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

Market Overview

 

Although the major equity index funds, such as the SPY, are near record highs, breadth continues to lag. Weak internals is unhealthy and a cause for concern. We maintain a near neutral portfolio and watch developments.

To illustrate the breadth situation we have plotted the percentage of NYSE stocks trading above their 10-week moving average. A bearish divergence is clear and until that is erased we advise caution.

Today we add just one trade, a short in the silver fund.

 

 


This Week's Trades

  • Silver Trust (SLV) - shorting, stoploss at $21.50

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


Other ETF Highlights

 

US Equity Indices

  • S&P 500 (SPY) - avoid new longs

US Sector Indices

  • Health Care Providers (IHF) - relative buy
  • Consumer Discretionary (XLY) - relative sell
  • Consumer Staples (XLP) - relative sell

Other Developed Indices

  • Hong Kong (EWH) - sell

Emerging Indices

  • Russia (RSX) - sell reiterated

Currencies

  • US Dollar Index Bullish (UUP) - trading buy

Commodities

  • see trades

Bonds

  • 1-3 year T-Bond Fund (SHY) - trading buy


Analysis

 

US Equity Indices

 

The S&P 500 (SPY) fund has traded a range between $185 and $189 since breaking above the January peak at the end of February. It is yet to be shown as to whether the sideways move is a top or a bullish consolidation. That outcome should become clear soon. Breaking below $184 would activate the top and call for defensive measures.

 

 

US Sector Indices

 

The Health Care Providers (IHF) broke to a new all-time price high yesterday. The relative chart also surged and that looks set to test the high from October last year over the coming sessions. Momentum, the 14-day RSI, is not overbought, allowing for further short-term gains.

 

 

The Consumer Discretionary (XLY) sector has failed to hold its break above the peak from the end of 2013, developing a potential bull-trap.

Bearish divergences are present on the relative chart and also the 14-day RSI, suggesting a waning trend. Further underperformance looks likely over the short-term.

 

 

The Consumer Staples (XLP) price chart is forming a lower high compared to that of November last year. Momentum is rolling back to the downside. The relative chart is resuming its long-term downtrend and we would be sellers.

 

 

Other Developed Indices

 

The Hong Kong (EWH) fund continues its struggle across the $20 ceiling. A top may have been developing since late 2012 and that would confirm on a break down through $18.

Given the downtrending relative chart, which is at its lowest level since 2006, we would continue to avoid longs in this underperformer.

 

 

Emerging Indices

 

Russia (RSX) remains in medium-term price and relative downtrends and we reiterate our sell advice.

The three day bounce which started last Friday enabled momentum to correct from oversold. Consequently the downtrend is well positioned to reassert again and that may have occurred with yesterday's 3.5% slide.

 

 

Currencies

 

The US Dollar Index Bullish (UUP) rallied 0.8% yesterday, recovering support from the October 2013 low, leaving a bear-trap. A bullish momentum divergence is evident on the 14-day RSI, supporting the case for further upside. Potential for a test of the 200-day exponential moving average at $21.78 over the next few weeks.

 

 

 

Commodities

 

The Silver Trust (SLV) shows a classic failure at resistance from its 200-day exponential moving average. The primary downtrend is likely reasserting and momentum is high enough to allow for further weakness down towards the $18 level.

We shall open a short on the close today and place a stoploss at $21.50.

 

 

Bonds

 

The 1-3 year T-Bond Fund (SHY) fell sharply yesterday, nearing a support level just above $84.30. Momentum, the 14-day RSI, is nearing the same oversold level as per late December last year. A trading opportunity may be at hand should the fund turn up from the $84.30 level. On that signal we would circle $84.55 as a target level.

 

 

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 106.11 106.66 +0.52% 104.50
6 Feb 2014 ISHR S&P Small Cap 600 Index IJR Long 102.96 111.55 +8.34% 108.75
12 Feb 2014 SPDR Sector Trst Health Care XLV Long 57.59 59.46 +3.25% 58.50
19 Feb 2014 CurrencyShares Euro Trust FXE Long 135.68 136.63 +0.70% 134
19 Feb 2014 iPath Sugar ETN SGG Long 55.84 57.42 +2.83% 51
19 Feb 2014 iShares IBOXX Investment Grade Bond Fund LQD Long 116.33 115.74 -0.51% 115
26 Feb 2014 iShares Switzerland Index EWL Long 33.8 33.46 -1.01% 33
5 Mar 2014 iShares DJ Select Dividend Index DVY Long 72.16 72.34 +0.25% 70.75
5 Mar 2014 SPDR Sector Trst Materials XLB Long 47.82 47.13 -1.44% 46.25
17 Mar 2014 iShares Germany Index EWG Long 30.48 30.42 -0.20% 29
17 Mar 2014 iShares MSCI Emerging Markets EEM Long 38.87 38.57 -0.77% 37
ETF Trading (Long/Short) Shorts
Date Stock Code Type Open Price Current Price % P&L Stop
2 May 2013 Market Vectors Agribusiness ETF MOO Short 53.68 53.04 +1.19% 55.40
14 Aug 2013 iShares S&P US Preferred Stock Index Fund PFF Short 37.94 38.74 -2.11% 39
8 Jan 2014 CurrencyShares Canadian Dollar Trust FXC Short 92.02 88.41 +3.92% 94.25
22 Jan 2014 Market Vectors Russia ETF RSX Short 27.44 22.68 +17.35% 25.30
26 Feb 2014 Market Vectors Steel Fund SLX Short 45.08 44.22 +1.91% 48
26 Feb 2014 iShares FTSE/Xinhua China 25 Index Fund FXI Short 34.82 33.1 +4.94% 36.25
12 Mar 2014 SPDR Sector Trst Energy XLE Short 87.17 86.91 +0.30% 89.50
12 Mar 2014 iShares South Korea Index EWY Short 59.77 58.82 +1.59% 62.10
17 Mar 2014 iShares Australia Index EWA Short 25.06 24.84 +0.88% 26
17 Mar 2014 iShares Canada Index EWC Short 29.25 28.99 +0.89% 30

 

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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