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

Market Overview

 

Our short-term-composite is turning up from beneath neutral and has the potential to rally from here. That would coincide with strength on the U.S. equity markets but it is difficult to see the move lasting into next week as red flags remain raised elsewhere. We mentioned the sentiment situation last week. Highlighted today is the underperformance by the small cap ETF, an area which typically leads.

This week we open shorts in the underperforming U.S. industrial sector plus the U.S. small-caps. We buy two international funds, Hong Kong and the Japanese Small Cap dividend ETF.

 

 


This Week's Trades

  • Russell 2000 Index (IWM) - shorting, stoploss at $119
  • Industrials (XLI) - shorting, stoploss at $55.25
  • Hong Kong (EWH) - buying, stoploss at $20.75
  • Japan Smallcap Dividend Fund (DFJ) - buying, stoploss at $52

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


Other ETF Highlights

 

US Equity Indices

  • S&P 500 (SPY) - sell into strength

US Sector Indices

  • Biotechnology (IBB) - short-term trading buy
  • Oil Service (OIH) - short-term trading buy
  • Social Media Index (SOCL) - short-term trading buy

Other Developed Indices

  • see trades

Emerging Indices

  • Emerging Markets (EEM) - buy
  • Emerging Asia Pacific (GMF) - buy

Currencies

  • Canadian Dollar Trust (FXC) - buy

Commodities

  • US Natural Gas Fund (UNG) - sell

Bonds

  • US 20+ years (TLT) - buy


Analysis

 

US Equity Indices

 

The S&P 500 (SPY) is making new highs but internals remain a concern. The percentage of S&P 500 stocks trading above their 30-week moving average still shows a bearish divergence, peaking earlier this month. A visit to the 50-day exponential moving average at $194 is overdue. Therefore caution is still called for with respect to this fund.

 

 

The Russell 2000 Index (IWM) ETF continues to underperform. The price and relative charts are both in correction mode. We would continue to avoid longs here.

The fund is up slightly today and we shall go short on that strength. Our stoploss will be at $119. 

 

 

 

US Sector Indices

 

The Biotechnology (IBB) fund was up decently yesterday and is up a further 1.8% this afternoon. The uptrend off the April low is reasserting and heading towards the peak from February. The 14-day RSI is well positioned to allow that strength. Outperformance set to continue.

 

 

The Oil Service (OIH) fund is resuming its price and relative uptrends off the February lows. Conditions are not overstretched in anyway, with the 14-day RSI rising from neutral. Record price highs expected over the near-term.

 

 

The Social Media Index (SOCL) is attempting to resume its price and relative uptrends off the May lows. Momentum, the 14-day RSI, is at a good level to allow further short-term strength.

 

 

The Industrials (XLI) sector fund has underperformed since the start of June. The price has drifted lower over that period and could go lower as conditions are not oversold.

The fund is an underperformer and we shall short this afternoon. We aim for a test of $52 and shall place a stoploss at $55.25.

 

 

 

Other Developed Indices

 

The Hong Kong (EWH) fund made a new 52-week high intraday yesterday. The 14-day RSI has only just risen through neutral, so strength should continue. The fund offers a yield of 3.45%.

We shall buy the EWH on the close today. The stoploss will be at $20.75.

 

 

The Japan Smallcap Dividend Fund (DFJ) is pushing towards record highs and conditions are not overbought. The fund has shown outperformance since March and that is resuming. Current yield is 1.65%.

We shall open a long in the DFJ today with a stoploss at $52.

 

 

 

Emerging Indices

 

The Emerging Markets (EEM) fund is heading towards its peak from the start of 2013 at $45.33. A test of that peak looks possible over the next few weeks as momentum is not overbought.

 

 

The Emerging Asia Pacific (GMF) fund rose over 1% yesterday with upside follow-through today. Yesterday's move advanced the P&F price chart by a box. A small 2014 base has confirmed on the P&F relative chart, implying further outperformance over the short-term.

 

 

 

Currencies

 

The Canadian Dollar Trust (FXC) maintains its uptrend off the March low. Support is being provided by the rising 50-day exponential moving average. Momentum is in a good field position to allow a reassertion from here.

 

 

Commodities

 

The US Natural Gas Fund (UNG) was weak yesterday and is in the red again today. The drop yesterday was enough to fill a box to the downside and test rising trendline support off the November 2013 low.

With the long-term price and relative trends down, we would see any bounces as a selling opportunity.

 

 

Bonds

 

The US 20+ years (TLT) has strengthened the past week, with upside movement on both the price and relative P&F charts. The price has reasserted its 2014 uptrend to new highs and the relative chart has found support from January. Present yield is 2.98%.

 

 

 

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 106.11 108.88 +2.61% 107.25
9 Apr 2014 CurrencyShares British Pound Sterling Trust FXB Long 165.31 167.84 +1.53% 162
16 Apr 2014 SPDR Sector Trst Health Care XLV Long 56.9 61.69 +8.42% 60.25
30 Apr 2014 SPDR Sector Trst Technology XLK Long 36.45 39.73 +9.00% 37.75
18 Jun 2014 iPath MSCI India Index ETN INP Long 68.9431 70.5 +2.26% 64.50
25 Jun 2014 SPDR Sector Trst Utilities XLU Long 43.61 42.61 -2.29% 41.50
25 Jun 2014 Gold GLD Long 126.99 125.74 -0.98% 121.55
25 Jun 2014 Emerging Markets Bond EMB Long 115.58 115.7 +0.10% 113.50
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 26.33 +4.15% 28.50
9 Jul 2014 iShares Dow Jones US Aerospace & Defense Index Fund ITA Short 106.81 108.46 -1.54% 109.60
9 Jul 2014 streetTRACKS KBW Bank ETF KBE Short 33.2 32.26 +2.83% 34.25
9 Jul 2014 iShares DJ US Broker-Dealers Index Fund IAI Short 37.03 37.95 -2.48% 38.50
16 Jul 2014 SPDR Consumer Discretionary XLY Short 67.52 67.47 +0.07% 69

 

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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