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I am retired and live off my portfolio income and real estate rental income. I follow a simple investment strategy: (1) spend less than I earn; (2) use the savings to add more dividend paying stocks and rental properties to my portfolio. By doing this for many years, I've been able to grow my... More
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  • Goodbye Ruby Tuesday

    Who could hang a name on you?

    Mick Jagger's memorable question burns brightly today: the name is either "bull or bear", and nobody can hang it up on the equities markets at the moment. But at least from a quick technical point of view, a naming opportunity grows close.

    Let's start with oil - the price of which can (but does not always) point towards future economic conditions. Or just trading momentum that relates to nothing other than, well, trading momentum.  I have no idea. But what I do know is that the price of oil options hit their 200 day exponential moving average back in June, sold off with furious anger, and now are testing their 50 day exponential moving average as resistance. Upshot? None. It's not unusual for an asset, like oil, that is in the throws of a downturn, to bounce up to it's 200 day moving average, sniff it out as support, and then fall back. It's also not unusual for an asset, at the front end of a technical uptrend, to fail at it's first test of the 200 day average. No telling which situation is at play yet.  No name to be hung on this segment of the capital markets.  Thus, I am avoiding commodity linked asset categories at the moment. If the price of oil were to establish an upwards trend, I'd be looking at adding Latin American stocks and master limited partnerships to my portfolio, but at the moment, I'm holding off.

    My hunch? Oil goes up from here - not in a straight line, obviously, but over the next four or five years, yes, up. I believe the economy will recover, demand will increase, and supply will not keep pace. Moreover, I see inflation eventually creeping into the system, and with it, a demand for assets offering some protection against inflation. Commodities come to mind, and oil is an important one. I'd look forward to owning some oil and gas pipelines, which are churning out a tax-advantaged yeild of about 9% or 10%. But patience is in order.

    Equities markets are somewhat better positioned than oil, for sure. Vanguard's Total Market Viper (ticker symbol VTI) has observed it's 30 day EMA as support, and is now positioned to mount a second challenge of it's 200 day EMA - this time with far more bottom-up support than it had in early June. A decisive move above will go a long way towards confirming a new bull market in US equities - particularly if the 30 day EMA breaks above the 200 day EMA - and they are getting closer and closer.

    Upshot? The next 5% gain in the equities markets comes with enormous risk. A bearish reversal can certainly happen at any moment. Those who shorted VTI at the 200 day EMA a few weeks ago got rich. They will execute the same trade this time, until it starts costing them money. And they might force the market down. If they don't, they'll start buying VTI, and other equities, in droves. That's where the next 30% gain comes in, and that's far less risky than the 5% sitting on the table right now. If you are into preserving capital, then I think it's better to buy too late and sell too soon. That's my plan.

    Things are even niftier abroad. The total world ex-US equities index etf (ticker GWL) is above the 200 day EMA, and the 30 day EMA is soon to cross above the 200 day EMA. This will be a fun thing to invest in, but again, I'd rather be a few days "late" getting in.

    The story with the simple moving average is, well, far more simple. Take GWl. The 30 and 65 day simple moving average has crossed above the 200 day simple moving average, and GWL is trading above the 30 day simple average as of today. Bull market, pure and simple. Same is true of VTI. Very simple story. I expect the exponential moving averages to follow suit in due course, but again, patience is a virtue. For oil, the simple moving averages are a bit more tricky. The 65  day moving average is right smack on the 200 day simple moving average. Give it a little nudge higher, and you've got yourself a bull market there.

    The preponderance of evidence suggests a bull market in commodities and equities is at hand. There are a few more pieces in the puzzle that would confirm it, and these pieces are not unimportant. So it's still too soon to name this market. By the end of the week, it may not be.

     

     

     

    Jun 30 9:44 AM | Link | Comment!
  • What a Difference a Weekend Makes

    Markets may close for the weekend, moving averages, however, do not. As it currently stands, the 65 day simple moving average has now crossed above the longer term 200 day simple moving average on most major equities indexes on Earth - including the S&P 500.  This represents short term bullish engulfment of longer term bearish momentum, signifying a potential start to a new upwards trend in equities over the longer term.  In addition, today, it appears that the 30 day exponential moving average, which tracks very short term momentum and which places greater emphasis on recent trades, is acting as trading support on most broad equities ETFs as well. Another bullish development.  There are only a couple of shoes left to drop. It would be constructive to see the 30 day exponential moving average cross above the 200 day exponential moving average on US equities indexes - something we have seen in certain non-US equities markets. Finally, it will be constructive to watch volume and breadth on any up days (like today) in the equities markets. Generally, when long term trends shift, they do so on heavy volume and with 9 to 1 breadth, signifying a vast tourching of short positions and a strong degree of conviction on the part of bullish investors.

    Assuming these technical developments do, in fact, transpire over the near term, the next issue will be how investable the markets are apt to be over the longer term. Will the ensuing long term trend last six months, or several years? And how robustly will the equities markets perform? At this stage, these questions may be somewhat premature - markets could easily sell off and revisit the March lows at this point, although becoming less likely to do so. Hopefully, this will be the subject of my next posting - assuming this week continues to go as well as it has started.

    Jun 29 1:32 PM | Link | Comment!
  • Post Fed Lift?

    Hmmm. The day is young, but the story is getting old. In an interesting confluence of technical developments, the S&P 500 sits almost precisely now at its 50 day exponential moving average, and its 200 day simple moving average, having recently violated these areas as technical support. As one would expect, upon striking above these areas early in the day, the index showed a modest bounce this morning, suggest these areas may be technical trading support. Those gains have moderated somewhat, but as of three PM are holding by a thread. Unlike the Dow Jones Industrial Average, which has staged a remarkable intraday turn for the worst - some would call it "bearish engulfment".

    The question now is whether the Dow Jones will act as a great stone around the neck of the markets. If so, the S&P 500 will be unlikely to hold support, which would bode ill for the intermediate term.

    A quick peek at MACD shows a distinct move against the baseline, which signifies that momentum to the downside is picking up fast, right as the markets hang on tight to technical support. That raises the potential for a sharp break to the downside, which, should it come to pass, would confirm the bearish case.

    Meanwhile, equities abroad have held up rather well from a technical perspective, and in many regions remain in strong bull markets. Whether the US markets will drag everything down with them remains to be seen. Thus far, betting on "decoupling" has proven disasterous, but perhaps things will be different this time around. I wouldn't count on it, though. Based on recent history, the US would likely act as the great stone around the neck of equities worldwide - a pattern we have seen only too often over the past two years.

    Technical trends are not established in a day, but often over a longer time frame. In a sense, what happens today is not determinative, but cummulative, evidence, of the nature of where the equities markets stand.  Thus far, where the evidence is accumulating is not favorable to the bull's case.

     

    Jun 24 3:11 PM | Link | Comment!
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