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ETF Global Opportunities
Weekly analysis on US stocks, sectors, commodities and global indices.
25 February 2015
     

Market Overview

 

The S&P 500 (SPY) has risen for the past ten sessions. That has quickly pushed our indicators into overbought territory and caution is now in order.

Our short-term-composite is overlaid onto the SPY. It is clear that some corrective action soon follows the present elevated level on that indicator. It is at its highest level since early July last year after which a sharp correction ensued later that month.

Today we trail some stops higher on longs and also take some profits, reducing our long exposure to equity ETFs. Also exited are two bond ETF shorts.

 

 


This Week's Trades

  • Energy (XLE) - closing long
  • Telecom (IYZ) - closing long
  • Hong Kong (EWH) - closing long
  • Midcap Index Trust (MDY) - stop raised to $274
  • Consumer Discretionary (XLY) - stop raised to $75
  • Transportation Average (IYT) - stop raised to $162.25
  • Germany (EWG) - stop raised to $29
  • 1-3 year T-Bond fund (SHY) - closing short
  • US Treasury Inflation Protected Securities Fund (TIP) - closing short

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


Other ETF Highlights

 

US Equity Indices

  • see trades

US Sector Indices

  • see trades

Other Developed Indices

  • Taiwan Index (EWT) - watch to buy

Currencies

  • British Pound (FXB) - trading buy

Commodities

  • Commodity (DBC) - sell

Bonds

  • see trades


Analysis

 

US Equity Indices

 

The Midcap Index Trust (MDY) is hitting new all-time highs. The 14-day RSI is overbought but the uptrend still stands. Also of slight concern is the relative ratio which is showing a slight negative divergence but that could easily correct itself over a session or two.

We trail the stop higher on our long position to $274.

 

 

US Sector Indices

 

The Energy (XLE) fund may be ready to roll back to the downside following an oversold correction into the $80 level and the 50-day exponential moving average.

Medium-term downtrends could be resuming; we shall take the profit on our long position today.

 

 

The Telecom (IYZ) fund is struggling to overcome $31 resistance. In the meantime, the relative ratio is reasserting its long-term downtrend.

Underperformance is returning and therefore we shall take the profit on our long in IYZ on the close.

 

 

The Consumer Discretionary (XLY) fund is extending to record price highs, with the relative ratio close to new 52-week highs.

We trail the stop higher on our long to $75.

 

 

The Transportation Average (IYT) ETF remains in a long-term uptrend and trades towards the top end of a three month range.

To protect ourselves from a failure from the range's ceiling, we trail the stop higher on our long to $162.25.

 

 

Other Developed Indices

 

The Hong Kong (EWH) fund may be forming a lower high to that of November and prior to that, August. A return towards the $20 is possible over the next several weeks.

With the medium-term underperformance trend also reasserting, we shall exit our long in the EWH on the close today.

 

 

The Germany (EWG) ETF is breaking out to new six month price highs. Momentum is not overbought, evident from the 14-day RSI, so further near-term strength is likely.

We trail the stop higher on our long position to $29.

 

 

The Taiwan Index (EWT) has reversed up this month in an attempt to resume its long-term price uptrend. Yesterday again saw outperformance, up 1.5%.

The P&F relative chart needs to reverse up from the bottom of its decade range before considering longs.

 

 

Currencies

 

The British Pound (FXB) maintains its small uptrend off the late January lows. Trading looks to be finding support from the 50-day exponential moving average with the next level to watch being the 200-day at $156. However, dropping down through the 50-day would resume the medium-term downtrend.

 

 

 

Commodities

 

The Commodity (DBC) fund is likely resuming its price and relative downtrends following a correction into its 50-day exponential moving average. The 14-day RSI is rolling over from neutral.

 

 

Bonds

 

The 1-3 year T-Bond fund (SHY) is attempting to resume its long-term uptrend. The price has just based and then rallied off the 200-day exponential moving average.

A return to the $85 level is possible over the next week. We shall exit our short in the SHY on the close today.

 

 

The US Treasury Inflation Protected Securities Fund (TIP) is also showing upside potential as it moves up from the floor of its 52-week price range.

Versus the equity market. the relative ratio is finding support from the end of 2014. Outperformance forecast over the next few weeks.

We shall exit our short position this afternoon.

 

MODEL PORTFOLIO

ETF Trading (Long/Short) Longs

Date Stock Code Type Open Price Current Price % P&L Stop
6 Aug 2014 SPDR Consumer Staples XLP Long 43.79 49.91 +13.98% 42
16 Oct 2014 iShares Hong Kong Index EWH Long 20.8 21.81 +4.86% 17.50
19 Nov 2014 DJ US Pharmaceuticals Index Fund IHE Long 147.52 167.17 +13.32% 142.50
3 Dec 2014 SPDR Sector Trst Utilities XLU Long 46.27 46.34 +0.15% 43
17 Dec 2014 SPDR Sector Trst Energy XLE Long 77.08 80.43 +4.35% 70
21 Jan 2015 iShares DJ Select Dividend Index DVY Long 80.29 80.36 +0.09% 77.75
21 Jan 2015 iShares DJ Transportation Average IYT Long 159.47 164.93 +3.42% 162.25
4 Feb 2015 SPDR Midcap Index Trust MDY Long 266.79 276.34 +3.58% 274
4 Feb 2015 SPDR Consumer Discretionary XLY Long 72.6 75.73 +4.31% 75
4 Feb 2015 iShares DJ US Telecom IYZ Long 29.8 30.37 +1.91% 27
4 Feb 2015 iShares Germany Index EWG Long 28.74 29.66 +3.20% 29
10 Feb 2015 SPDR Sector Trst Health Care XLV Long 70.12 72.42 +3.28% 66.50
18 Feb 2015 iShares Italy Index EWI Long 14.73 14.98 +1.70% 13.50
ETF Trading (Long/Short) Shorts
Date Stock Code Type Open Price Current Price % P&L Stop
2 Jul 2014 Agriculture DBA Short 27.47 23.03 +16.16% 28.50
1 Oct 2014 WisdomTree Dreyfus Brazilian Real Fund BZF Short 17.67 16.13 +8.72% 19
11 Nov 2014 CurrencyShares Japanese Yen Trust FXY Short 84.29 81.76 +3.00% 90
19 Nov 2014 Copper JJC Short 36.54 31.5 +13.79% 38
17 Dec 2014 Livestock COW Short 28.881 26.0801 +9.70% 31.50
6 Jan 2015 streetTRACKS KBW Bank ETF KBE Short 31.56 33.28 -5.45% 34
21 Jan 2015 iShares Barclays 1-3 yr T-Bond Fund SHY Short 84.84 84.75 +0.11% 85.10
27 Jan 2015 iShares Brazil Index EWZ Short 36.97 35.77 +3.25% 40
27 Jan 2015 Claymore/BNY Mellon BRIC ETF EEB Short 30.12 30.01 +0.37% 31
27 Jan 2015 Emerging Markets Bond EMB Short 111.4 111.87 -0.42% 112.50
4 Feb 2015 iShares Barclays US Treasury Inflation Protected Securities Fund TIP Short 115.26 113.37 +1.64% 117.50

 

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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