composite down its lowest level since November 2012. That is deeply oversold and it rarely spends more than a few days down there. A snap-back remains imminent.

Equity ETFs are oversold, with many finding key moving average support. Today we cover shorts in the industrial and consumer discretionary sector ETFs. Plus we add longs in domestic indices as well as the stronger economies of Europe.

 

 


This Week's Trades

  • NASDAQ 100 (QQQ) - buying, stoploss at $91
  • S&P 500 (SPY) - buying, stoploss at $188
  • Consumer Staples (XLP) - buying, stoploss at $42
  • Germany (EWG) - buying, stoploss at $25
  • United Kingdom (EWU) - buying, stoploss at $18.50
  • Industrials (XLI) - close short
  • Consumer Discretionary (XLY) - close short

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


Other ETF Highlights

 

US Equity Indices

  • see trades

US Sector Indices

  • Homebuilders (XHB) - sell

Other Developed Indices

  • see trades

Emerging Indices

  • India Small-Cap Index (SCIF) - buy

Currencies

  • Japanese Yen Trust (FXY) - buy

Commodities

  • Base Metals Fund (DBB) - buy

Bonds

  • Treasury Inflation Protected Fund (TIP) - buy


Analysis

 

US Equity Indices

 

The NASDAQ 100 (QQQ) has maintained its outperformance trend during the market sell-off. The price had a shallower correction than most other indexes, down to just its 50-day exponential moving average. The 14-day RSI is at neutral and in a great field position to allow the price uptrend to reassert. A return towards the highs of last month is possible over the next few weeks.

We shall open a long in the QQQ on the close today. Our stoploss will be at $91.

 

 

It is the 100-day exponential moving average which has curbed the correction for the S&P 500 (SPY). Previous pull-backs to that average over the past year have been followed by uptrend reassertions. With the 14-day RSI oversold, we expect that to be case again. Watch for a move higher over the near-term.

We shall also buy the SPY at the end of the session. The stoploss will be at $188.

 

 

US Sector Indices

 

The Industrials (XLI) have corrected down to potential support from their 200-day exponential moving average. With momentum at its most oversold in a year, a snap-back would be no surprise from here.

We shall cover our short in the XLI on the close today.

 

 

The Consumer Discretionary (XLY) fund has outperformed the S&P 500 the past week, perhaps a clue that the general market sell-off is near an end, as this area typically leads.

The price has found support from the 100-day exponential moving average and momentum is down to a favorable level.

We are short the XLY and shall cover that this afternoon.

 

 

The Consumer Staples (XLP) are finding support from their 200-day exponential moving average. Momentum, the 14-day RSI, is down to the same oversold level as per the sharp recovery in February. A reassertion looks imminent. The present yield is 2.57%.

We shall go long the XLP today. The stoploss will be at $42.

 

 

The Homebuilders (XHB) are at two year relative lows against the S&P 500. The price chart is trending down and heading towards the $28 level. We would avoid this fund.

 

 

Other Developed Indices

 

The sell-off in the Germany (EWG) fund has been swift. Momentum shows that conditions are now deeply oversold and the price is at uptrend support drawn up from the 2011 low. Additionally support is close by from the 500-day exponential moving average, a line which provided a springboard at the end of 2012.

We shall buy the EWG on the close today. The trade aims for a return towards $32 and we would exit on a drop to $25.

 

 

Three year up channel support is being tested by the United Kingdom (EWU) ETF. Once again, the chart is oversold and consequently the uptrend is likely to soon attempt a reassertion.

We shall open a long in the EWU on the close today. The stoploss will be at $18.50. The long aims for a recovery to new highs.

 

 

Emerging Indices

 

The India Small-Cap Index (SCIF) has spent the past couple of months consolidating into its 50-day exponential moving average. With momentum just above oversold and turning up, the price and relative trends look to be reasserting. The recent low ($45.43) could be used as a tight stoploss.

 

 

 

Currencies

 

The Japanese Yen Trust (FXY) is at the lower end of a range underway since February. With the 14-day RSI moving up from oversold, a return to $96 is expected over the short-term. That will buoy Japanese equity funds like the EWJ.

 

 

Commodities

 

The Base Metals Fund (DBB) has continued to outperform during the recent equity market rout. The strong price and relative uptrends off the June lows hold and momentum is not overbought. Further outperformance expected.

 

 

Bonds

 

The Treasury Inflation Protected Fund (TIP) maintains its uptrend of the past year. The 50-day exponential moving average is providing support and momentum is not overbought. Present yield is 1.47%.

 

 

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 106.11 108.59 +2.34% 107.25
9 Apr 2014 CurrencyShares British Pound Sterling Trust FXB Long 165.31 165.987 +0.41% 162
30 Apr 2014 SPDR Sector Trst Technology XLK Long 36.45 38.7 +6.17% 37.75
18 Jun 2014 iPath MSCI India Index ETN INP Long 68.9431 69.25 +0.45% 64.50
25 Jun 2014 Gold GLD Long 126.99 123.87 -2.46% 121.55
23 Jul 2014 iShares Hong Kong Index EWH Long 21.55 21.72 +0.79% 20.75
23 Jul 2014 WisdomTree Japan SmallCap Dividend Fund DFJ Long 53.89 52.27 -3.01% 52
ETF Trading (Long/Short) Shorts
Date Stock Code Type Open Price Current Price % P&L Stop
2 Jul 2014 Powershares DB Agriculture Fund DBA Short 27.47 26.61 +3.13% 28.50
9 Jul 2014 iShares Dow Jones US Aerospace & Defense Index Fund ITA Short 106.81 103.31 +3.28% 109.60
9 Jul 2014 streetTRACKS KBW Bank ETF KBE Short 33.2 31.32 +5.66% 34.25
16 Jul 2014 SPDR Consumer Discretionary XLY Short 67.52 65.83 +2.50% 69
23 Jul 2014 SPDR Sector Trst Industrial XLI Short 54.19 51.65 +4.69% 55.25
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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