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CFA member. In this blog I put my thoughts. Work in an Italian bank in a strategist position (forex and commodities), but my true passion is the stock market.
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Asset allocation models for private & institutions
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  • Buy List And Market Signals

    After a new record on May, last week markets corrected driven by Fed's minute, some Fed member words and Japan bond market/China Pmi news

    The daily chart of S&P500 shows that market was quite overbought and last 3 days can be seen as a normal "take a breath" moment.

    I placed the blue arrows in the previous small correction of last months: all of them stopped a little above the lower Keltner channel bands, that at the moment is just above 1600.

    The OBV is in an healthy uptrend and confirm that market is strong at the moment.

    A warning signals come from the number of correction: this is the fourth one, and typically after the first three, the fourth could be deeper and less safe as entry point.

    According Merrill Lynch, Institutional are quite overweight Japan and US equity, underweight EM and Europe. Hedge fund have a leverage level at the highest since 2007.

    (click to enlarge)SPX daily

    If we have a look at the weekly chart, situation is less rosy. Market is still extremely overbought and showed a bad reversal weekly candle.

    Volume situation is still rosy and this let think that the correction will be bought, but could be deeper than daily chart assumption. I place in the blue circle previous reversal candles. In those events, the correction drove markets to the lower bands (around 1500 today).

    What do we do? Watching chart, the actual situation seems like in beginning of 2011. The correction could drive market until the mid-band of Keltner channel, now around 1560.

    (click to enlarge)SPX weekly

    Because of this charts, I'll wait a bit before buying.

    Don't know if the market will correct or just will go sideway for few weeks (in that case would be the middle of the channel that would reach the index), but a kind of consolidation is needed.

    By the way the market is in long term uptrend until:

    S&P500 > 1425

    DJ30 > 13385

    NASDAQ COMP > 3030

    NIKKEY 100> 10.740

    ESTOXX 50 > 2575


    These are the ETF (non only equity) I have under radar for future purchases. I could buy them in more phases when they reach support level

    Global X Superdividend ETF (NYSEARCA:SDIV)

    Powershares DWA EM technical leader (NYSEARCA:PIE)

    Guggheneim multiasset income (NYSEARCA:CVY)

    SPDR Income asset allocation (NYSEARCA:INKM)

    SPDR DJ International real estate (NYSEARCA:RWX)

    I like these Etf for Income and capital appreciation

    Sectors I like are Energy, Semiconductors, Financials (but wait lower prices on these sectors). Could buy healthcare for short term.

    Bond Etf I like are:

    Pimco 0-5y high yield (NYSEARCA:HYS)

    Pimco Total return (NYSEARCA:BOND)

    Powershares loan seniors bond (NYSEARCA:BKLN)

    I have them and could buy more now.

    If price will correct more, I'll purchase EMB, JNK, SJNK and AGG and switching out from HYS

    Disclosure: I am long BKLN, HYS, BOND.

    May 25 5:16 AM | Link | Comment!
  • Sell In May Or Not?

    May is near, will "Sell in May and go away" be right in 2013?

    So far, Us indexes were stronger than I thought driven by Fed liquidity and dividends/buyback cash. But now? what to expect for the next month?

    this is the situation on markets


    US and Japan indexes are the strongest at the moment, while general Emerging Market and Europe are weak, especially EM. The German Dax is weakening and could drop in May. Eurostoxx is going sideway in this 2013 and a double top is looming.

    Even if US indexes are overperforming, we recently had many distributional days and market now are in correction mode. Breadth show a new weakness in play and is in short signal again. S&P500 is still above the important support 1540: until this level holds, short term trend is up. A break below could lead to a loss of almost 100points and this could happen next month.

    (click to enlarge)S&P500


    Are the weakest play in the game. Gold crashed recently and now the technical picture deteriorated (trend still up but it may need months to regain investor's trust). Crude Oil continue to slide, copper is at lowest since more than 1y and half. Basically commodities are not benefiting from the liquidity (Fed and BoJ) and signals an underlying weakness in global economy (in Emerging Markets too).

    (click to enlarge)GLD


    euro/$ is stuck around 1,30l level and for the next months this will be the "kernel" , with a chance to swing from 1,25 to 1,35.

    Yen was sold after Kuroda's (BoJ) new measures. It could continue to be weak this year, but in May could appreciate fast if US Indexes drop fast. It's again the carry trade currency.


    Investors continued to seek for yield, going to catch high yield bonds and bank loans. They started to buy long term gov/corp bonds after BoJ decision trying to anticipate Japan purchases.

    (click to enlarge)Long term corporate bonds


    Cross market behavior shows that the huge liquidity from central bank isn't going to real economy. Commodities are weak and the same is happening in emerging markets. Europe is still in trouble and last GDP projection shows the German economy is weakening. Southern European countries are still in recession and won't end it until end of year (at the best!).

    US and Japan are bought now, but recently signals of market distributions have appeared. Support are still holding therefore the market could regain strength again. Recent US macroeconomic data were below consensus and show the risk of the "Spring slump".

    At the moment US stock market is in correction/distribution model and I'm not going to buy new stocks. If a follow through day with volumes will come, I'll be glad to buy in May, but at the seems a month to sell...again!

    (and if this will be a buy opportunity)

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Tags: SPY, VCLT, EEM, DJP
    Apr 20 3:07 AM | Link | 1 Comment
  • Gold Sell Off - Distribution Days On Stock Indexes

    This is the first post of 2013. I started new things this year in the weekend and free time isn't a lot.

    I make an update with my view on the actual situation:

    -Gold (NYSEARCA:GLD)- It wasn't a good trade as I supposed. Luckily I was able to exit the trade without big pain because I closed it in Early January few days after FOMC December minute. It's a pity because it was acting well after my purchase and was on the street towards 165-170 easily. Recently fund selling (Soros, Pimco and others) added further weakness and fear among investors. Have a look at area 150 that is a good level to play a short term trade; or eventually to go long for a longer time frame, but I'd add a out-of-the money put.

    (click to enlarge)GLD weekly charts

    Stocks- they were stronger than I supposed in the US. Especially in February while Emerging Markets and Europe dropped.

    In the last few days US Indexes showed some weakness with two distributions days. Many leader stocks and Etf lost momentum and trigger take profit levels. Now we have to monitor if "purchasers on the dip" appear in the next 1-2 weeks. Friday volume were light and looked as a dead cat bounce. Major Fibonacci retracements are much lower, be aware of it.

    (click to enlarge)S&P500 daily

    Sell signal appeared on Bullish percent. I would avoid buying on dips until bullish % doesn't improve much. Over next days we could have a situation like in October (that was a distribution period). I could sell some call spread (short ATM call on SPY, long OTM call with same expiration)

    (click to enlarge)Bullish Percent

    BOND - Long term Treasury are falling (yields rising) and driving down Emerging Bond too in 2013. High Yield showed weakness only in February. Treasury are the weakest with yields rising since December.

    Signals of consolidation appeared recently and bonds could return in favor if stocks will drop toward Fibonacci levels

    (click to enlarge)TLT

    CURRENCY - Dollar showed strength recently and is near resistance at the moment. A further sell off on Stocks is likely only when dollar will strength further towards 23

    (click to enlarge)UUP

    SUMMARY: signal of weakness in Stocks appeared this weak. It doesn't mean that stock will fall instantly, a week or 2 of distribution could materialize. I'd take profit on stock positions (or hedge them) now.

    Fibonacci retracement are much lower on S&P500.

    Gold could be a good tactical buy at 150 (GLD).

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Feb 23 6:25 AM | Link | 1 Comment
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