Stocks retreat as Fitch downgrades Spain’s debt – What did smart money do? Plus more contrary picks May 28, 2010
Posted by Marlowe Cassetti in DOG, DXD, SH, TLT.add a comment
Stocks closed out their worst month in more than a year by sliding again on more unsettling news about Europe.
The Dow Jones industrials dropped 122 points Friday after Fitch Ratings gave Spain the second downgrade of its credit rating in a month. The rating agency’s action was another reminder to traders of the long-term economic problems still facing several European countries, and pehaps the rest of the continent and the global economy as well.
May was difficult as persistent and intensifying worries about Europe’s debt problems sent the Dow down 7.9 percent and the broader Standard & Poor’s 500 index down 8.2 percent. Both indexes had their worst monthly performance since February 2009, the month before stocks began their recovery from 12-year lows. The Dow lost nearly 872 points, its biggest point drop ever for May. (market commentary & photo courtesy of AP News via Yahoo Finance)
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I monitored yesterday’s RSI pick, iShares Barclays 20+ Year Treasury Bond (TLT) throughout the day and it appeared to be languishing, but with a small positive bias (it did gain 0.45%). That’s okay since it could be building a base in the vicinity of $96.50. I will continue to monitor over the next few days for a possible buy.
RSI’s other pick was much stronger today, up 1.26% coming mostly in the last 15 minutes. Rather ominous going into the long weekend. Someone wanted to hold the market short as they enjoyed the long weekend. Was it smart money?
So after the bell, RSI piles on to the contrary side with these two picks:
- Buy 280 shares ProShares Short S&P500 (SH) Stop -$3.51 Alert Target = +$5.85 Volatility = 5.6%
- Buy 300 shares ProShares UltraShort Dow30 (DXD) Stop -$3.34 Alert Target = +$5.57 Volatility = 9.5%
Needless to say, these two look a lot like the chart of DOG.
There you have it. Do I recommend loading up on all these short and defensive funds? No, I cannot in good conscience recommend such a drastic shift in portfolio allocation. But then again RSI is suggesting this very strategy.
Have a great Memorial weekend. I’ll catch you after the market closes on Tuesday.
Wall Street flies on China comment, Microsoft upgrade – Buy TLT & DOG May 27, 2010
Posted by Marlowe Cassetti in DOG, TLT.add a comment
Stocks rallied on Thursday as investor worry was eased after China refuted a report that it was reviewing its euro-zone bond holdings due to the region’s debt crisis.
Thursday’s gains marked the largest advance for the S&P 500 on a percentage basis since May 10, although volume was below average.
China’s denial was enough of a catalyst to entice buyers into the volatile equity market, which fell sharply from April highs as investors worried that Europe’s debt woes would spiral into a larger financial crisis.
The Dow Jones industrial average .DJI gained 284.54 points, or 2.85 percent, to 10,258.99. The Standard & Poor’s 500 Index .SPX advanced 35.11 points, or 3.29 percent, to 1,103.06. The Nasdaq Composite Index.IXIC jumped 81.80 points, or 3.73 percent, to 2,277.68. (market commentary & photo courtesy of Reuters)
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Today RSI issued two buy signals:
- Buy 116 shares iShares Barclays 20+ Year Treasury Bond (TLT); Stop -$8.60 Trailing Stop Alert +$25.78 Volatility = 3.50%
- Buy 303 shares ProShares Short Dow30 (DOG); Stop = -$3.30 Trailing Stop Alert +$5.49 Volatility = 5.31%
Okay, let’s address the first pick. TLT has been the ETF that has been the target of “flight to safety” since all the high volatility of the past few weeks.
TLT took a hit today (-2.27%) as the market euphoria flushed the holders of TLT out of their positions to move into more speculative equities. I suspect that it may test the lower trend line before a move higher. I will be looking to buy TLT. Keep in mind any Fed rate hiking will slam TLT. Rates up, long bonds down.
As for DOG, RSI has previously picked this fund, but another, unrelated module has picked it again. So let’s take another look at it too.
Boy, do these two charts look the same or what? If you don’t have a market short position, you might consider DOG when it returns to the upward path. It too got slammed today (-2.91%). I already own it for a small net profit.
Catch you later.
Stocks fade late as euro sinks; Dow ends under 10K May 26, 2010
Posted by Marlowe Cassetti in GDX.add a comment
A drop in the euro set off a late-day slide in stocks Wednesday and sent the Dow Jones industrial average to its first close below 10,000 in nearly four months.
The Dow, up 135 points in morning trading, ended down about 69. It was the eighth drop for the Dow in 10 days. Wednesday’s trading extended a streak of volatility since stocks went to their highest level of the year in late April.
The late reversal underscored how jittery traders are about Europe. They are worried that heavy debt loads in European countries and more rounds of cost-cutting will hamper a recovery there, which could spread quickly to other regions. (market commentary and photo courtesy of AP via Yahoo Finance)
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I went ahead and added to my position in Market Vectors Gold Miners ETF (GDX). I bought it in the morning at what I thought was a good price. However the late day market fade took its toll and it ended up a losing position. Yet, the RSI portfolio eked out a small gain today.
I’m having some technical difficulties running RSI this evening. If there any new picks I’ll post them tomorrow, as early as possible.
Dow plunges below 10,000 as Wall St. slide goes on – What about gold? May 25, 2010
Posted by Marlowe Cassetti in GDX.add a comment
The stock market sank to its lowest levels of the year Tuesday, sending the Dow Jones industrials below 10,000 as investors feared that even Europe’s painful debt-fighting measures will not contain the crisis.
The Dow fell more than 250 points in the minutes after the opening bell and spent most of the day under 10,000. It recovered somewhat and was down about 80 in late afternoon. The average has fallen nearly 12 percent in the past month.
Besides the financial crisis in Europe, investors were reminded that political issues, such as tension between North and South Korea, can threaten economic growth. Analysts said the unresolved Gulf of Mexico oil spill contributed to the foul mood. (market commentary & photo courtesy of AP News via Yahoo Finance)
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As my readers may recall, RSI picked Market Vectors Gold Miners ETF (GDX) a few weeks ago. Today, gold touched $1200/oz and may be signaling renewed interest in the metal. Let’s take a look at chart of GDX:
It was up a strong 2.73% today, reflecting good investor interest. On the plot relative to the general market (highlighted by the violet trendline), it shows strong performance over the past two months. I’m tempted to add to my position, but I have to think about that.
No RSI signals for tonight. Catch you later.
Late slide in financial stocks hits stock market – Which way to lean? May 24, 2010
Posted by Marlowe Cassetti in DOG, FHO, MHY.add a comment
Financial companies dragged stocks lower Monday as already anxious investors grew even more uncertain about the U.S. government’s financial overhaul plan and debt problems in Europe.
The Dow Jones industrial average slid 80 points in the final 15 minutes of trading to end with a loss of almost 127. It was the lowest close for the Dow since Feb. 10. The Dow and the Standard & Poor’s 500 index fell more than 1 percent.
Investors are worried about limits that could be placed on U.S. banks in a final version of the financial overhaul bill. A bill that passed the Senate last week is now being reconciled with the House version. The late drop illustrates how jittery traders are in particular about what will happen in Europe. (market commentary & photo courtesy of AP)
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The RSI portfolio made a nice gain today led by MHY, FHO and DOG. The portfolio has a defensive bias, not by my design but by the RSI system. We have recently seen protective stops exiting our long positions in equity ETFs and material/commodity funds. Thus we have built up money market reserves. So the strategy is to wait for RSI to issue some new buy and deploy the cash reserves. No need to forecast what the future holds.
With that noble stance, let me observe that there are a lot of concerns out there that make me happy with a defensive portfolio. Troubling thing is that this market has been in a broad rally, based in part on the expectation that we are moving out of the depths of an economic depression. Excuse me .. I mean recession. Maybe, just maybe, we may have a W recovery rather than the expected V shaped recovery. In simple terms, maybe another move down before we get out of this mess.
The above graphic is from the Conference Board. Likewise, the respected economic cycle forecasting group, ECRI issued a report on May 21st stating U.S. Indexes Point to Change in Cyclical Direction. This is a sobering thought indeed. In the vernacular of tennis, not wanting to be “wrong footed”, I will be awaiting RSI’s next pick to see which way to lean.
Speaking of the devil, there were no new RSI picks tonight. Catch you later.
Stocks end higher after biggest slide in a year – Does this DOG hunt? May 21, 2010
Posted by Marlowe Cassetti in DOG.2 comments
Stocks ended sharply higher a day after posting their biggest drops in more than a year.
Trading was volatile Friday and there are still worries about how Europe is handling its debt crisis. Analysts said a bounce back after the slide Thursday wasn’t surprising.
The Dow Jones industrial average rose 125 points after falling below 10,000 in morning trading.
The volatility comes after major indexes entered "correction" mode, having dropped more than 10 percent from their 2010 highs set last month. The gains Friday pulled the Dow back out of correction territory and left it down 9 percent from its peak.
Investors again looked to Europe for direction. The German parliament approved the country’s share of a $1 trillion plan to help contain debt problems in the European Union. Major stock indexes in Europe were mixed but pulled well off their lows. Traders have been worried that stronger countries like Germany and France will be saddled with heavy debts to help weaker EU countries. (market commentary & photo courtesy of AP)
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As we finish out this tumultuous week I want to take a look at RSI’s recent pick of ProShares Short Dow30 (DOG). The chart shows its recent parabolic move up as the market has plunged and jinked around. Since DOG is an inverse fund, it has moved opposite to the DJIA 30 stock index. Thus it will continue to rise as the market falls and visa versa. So the question is, where does DOG go from here? The schoolbook answer is we follow the system, honor our stops, and stick by our guns. Privately, I will be monitoring the trajectory of DOG relative to the lower, red trendline. So we shall see how well this dog hunts.
No RSI pick tonight. Have a great weekend and I’ll catch you on the other side.
Wall Street sinks on euro-zone fears, reform angst – Sold XPP & PGM May 20, 2010
Posted by Marlowe Cassetti in DOG, PGM, XPP.add a comment
Stocks sank nearly 4 percent on Thursday on growing fears the euro zone’s efforts to tackle its sovereign debt crisis will fall short, jeopardizing the global economic recovery.
Selling picked up speed late in the day and indexes closed around their session lows after the U.S. Senate voted to end debate on the sweeping overhaul of financial regulation, allowing a final vote on the bill later on Thursday or Friday.
The S&P 500 finished down 12 percent from its April 23, 2010, closing high, signaling a correction and marking the worst day since late April 2009. The index also ended below its 200-day moving average, a sign the momentum downward could build. (market commentary & photo courtesy of Reuters)
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The carnage continues and it caused two more stops to be hit, resulting in selling:
- ProShares Ultra FTSE/Xinhua China 25 (XPP)
- iPath DJ-UBS Platinum TR Sub-Idx ETN (PGM)
This completes the last of my long equity holdings. The remainder of the RSI portfolio are only cash, income funds and DOG. Okay, so where do we go from here? We wait for the new RSi picks and go with the system. I look forward to see what unfolds next. RSI has good back-testing results during past market downdrafts including bear markets.
After the market close RSI issued another buy signal for ProShares Short Dow30 (DOG). This additional buy signal was generated by a different RSI module. I guess one could say that this pick is a vote of confidence. Maybe so….
Catch you later.
Stocks slide after investors focus on Europe woes – Sold commodity funds GSG & DBC May 19, 2010
Posted by Marlowe Cassetti in DBC, GSG, MDY.add a comment
Another wave of selling hit stocks Wednesday in response to growing fears that Europe has no quick fix for its debt crisis.
The Dow Jones industrial average fell about 67 points after having been down as much as 186.
The extent of investors’ worries became clear after the euro bounced off a four-year low but stocks still fell. The euro has been driving stock trading for weeks.
The Standard & Poor’s 500 index, widely considered one of the best measures of how the stock market is doing, neared a 10 percent drop from the 2010 trading high it reached last month. That would mark the first time the market has had what’s known as a "correction" since it bounced off a 12-year low in March last year. Most analysts say a correction is a drop of at least 10 percent. (market commentary & photo courtesy of AP)
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Continued market weakness hit some more of RSI’s stops today. Sold PowerShares DB Commodity Index Tracking (DBC) & iShares S&P GSCI Commodity-Indexed Trust (GSG). That’s the problem of doubling up on two commodity funds. I doubled up my exposure to the sector and doubled my risk. Did this is my learning adventure?
Yesterday I failed to mention that during this drop, I have been monitoring RSI’s latest pick SPDR S&P MidCap 400 (MDY). It has been falling along with the rest of the markets. See chart below.
I will continue to monitor MDY until it looks like a bad bet and I’ll move on to another.
Stocks slide after euro falls to new 4-year low – Thoughts on the “Flash Crash” May 18, 2010
Posted by Marlowe Cassetti in Blogroll.add a comment
Investors uneasy about the news coming out of Europe Tuesday went back to selling stocks sharply lower. The falling euro and news that German regulators plan to limit some kinds of short selling fed the drop.
The Dow Jones industrial average closed down almost 115 points after giving up an early gain of 93. The Dow and broader indexes lost more than 1 percent.
The euro gave stocks a boost early in the day when European Union countries sent bailout money to Greece. The move raised confidence about Europe’s ability to prevent its debt crisis from spreading to other economies including the U.S. (market commentary & photo courtesy of AP)
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I have been spending some considerable effort pondering the effect of the recent May 6th Flash Crash and its effect on the RSI system. One of the strategies I’m testing is to simulate a modified stop loss method to replace the current RSI procedure. Unfortunately this is a large programming task that is taking longer that I first expected. Anyway, I have to complete this task and then test it. Only after testing the modified stops will I decide to modify the “operational system”. I will report on the results when available. Until then we will stay with the current system.
No new RSI picks today. Catch you later.
Dow recovers from 184-point drop to edge higher – Buy SPDR S&P MidCap 400 (MDY) May 17, 2010
Posted by Marlowe Cassetti in DOG, MDY.add a comment
Stocks had another wild day, but there was no big event, no surprise announcement behind the swings.
All that happened was that the euro, battered to a four-year low Monday before trading began in the U.S., started 
rising again. And the stock market followed the currency shared by 16 European nations.
Shortly after noon Eastern time, the Dow Jones industrials were down 184 points. It looked like they would add to the pile of triple-digit losses they’ve suffered over the past two weeks as investors worried that Europe’s economic problems would spread to the U.S.
But the euro, which seesawed after earlier falling to $1.2237, finally started its move higher — a bumpy move, but an upward one nonetheless. The Dow also ratcheted higher, finally ending with an almost six-point advance. (market commentary & photo courtesy of AP)
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In spite of the market recovery from a wild ride, the RSI portfolio showed all red today. Some of the positions are flirting with their stop loss levels, so we shall see what happens this week.
As I have expected, all this market volatility has triggered more RSI fund selections. Recently it was the short Dow DOG and today it is MDY. Very quixotic would you say. So here is RSI’s recommendation:
- Buy 88 shares SPDR S&P MidCap 400 (MDY); stop -$11.33 below entry and trailing stop initiated at +$18.89 above entry
MDY sports a volatility reading of 6.58% and has been bouncing around (as have many of its cohort indices).
I guess I understand why RSI picked this fund. I think it is because MDY is making a local pullback and recovery. I would wait into this move is confirmed.
Catch you later.
