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ETF Global Opportunities
Weekly analysis on US stocks, sectors, commodities and global indices.
19 November 2014
     
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Market Overview

 

The difference between the bulls and the bears on our Advisors Sentiment Survey has entered the danger territory of plus 40%. Typically when that happens we express caution but the market can still creep higher.

Today we add three longs in non-overbought equity funds and open shorts in two underperforming areas. We also trail some stops higher to further lock in gains on longs.

 

 


This Week's Trades

  • Russell 2000 (IWM) - stoploss raised to $113.50
  • India Index (INP) - stoploss raised to $71
  • U.S. Broker-Dealers Index (IAI) - shorting, stoploss at $42
  • Copper (JJC) - shorting, stoploss at $38
  • Agribusiness (MOO) - buying, stoploss at $53.50
  • Pharmaceuticals Index fund (IHE) - buying, stoploss at $142.50
  • Spain (EWP) - buying, stoploss at $35

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


Other ETF Highlights

 

US Equity Indices

  • S&P 500 (SPY) - buy weakness

US Sector Indices

  • Industrial (XLI) - buy weakness

Other Developed Indices

  • Europe 350 Index (IEV) - now potentially basing

Emerging Indices

  • see trades

Commodities

  • Agriculture (DBA) - sell reiterated

Bonds

  • U.S. High Yield (HYG) - sell


Analysis

 

US Equity Indices

 

The S&P 500 (SPY) broke out to a new all-time high yesterday. However, momentum is overbought, so a small reaction lower would be no surprise, after which, the uptrend should resume. It is a fast market, so any retreat would be shallow, possibly just as far as the $204 level.

 

 

 

The Russell 2000 (IWM) has consolidated since the start of the month, allowing momentum to ease back to a more comfortable level.

A deeper correction is not anticipated just yet but we trail our stop higher nonetheless. The new stoploss will be at $113.50.

 

 

US Sector Indices

 

The Industrial (XLI) fund, like SPY, also made a record high on Tuesday. Momentum, the 14-day RSI, is close to overbought, so a pause for breath will soon be necessary and may even be commencing today. We see weakness as a buying opportunity.

 

 

The U.S. Broker-Dealers Index (IAI) is rolling over from resistance drawn across from the September high. Momentum is doing likewise and the relative chart is resuming a gently falling down channel, underway since mid-September.

We shall open a short here, placing a stoploss at $42, just above the recent high.

 

 

The Agribusiness (MOO) fund advanced a box yesterday to test the high from May. A resumption of the long-term uptrend has been underway for the past few weeks and new five year highs, around the $60 level, should be printed over the next month or two.

We shall buy MOO on the close today. The stoploss will be at $53.50.

 

 

The Pharmaceuticals Index fund (IHE) is resuming long-term uptrends and is very close to new all-time highs. The 14-day RSI has ample room to allow the strength to continue.

We shall open a long in the IHE at the end of the session today, placing a stoploss at $142.50. Trade targets a move towards $160.

 

 

 

Other Developed Indices

 

The Europe 350 Index (IEV) pulled out of a two month base formation yesterday, potentially breaking downtrend resistance. The small bottom, built up largely during October, would confirm on further follow-through over the next couple of sessions. The 50-day exponential moving average has also been recaptured, a further positive. Momentum is rising off neutral, so the recovery attempt should continue.  

 

 

A week ago the chart for Spain (EWP) was also looking weak but the situation is improving with a test now underway of the 50-day exponential moving average. Breaking that and moving above $38.25 would activate a small base, yielding a target towards $42.

We shall open a speculative long here in EWP, placing a stoploss at $35.

 

 

Emerging Indices

 

The India Index (INP) stop is trailed higher with the rally, raised to $71. New 52-week price and relative highs look imminent.

 

 

 

Commodities

 

The Agriculture (DBA) fund has weakened over the past few sessions, resulting in a likely reassertion of the downtrend off the high in late April. Momentum is not oversold with the 14-day RSI rolling over from neutral. New 52-week relative lows imminent and shorts could be added to here.

 

 

Copper (JJC) remains in three year price and relative downtrends. The relative chart is at new 52-week lows and the price chart should soon print fresh lows too.

We shall open a short in the JJC this afternoon. The stoploss will be at $38 and we are aiming for a drop down towards round-number $30.

 

 

Bonds

 

The U.S. High Yield (HYG) fund is weakening again and looks to be reasserting the downtrend off the high from June. Momentum has room to go lower and with the relative chart at new 52-week lows, we would continue to avoid longs here.

 

 

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 48.26 +10.21% 42
7 Oct 2014 iPath MSCI India Index ETN INP Long 69.61 74.38 +6.85% 71
16 Oct 2014 ISHS Russell 2000 Index IWM Long 107.8 116.39 +7.97% 113.50
16 Oct 2014 iShares DJ Transportation Average IYT Long 143.77 162.22 +12.83% 158
16 Oct 2014 iShares Hong Kong Index EWH Long 20.8 21.54 +3.56% 17.50
20 Oct 2014 iShares United Kingdom Index EWU Long 18.39 19.1 +3.86% 17
29 Oct 2014 iShares FTSE/Xinhua China 25 Index Fund FXI Long 39.41 38.82 -1.50% 36
4 Nov 2014 Natural Gas UNG Long 21.74 22.27 +2.44% 19.30
ETF Trading (Long/Short) Shorts
Date Stock Code Type Open Price Current Price % P&L Stop
2 Jul 2014 Agriculture DBA Short 27.47 25.64 +6.66% 28.50
1 Oct 2014 WisdomTree Dreyfus Brazilian Real Fund BZF Short 17.67 17.26 +2.32% 19
29 Oct 2014 US 20+yrs TLT Short 119.46 119.52 -0.05% 129
4 Nov 2014 SPDR Sector Trst Materials XLB Short 47.56 49.87 -4.86% 49
4 Nov 2014 iShares South Korea Index EWY Short 57.38 56.98 +0.70% 60.50
11 Nov 2014 CurrencyShares Japanese Yen Trust FXY Short 84.29 83.26 +1.22% 90
11 Nov 2014 iShares Barclays 1-3 yr T-Bond Fund SHY Short 84.6 84.67 -0.08% 84.80

 

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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