Example Articles

The ETF Review
6 August 2010 By Tarquin Coe

Trades this week

We will short the Homebuilders (XHB) for the Trading Portfolio. Short would be covered following an end-of-day close above 16. Target is 13.50.
We will short the Semiconductor (SMH) fund for the Trading Portfolio. Trade would be closed following three consecutive end-of-day closes above 29. Target is 24.42.

Stop adjustments

The stop for Health Care (XLV) is raised to 29.90.
The stop for Taiwan (EWT) is raised to 12.45.

The stop for Europe 350 (IEV) is raised to 36.20.

The stop for Platinum (PGM) is raised to 36.80; now intraday.

Position closures

None.

Chart of the Week

The S&P 500 (SPX) is failing to extend beyond its 200-day simple moving average (SMA). Similar behavior was seen in mid June, where the index hanged above the average for five days before finally collapsing back through it. Today marks day five of this second visit so it will be interesting to see where we are later this afternoon. Failure from current levels could see a drop back all the way down to the 500-day moving average, a move that would violate the July lows. At this point, that is speculation, as the index has yet to give the signal, but it is something to be prepared for should the market roll-over later today.

Capitalization Funds

Since last week the Dow Jones Industrial Average (DIA) ETF has edged higher. This index ETF has broken above its June high and is one of the first to do so. For a defensive big cap index to be leading the way is not indicative of a healthy market.

Watch to sell on evidence of a bull trap.

Sectors

For the second time in two weeks, the Homebuilders (XHB) have failed to break through their 50-day exponential moving average (EMA).

Momentum is well positioned for a reassertion lower following the correction from oversold at the start of July.

We will short XHB for the Trading Portfolio. Short would be covered following an end-of-day close above 16. The target is to 13.50, support from the November 2009 low.

For the past three months the Semiconductor (SMH) fund has struggled to clear resistance at 29.

The past two weeks has seen a relative deterioration by SMH with the end of a six month uptrend against the S&P 500.

We will open a short in SMH for the Trading Portfolio. Trade would be closed following three consecutive end-of-day closes above 29. The target is to 24.42, potential support from the February low.

The Consumer Discretionary (XLY) relative performance remains a problem. Against the S&P 500, the sector has been flat since the start of July. This sector was previously one of the leaders of the rally out of the March 2009 bottom.

Further relative deterioration by XLY would be bad news for the general market. One to keep an eye over the next few weeks.

The Health Care (XLV) stop is raised to 29.90 to allow more elbow room for our short.

Momentum, 14-day RSI is nearing overbought and the price is nearing the top of its three month range. Plus the 200-day EMA is now providing resistance.

Consider adding to short positions on any move towards 29.90.

The DJ Transportation (IYT) ETF maintains is strong P&F price uptrend. If there is a pull-back in August, look to accumulate long-term positions on the weakness. This chart is one of the more bullish and robust amongst the sector ETFs.

International Funds

Taiwan (EWT) has been one of the better performing international ETFs over the week. The fund is nearing resistance from its highs in April and momentum, 14-day RSI, is close to overbought.

We raise our stop to 12.45 to protect profits should the fund react adversely to the prior highs.

The Europe 350 (IEV) continues to trend higher but conditions are getting short-term overbought, with the 14-day RSI at 70. That is above the momentum high at the April top.

The P&F chart shows the fund challenging down trendline resistance.

We raise our stop to 36.20.

Commodities

The Platinum (PGM) stop is raised to 36.80, now intraday. A move to there would indicate a bull trap break above the 50-day EMA.

The Grains (GRU) ETF has accelerated higher over the past week on news that Russia, one of the biggest exporters of wheat, was halting exports.

Conditions are very overbought, with the 14-day RSI at 80, a level never seen before since the funds inception in April 2008.

Price action is also trading at resistance across 6, so the move may stall around current levels. Too speculative, avoid.

The Oil Fund (DBO) enjoyed a significant break out on Monday. The fund moved above a two and a half month double-bottom base formation. However, the move halted at resistance from the 200-day EMA.

Watch for a move above the recent high (26.097) as a cue to go long, as that would imply the 200-day EMA had been cleared and the price was heading towards the base's target at 27.

Bonds

The rally by the 20+ yr T-Bond (TLT) may be starting to falter. A trendline drawn up from the April low has been broken and momentum is exhibiting bearish divergence. A technical signal sell signal would come on a close beneath the 50-day EMA. Watch to go short.

Currencies

The Swiss Franc (FXF) has made little ground since the start of July. Momentum, the MACD, exhibits strong bearish divergence. The bounce off the June low looks to be maturing and near-term short trades may be considered. Aim for a move down to at least 92. Cover shorts should the trend push back up through 96.

MODEL PORTFOLIOS

ETF Investment (Long only)

Date Stock Code Type Open Price Current Price % P&L Target Stop Alloc % Comment

9 Jul 2010 SPDR Sector Trst Utilities XLU Long 29.65 30.93 +4.32% 32 30.15 5 Stop type - ITD

9 Jul 2010 iShares Taiwan Index EWT Long 12 12.71 +5.92% 13.50 12.45 5 Stop type - ITD

16 Jul 2010 iShares S&P Europe 350 Index IEV Long 34.39 37.07 +7.79% 38 36.20 5 Stop type - ITD

ETF Trading (Long/Short)

Date Stock Code Type Open Price Current Price % P&L Target Stop Alloc % Comment

9 Jul 2010 Market Vectors Coal ETF KOL Long 32.067 35.24 +9.89% 40 32.70 5 Stop type - ITD

9 Jul 2010 I-Path DJ-UBS Platinum ETN PGM Long 36.26 37.23 +2.68% 42 36.80 5 Stop type - ITD

30 Jul 2010 DB Gold Short ETN DGZ Long 18.44 18.11 -1.79% 19.45 17.85 5 Stop type - EOD

30 Jul 2010 Retail HOLDRS RTH Short 88.705 91.05 -2.64% 82 95 5 Stop type - EOD

30 Jul 2010 SPDR Sector Trst Health Care XLV Short 28.39 29.65 -4.44% 26 29.90 5 Stop type - EOD3

30 Jul 2010 iShares Spain Index EWP Short 39.385 41.43 -5.19% 35 42 5 Stop type - EOD

30 Jul 2010 iShares High Yield Corp Bond HYG Short 88.61 88.39 +0.25% 86 90 5 Stop type - EOD3

Model Portfolio Rules

Allocation – The maximum number of trades per portfolio is limited to 20 (assuming each trade is allocated 5% of a 100% portfolio unless otherwise stated).

Opening of positions – Positions are opened on the day of the recommendation providing the recommendation was made before the market open or within one hour following the market open. At any other time, the next day’s trading will be used. The opening price used for the model portfolios will be the mid-point between the day’s high and low (note: previously we used 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 the mid-point of the days range on the day the advice was published, providing the advice was made before the market open or within one hour following the market open. At any other time, the next day’s trading will be used.

Stops – The type of stop used for model portfolio trades will be one of three types:

ITD executed when the stop is touched intraday.

EOD activated on an end of day close beneath the stop level. Trades should then be closed out on the following day. Our trade will be closed out at the day’s mid-range (to reflect a fair/average exit price).

EOD3 activated on three consecutive end of day closes beneath the stop level. Trades should then be closed out on the fourth day. Our trade is closed out at the day’s mid-range.

The stop type will be abbreviated in the Comments column on the portfolio table.

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 (positions stopped out on the Friday will not be updated until the following Monday).

Recommend a friend! Tell your friends to mention your name when subscribing to Investors Intelligence, and get a months free access to a service of your choice! For more information, email sbarnes@investorsintelligence.com.

Also available online at www.investorsintelligence.com. Unauthorized forwarding, copying or reproduction of this report will be treated as a breach of copyright. To subscribe, visit the website or contact Investors Intelligence on +44 20 7352 5435 or +1 914 632 0422.

This report has been produced and compiled by Investors Intelligence, a division of Chartcraft Inc, and is provided for information purposes only. Under no circumstances is it to be used or considered as an offer to sell, or a solicitation of any offer to buy. While all reasonable care has been taken to ensure that the information contained herein is not untrue or misleading at the time of publication, we make no representation as to its accuracy or completeness and it should not be relied upon as such. From time to time Chartcraft and any of its officers or employees may, to the extent permitted by law, have a position or otherwise be interested in any transactions, in any investments (including derivatives) directly or indirectly the subject of this report. Also Chartcraft may from time to time perform other services (including acting as adviser or manager) for any company mentioned in this report. The value of securities can go down as well as up, and you may not get back the full amount you originally invested. Derivatives in particular are high risk, high reward investment instruments and an investor may lose some or all of his/her original investment. If you make an investment in securities that are denominated in a currency other than that of US dollars you are warned that changes in rates of foreign exchange may have an adverse effect on the value, price or income of the investment. The investments referred to herein may not be suitable investments for all persons accessing these pages. You should carefully consider whether all or any of these are suitable investments for you and if in any doubt consult an independent adviser. This report is prepared solely for the information of clients of Chartcraft who are expected to make their own investment decisions without reliance on this report. Neither Chartcraft nor any officer of Chartcraft accepts any liability whatsoever for any direct and consequential loss arising from use of this report or its contents. This report may not be reproduced, distributed or published by any recipient for any purpose without the prior express consent of Chartcraft.

back | back to top

Access to our research services requires acceptance of our Terms of Business and is subject to our Disclaimer. View our Privacy Policy. The US Stock Service and the US Market Timing service are provided by Chartcraft Inc (’Chartcraft’), which is not a regulated business. All other services are provided by Stockcube Research Limited (’Stockcube’) which is authorised and regulated by the UK’s Financial Services Authority. Chartcraft and Stockcube are wholly-owned by Stockcube plc a UK company registered in England.

Date	Stock	Code	Type	Open Price	Current Price	% P&L	Target	Stop	Alloc %	Comment
9 Jul 2010	SPDR Sector Trst Utilities	XLU	Long	29.65	30.93	+4.32%	32	30.15	5	Stop type - ITD
9 Jul 2010	iShares Taiwan Index	EWT	Long	12	12.71	+5.92%	13.50	12.45	5	Stop type - ITD
16 Jul 2010	iShares S&P Europe 350 Index	IEV	Long	34.39	37.07	+7.79%	38	36.20	5	Stop type - ITD