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

Market Overview

We last covered our short-term-composite two weeks ago and then we noted "The market remains deeply oversold and vulnerable to an oversold bounce. Our short-term-composite has been building a base for the past couple of weeks and the longer it does that, the larger the subsequent snap-back should be". That snap-back is certainly now in full swing and with the indicator only just above neutral, the potential is there for further strength by the equity funds over the next couple of weeks.

Today we cover an equity short, open an emerging market long and short a bond ETF.

 

 


This Week's Trades

  • Bank (KBE) - covering short
  • China 25 Index Fund (FXI) - buying, stoploss at $36
  • Australian Dollar (FXA) - buying, stoploss at $86
  • US 20+ years (TLT) - shorting, stoploss at $129

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


Other ETF Highlights

 

US Equity Indices

  • DJ Select Dividend Index (DVY) - buy
  • Russell 2000 (IWM) - buy reiterated

US Sector Indices

  • Software Index Fund (IGV) - buy
  • Energy (XLE) - buy
  • Oil & Gas Exploration Production (XOP) - buy
  • Metals & Mining (XME) - trading buy

Emerging Indices

  • see trades

Commodities

  • Gold (GLD) - sell

Bonds

  • see trades


Analysis

 

US Equity Indices

 

The DJ Select Dividend Index (DVY) is resuming its long-term uptrend following a bear-trap break of its 200-day exponential moving average. With the MACD only just turning up from oversold, there is a strong likelihood that the DVY will breakout to new all-time highs over the next few weeks.

 

 

The Russell 2000 (IWM) index outperformed Tuesday, rising by 2.8%. That strength enabled two boxes to be filled to the upside, potentially resuming the long-term uptrend. With conditions not being overbought, a push to record highs is expected.

 

 

US Sector Indices

 

The Bank (KBE) fund has recovered sharply the past three weeks and trading now looks to be close to regaining support from the 200-day exponential moving average. The primary uptrend is likely reasserting and we shall cover our short position on the close today.

 

 

The Software Index Fund (IGV) is resuming its four year uptrend channel following this month's correction. With momentum not yet overbought, an extension to record highs is expected.

 

 

The sell-off in the Energy (XLE) ETF looks complete following the sharp reversal off the low of three weeks ago. The MACD is down to the same oversold low from where the index reasserted from in 2011. Investment longs entered here could use this month's low of $77.51 as a stoploss. Present yield is 1.96%.

 

 

The Oil & Gas Exploration Production (XOP) fund has been developing small bases on its price and relative charts over the past few weeks. Closing above $62.50 would confirm those bottoms and imply outperformance, possibly into yearend.

 

 

 

The Metals & Mining (XME) fund has reversed up the past week on its P&F chart, finding support from its June low. Potential for a trading bounce back up towards the August high at $44. Ideally the relative chart needs to also show improvement to warrant anything more than short-term positions.

 

 

Emerging Indices

 

The China 25 Index Fund (FXI) is attempting to resume its price and relative uptrends off the March lows. The 14-day RSI is favorable as it rises through neutral.

We shall open a long in the FXI on the close this afternoon, placing a stop just under the recent lows, at $36. The trade aims for a push up towards $43.

 

 

 

Currencies

 

The Australian Dollar (FXA) is developing a small base at support drawn across from its late January bottom. The price could now embark on a rally back towards the top end of the 2014 range at $95. The MACD momentum indicator is rising with ample room to climb further.

We shall open a long in the FXA on the close today. The stoploss will be at $86.

 

 

 

Commodities

 

The Gold (GLD) ETF is deteriorating again and is very close to new five year relative lows against the equity market. The price is steadily trending lower and conditions are not oversold. A break of the 2013 and 2014 price lows is expected soon.

 

 

Bonds

 

The US 20+ years (TLT) fund continues to weaken following capitulation on the 15th October. The price looks to be heading down towards 2014 uptrend support around $113.

The P&F relative chart, versus the S&P 500, is also showing poor action as it potentially reasserts its long-term downtrend.

We shall open a short in the TLT on the close today. The stoploss will be at $129, just above the recent price spike.

 

 

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 106.11 109.96 +3.63% 107.25
6 Aug 2014 SPDR Consumer Staples XLP Long 43.79 46.2 +5.50% 42
7 Oct 2014 iPath MSCI India Index ETN INP Long 69.61 71.07 +2.10% 66
16 Oct 2014 ISHS Russell 2000 Index IWM Long 107.8 114.17 +5.91% 102
16 Oct 2014 iShares DJ Transportation Average IYT Long 143.77 156.88 +9.12% 136
16 Oct 2014 iShares Hong Kong Index EWH Long 20.8 21.34 +2.60% 17.50
20 Oct 2014 iShares United Kingdom Index EWU Long 18.39 18.82 +2.34% 17
ETF Trading (Long/Short) Shorts
Date Stock Code Type Open Price Current Price % P&L Stop
2 Jul 2014 Agriculture DBA Short 27.47 25.74 +6.30% 28.50
9 Jul 2014 streetTRACKS KBW Bank ETF KBE Short 33.2 32.09 +3.34% 34.25
1 Oct 2014 WisdomTree Dreyfus Brazilian Real Fund BZF Short 17.67 17.99 -1.81% 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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