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Dr. Kris has two degrees from MIT because one just wasn't enough. Her life goal was to figure out the universe and having done that (at least to her satisfaction), she decided to tackle something even more difficult—the stock market. Applying the scientific method along with an insatiably... More
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  • Market Notes Investors Nuts For Brazil, Retail, Steel, Dollars -- August 26

    It was touch and go for the S&P 500 (SPX) going into the close: Would it or wouldn't it close above the 2000 mark? As the bell on the NYSE rung, the SPX was just shy of the mark, but after the final trades were tallied, it managed to push above it, marking an important event (in the psychological sense).

    Earlier, it wasn't clear if it could actually make it above 2000. Sure, the rest of the major averages were advancing with the one exception of the Dow Transports (DTX). Out of all of them, this one is the most important as it is considered to be the leader in market direction. If you look at its chart for the past six days, it's been trading in a very tight range while the other major averages were advancing. Now this can be viewed in both a bullish and bearish light.

    On the bullish side, the argument can be that the DTX is digesting gains before making its next push higher. On the bearish side, it could be the signal that it's about to poop out. Market internals aren't much help in swaying the argument to one side or the other except for perhaps one thing: VIX volatility, as measured by the $VVIX, has been moving sideways while the VIX has been declining. Under normal conditions, they should be moving in concert with each other and this situation represents a divergence. Whenever there's a divergence, a change in direction is typically (but not always) indicated.

    Market direction aside, investors are still finding new places to park their money. Here's a quick and dirty run-down of some of the more notable market action:
    1. Retail: Today, the Retail etf (NYSEARCA:XRT) broke out of a nine month base. Helping to push the industry group up to a new yearly high were retailers Abercrombie & Fitch (ANF, $46) and Cato (CATO, $36), and apparel maker G-III (GIII, $84) which all broke out to new highs themselves. Personally, I've never been a big fan of retail and Abercrombie in particular, but I must say that its chart looks particularly strong.
    2. Brazil: Brazilian stocks took a huge hit earlier this year but they've come roaring back with a vengeance. The Brazil etf (BRF, $51.98) is testing major resistance at $52. A break above that could propel it to its next area of congestion in the $54-$56 range. If it can move above that, it will likely make a run for its previous high at $70. Going along for the ride are two Brazilian banks: Banco de Brasil (BDORY, $14) and Banco Bradesco (BBD, $17). Both broke out to new highs, both sport small dividends (under 1% yields), and both have very low valuations (P/E's around 6).
    3. Steel Producers: Steel has been going strong for some time now. The Steel etf (SLX, $50)took a break at the end of July but has been advancing steadily since. It rose above the $50 mark today and is close to retesting its previous high near $50.50. A move above that would be a green flag for the industry. Stocks that continue to outperform in this area include AK Steel (AKS, $11.19) and US Steel (X, $39.49). US Steel was mentioned in our *Blue Plate Specials* Subscriber Notes on 8/5 as a potential long play and is up over 13% since.
    4. US dollar: The US dollar is on a roll while foreign currencies tumble. Mentioned to Subscribers on 7/30 was a long dollar/short euro pairs trade for Forex traders. This was based on a breakout in the dollar and a concomitant breakdown in the euro. Since then, the trade has done very well and today's move in the US dollar etn (NYSEARCA:UUP) above $22 followed by a slide in theEuro etn (NYSEARCA:FXE) below $130 is indicating that this trade is still hot.

    Aug 26 5:26 PM | Link | Comment!
  • Market Notes: Market Firing On All Cylinders...or Is It?

    The market seemed to be firing on all cylinders as the threat of tensions in the Ukraine fades, but is today's rally just a cover-up before the next sell-off? Let's take a closer look at the technicals.

    Supporting the bulls' case, we have the following:
    1. The Dow Transports were the clear leader of today's rally with four airlines breaking out to new highs: Jet Blue (JBLU, $12), Southwest Air (LUV, $31), Spirit Air (SAVE, $72), and Allegiant Travel (ALGT, $127).
    2. Tech also led with the following tech etfs hopping over resistance: Tech (XLK, $40), Internet (PNQI, $70) & (FDN, $61),and IT (VGT, $100). The tech rally helped push the tech-heavy Nasdaq to a 14 year high.
    3. The VIX fell and closed the day near 12--a very bullish level.

    The case for the bears can be made by looking at more esoteric indicators:
    1. Despite today's drop in the VIX, the volatility of the VIX--the VVIX--did not drop as much as it should have.
    2. Considering today's level of bullishness, the VWAPs did not reflect that. The positive VWAPs (an indication of buying pressure) ended the day with a very tepid median value in the mid-50's while the negative VWAPs (an indication of selling pressure) ended the day with a median value near -100 which is quite bearish.
    3. The chart of the SPX is diverging from the chart of the ratio of the Consumer Discretionary/Consumer Staples. The only times since 2007 that this has occurred was right before market corrections.

    So, there you have it. Will the bulls win the end-of-summer race or will it be the bears?

    Aug 18 4:45 PM | Link | Comment!
  • Market Notes: China Rocks/Building Stocks On The Rocks -- July 28

    Last week's sell-off extended into today's morning session but abruptly turned around when the bulls came charging back. While most of the major averages were able to climb back into the green, the inertia on the Dow Transports appeared to be too much for the bulls to overcome. This is not a good sign and today's rally could be just a one-day event. While the market internals aren't bearish, they're not very bullish, either. Maybe the dog days of summer are upon us...

    Stepping up: China, Africa jump to new highs
    Chinese etfs have been soaring recently and today both the iShares China Large-cap etf (FXI, $41; Yield = 1.7%) and the SPDR China etf (GXC, $82; Yield = 1.8%) both broke out to new highs on heavier than normal volume. In fact, there isn't one long-based Chinese etf that hasn't been going nuts. I don't know when the honeymoon will end but it sure doesn't appear to be anytime soon. For those of you who are in either of the above-mentioned funds, please note the next levels of major resistance: $85 for GXC and $42 for FXI.

    Emerging markets have also been out-performing and today two Africa funds broke out to new highs: Market Vectors Africa fund (AFK, $34; Yield = 2.4%) and iShares S. Africa fund (EZA, $72; Yield = 2.2%). Both of these charts are quite bullish and many Wall Street pundits are saying that Africa is the place to be.

    Falling down: Building stocks continue to tumble
    If you had been paying attention to building and construction stocks, you wouldn't have been shocked to hear that pending home sales were down much more than expected for the month of June, as reported early this morning. The following stocks have been in free-fall for months and continue to slide to new yearly lows:
    1. Window & door maker PGT (PGTI, $7.39)
    2. Gypsum wallboard maker Continental Bldg (CBPX, $12.58)
    3. Siding & fencing maker Ply-gem (PGEM, $8.84)
    4. Modular carpet maker Interface (TILE, $16.07)

    Today's break-down in the Home Builder etf (NYSEARCA:XHB) indicates further downside for this industry group.

    Jul 28 5:40 PM | Link | Comment!
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