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

 

Last week's wild market action resulted in a massive 605 selling climaxes, indicating capitulation in those equities. Often a high reading such as that coincides with the end of a correction. There may be further near-term volatility but a week from now we would expect the equity market ETFs to be higher. Today we cover two shorts, Aerospace & Defense and the Semiconductor Index, as they look to be commencing oversold bounces, moves which could easily morph into reassertions.

 

 

 


 

This Week's Trades

  • US Aerospace & Defense Index (ITA) - closing short
  • Semiconductor Index (SOXX) - closing short
  • United Kingdom Index (EWU) - buying, stoploss at $17

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

 


 

Other ETF Highlights

 

US Equity Indices

  •  NASDAQ 100 (QQQ) - buy

US Sector Indices

  •  Health Care (XLV) - buy

Other Developed Indices

  •  Japan Index (EWJ) - buy

Currencies

  • Canadian Dollar Trust (FXC) - sell 
  • Japanese Yen Trust (FXY) - sell

Commodities

  • Agriculture (DBA) - sell reiterated

Bonds

  • Emerging Markets Bond (EMB) - buy
  • 1-3 year T-Bond Fund (SHY) - sell

 


 

Analysis

 

US Equity Indices

 

The NASDAQ 100 (QQQ) looks to have found support from its 200-day exponential moving average. An oversold bounce is commencing and that could develop into a reassertion of the long-term uptrend. The 14-day RSI has just ticked up bullishly from oversold. Further strength expected.

 

 

 

US Sector Indices

 

The P&F price chart for the US Aerospace & Defense Index (ITA) fund reversed up on Friday, as the fund gained 3.5%. With the long-term uptrend likely reasserting, we shall cover our short on the close today.

 

 

The Semiconductor Index (SOXX) is bouncing off support across $75 and potentially resuming its near two year uptrend. The relative chart last week reversed up from rising trendline support, reasserting its two year trend. Charts are strengthening and we shall cover our short in the SOXX this afternoon.

 

 

The Health Care (XLV) fund is rallying off support from its 200-day exponential moving average, attempting to resume its long-term uptrend. With the 14-day RSI turning up from oversold, the move should extend.

 

 

 

Other Developed Indices

 

The United Kingdom Index (EWU) fund has traded down to lower support of a six year rising trend channel. With momentum starting to turn up from oversold, the uptrend is staging a reassertion attempt. The risk-to-reward ratio is favorable here and we shall buy on the close today. The stoploss will be at $17.

 

 

The Japan Index (EWJ) is finding support at the lower end of an eighteen month range. Momentum is oversold and the relative chart is at support from March. Potential for an oversold bounce, returning the price to the $12 ceiling.

 

 

 

 

Currencies

The Canadian Dollar Trust (FXC) last week extended its downtrend off the September 2012 peak, filling a box to the downside on the price chart. The next level of major support is across $85.

 

 

 

BUY IDEA
 

The oversold bounce in the Japanese Yen Trust (FXY), since the start of the month, is looking complete with the downside reversal at the end of last week. The 14-day RSI has turned down from the same level as previous failed tests of the 100-day exponential moving average, February through to June. A downside reassertion looks to be commencing.

 

 

 

Commodities

 

The Agriculture (DBA) fund is rolling over again following an oversold bounce into its 200-day exponential moving average. Momentum is not oversold, allowing the six month downtrend to resume back down to test the low from September.

 

 

Bonds

 

The Emerging Markets Bond (EMB) is developing a small potential base at support from its 200-day exponential moving average. The 14-day RSI has just risen through neutral, with plenty of room to rise further. Tradable bounce towards $116 expected over the next couple of weeks.

 

 

 

The 1-3 year T-Bond Fund (SHY) spiked last week into long-term resistance across the $85 region. Further gains look limited and we would be sellers here if held.

 

 

 

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 106.11 110.52 +4.16% 107.25
6 Aug 2014 SPDR Consumer Staples XLP Long 43.79 44.63 +1.92% 42
7 Oct 2014 iPath MSCI India Index ETN INP Long 69.61 68.2 -2.03% 66
16 Oct 2014 ISHS Russell 2000 Index IWM Long 107.8 107.48 -0.30% 102
16 Oct 2014 iShares DJ Transportation Average IYT Long 143.77 145.88 +1.47% 136
16 Oct 2014 iShares Hong Kong Index EWH Long 20.8 21.05 +1.20% 17.50

ETF Trading (Long/Short) Shorts

Date Stock Code Type Open Price Current Price % P&L Stop
2 Jul 2014 Agriculture DBA Short 27.47 26.14 +4.84% 28.50
9 Jul 2014 streetTRACKS KBW Bank ETF KBE Short 33.2 30.54 +8.01% 34.25
23 Sep 2014 iShares Dow Jones US Aerospace & Defense Index Fund ITA Short 107.96 104.18 +3.50% 112
23 Sep 2014 iShares GS Semiconductor Index SOXX Short 87.2 78.17 +10.36% 90.50
1 Oct 2014 WisdomTree Dreyfus Brazilian Real Fund BZF Short 17.67 18.2 -3.00% 19
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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