Jeff Diercks'  Instablog

Jeff Diercks
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Jeff Diercks, is an investapreneur and recovering CPA. He actively trades his own money and manages the assets of a select group of clients at InTrust Advisors, a Tampa, Florida based wealth management firm focused on trend following and price momentum strategies utilizing ETF securities. Mr.... More
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  • Country ETFs Look Very Extended 0 comments
    Sep 15, 2009 1:21 PM | about stocks: EWO, RSX, TUR, EWK, EZA

    At InTrust, we are trend followers and there is no doubt the trend in all equity markets is still up, especially the international markets which have benefited from a falling dollar in addition to a up move in worldwide equity markets.  However, I think we may be different than the average trend follower who waits for the trend to reverse and then blindly follows his/her signals and moves out of the position; we are nervous trend followers.

    Because of this rather annoying trait, we are constantly looking at the tea leaves for signs that a reversal may be imminent in one of the positions we follow or invest.  Over the years, we have learned the hard way that the trend can remain intact, but the position or market become short-term overbought.  This is what we are seeing now in many markets, especially the foreign equity markets.

    Our research has shown that when an equity moves 5% or more above its 25 day moving average there is a 70%+ probability it will revert to its mean shortly thereafter.  In fact, this can be quite a profitable trade for very short-term traders.  Well, we are now there with many of our country ETF positions and our models are flashing short-term caution.

    Of our top ten rated positions by long-term and short-term price momentum, only Turkey and India are still rated "neutral."  If you are thinking about putting on new country ETF positions, it may behoove you to wait for the inevitable pullback in these names.

    Stocks: EWO, RSX, TUR, EWK, EZA
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