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

Market Overview

Note - this will be the last ETF report for 2014 as staff will be on Xmas leave going into the end of the year. We wish all of our subscribers a happy and safe holiday season.

 

The past week our short-term-composite indicator has sharply broken down to oversold. As the P&F chart for the indicator shows, rising trendline support is now being tested and it will likely turn up from here, given the equity market strength today. That will allow for an oversold bounce, back towards at least 50%, a move which could last into the final days of 2014.

Our bearish view for the medium-term, as discussed last week, still stands. However, today we are adjusting the portfolio to allow for a short-term snap-back by the equity ETFs.

 

 


This Week's Trades

  • Energy (XLE) - buying, stoploss at $70
  • United Kingdom (EWU) - buying, stoploss at $17
  • Livestock (COW) - shorting, stoploss at $31.50
  • Materials (XLB) - covering short

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


Other ETF Highlights

 

US Equity Indices

  • DJ Select Dividend Index (DVY) - buy

US Sector Indices

  • Biotechnology (IBB) - buy

Other Developed Indices

  • France Index (EWQ) - buy
  • Australia Index (EWA) - buy

Emerging Indices

  • Russia (RSX) - sell on strength

Currencies

  • Euro Trust (FXE) - watch to buy

Commodities

  • see trades

Bonds

  • National Municipal Bond Fund (MUB) - buy


Analysis

 

US Equity Indices

 

The DJ Select Dividend Index (DVY) has pulled back to its 100-day exponential moving average and momentum has unwound substantially.

What we like most about this chart is the relative ratio, versus the S&P 500, which shows a multi-month base formation nearing activation. That would equate to outperformance by the ETF over Q1 2015.

Present yield for the fund is 2.96%.

 

 

US Sector Indices

 

The Energy (XLE) fund is down to uptrend support for a channel underway since 2009. Momentum for the sector is deeply oversold. An uptrend reassertion attempt is expected from here.

We shall open a long in the XLE on the close today. The stoploss will be at $70 which is just under the recent low. Target is towards the $90/$100 region; trade offers a decent risk-to-reward ratio.

 

 

The Materials (XLB) fund has rapidly become oversold, with the 14-day RSI ending yesterday at 30. Given today's strength from the sector, the fund is turning back to the upside and will avoid a return to the October low. A visit back towards the November high is now commencing.

We shall exit our short in the XLB on the close today.

 

 

The Biotechnology (IBB) fund is down to support from its 50-day exponential moving average and likely now reasserting its price and relative uptrends given the performance today. Momentum is well positioned to allow a push to new highs.

 

 

Other Developed Indices

 

The United Kingdom (EWU) fund looks to have just printed a bear trap break of its October low. Coupled to oversold momentum, with the 14-day RSI turning up from just above 20, we anticipate a bounce from here back towards $19 at least.

We shall buy the fund on the close today. The stoploss will be at $17.

 

 

The France Index (EWQ) ETF is oversold and appears to be finding support from just above the October low. Potential for a bounce from here, back towards the end of November peak.

 

 

The Australia Index (EWA) fund is now down to potential support drawn across from the July 2013 low. A bounce from here, expected given the oversold condition, would define a clear range between $22 and $28. Longs entered at present trading could use the lows of this week as a stoploss.

 

 

Emerging Indices

 

The Russia (RSX) index fund has broken down hard the past week. It is short-term oversold so there be a brief bounce but we would see that as a selling opportunity. The chart ideally needs to test the low from 2009 at $10.43 before a sustainable recovery attempt can be made.

 

 

Currencies

 

The Euro Trust (FXE) is attempting a multi-week base. Breaking above $124 would activate the base and also regain support from the 50-day exponential moving average. Momentum has the slack to allow such a move.

 

 

Commodities

 

The Livestock (COW) fund is breaking down from the top of its five year range. A return to the floor of that range around $25.50 is expected over the first half of 2015.

Given the awful relative ratio, which is resuming its long-term downtrend, we shall short the fund here. The stoploss will be at $31.50.

 

 

 

Bonds

 

The National Municipal Bond Fund (MUB) has resumed its long-term uptrend this month as it recovers off its 50-day exponential moving average. Momentum remains at a comfortable level and that will allow for more strength. Present yield is 2.82%.

 

 

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 47.41 +8.27% 42
16 Oct 2014 iShares Hong Kong Index EWH Long 20.8 20.28 -2.50% 17.50
19 Nov 2014 DJ US Pharmaceuticals Index Fund IHE Long 147.52 146.91 -0.41% 142.50
25 Nov 2014 SPDR Sector Trst Financial XLF Long 24.35 23.69 -2.71% 23.50
3 Dec 2014 SPDR Sector Trst Utilities XLU Long 46.27 45.48 -1.71% 43
ETF Trading (Long/Short) Shorts
Date Stock Code Type Open Price Current Price % P&L Stop
2 Jul 2014 Agriculture DBA Short 27.47 25.08 +8.70% 28.50
1 Oct 2014 WisdomTree Dreyfus Brazilian Real Fund BZF Short 17.67 16.39 +7.24% 19
29 Oct 2014 US 20+yrs TLT Short 119.46 127.6 -6.81% 129
4 Nov 2014 iShares South Korea Index EWY Short 57.38 56.24 +1.99% 60.50
11 Nov 2014 CurrencyShares Japanese Yen Trust FXY Short 84.29 83.45 +1.00% 90
19 Nov 2014 iShares DJ US Broker-Dealers Index Fund IAI Short 40.42 40.49 -0.17% 42
19 Nov 2014 Copper JJC Short 36.54 34.45 +5.72% 38
9 Dec 2014 SPDR Sector Trst Materials XLB Short 49.11 46.19 +5.95% 50.75
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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