Charts Of The Day
I … The chart of the Base Metals DBB, Oil, USO, Basic Material Stocks, XLB, Emerging markets, EEM, the BRICs, BIK and the Russell 2000, IWM, from June 18, 20101 to July 22, 2010, relates how rising base metals have sustained the emerging markets and BRICs, at a time when the US small cap companies, IWM were being decapitalized by debt deflation caused by the failure of banking shares, KBE.
II … The chart of the Proshares 200% inverse of base metals, BOM, shows four days of awesome losses communicating that there has been a carry trade rally into base metals, DBB, which has caused the basic material stocks and the emerging market shares like Brazil, EWZ to soar. One agent of the carry trade rally is the Brazilian Real, BZF, which is now trading back up to its April 26, 2010 high.
III … The Euro Yen carry trade took Spain, EWP, and the European shares, FEZ, higher. The chart of the day is that of the euro yen carry trade taking stocks higher.
Stocks Gained on a carry trade in the Brazilian Real …. and on a carry trade rally in the Euro on expectation that the European Banks will do well in their stress tests.
FEZ 4.5% Europe
EUFN 4.6% European Financials
EWP 4.9% Spain; this is the dog of Europe and of the stock market. It has been rising on expectations that the European Financial institutions will pass their stress tests. The market is likely to fall tomorrow or Monday, rewarding those who are short Spain.
EWD 3.9% Sweden has returned near its April 26, 2010 level
IGN 3.9% Networking shares should be in every institutional short sellers portfolio as when these move down, they move rapidly down, rewarding those who are short.
IYT 3.8% Transportation shares
GUR 3.7% Developing Europe
IYR 3.6% Real estate
KBE 3.6% Banks
EEM 3.0% Emerging markets
FXI 2.8% China rose on higher base metal prices
BIK 2.8% BRICs
TUR 2.9% Turkey has returned near its April 26, 2010 high
EWS 2.3% Singapore is near its April 26, 2010 high
SMH 3.1% Semiconductors has risen to strong resistance
XLI 3.1% Industrials
Solar stocks, TAN, rose 4.0% ; these should be added to the institutional short sellers portfolio as these were recently the worst performing stocks on the market; when these fall again they will reward those who are short.
EWM 1.0% Malasia is at April 26, 2010 high; this moves violently down and therefore should be in every institutional short sellers portfolio
IWM … 3.5% Gains in the Russell 2000 were muted by a falling US Dollar, $USD. Resistance levels are up at 63.58, 64.00, 64.25 … Chart of IWM
EWL Switzerland shares have not risen in comparison to its currency which has been a carry trade darling.
In contrast with the US Small Caps, IWM, debt deflation has not come to the Brazilian Small Caps, BRF, which rose 2.9%; these have been helped by the Brazilian Real, BZF. The Brazil small caps have exceeded their April 26, high; they have been an out performer. The chart of the ProShares 200% inverse of the Brazil shares, BZQ having bottomed out, suggests that this is an appropriate time for institutional investors to invest in BZQ.
The chart of the Proshares 200% inverse of the Nasdaq Biotechnology shares, BIS, suggests that this is an appropriate time for institutional investors to enter this consistent bear market investment.
The chart of the ProShares 200% inverse of the European Shares, EPV, suggests that this is an appropriate time for institutional investors to short the European shares based upon the assumption that the run in the Euro, FXE, is near its end, and that the rally in the European shares will end tomorrow, July 23, 2010, when the results of the European Bank stress tests are released.
My investment maxim is in a bull market be a bull, and in a bear market be a bear. Thus in a bull market one buys on dips; and in a bear market one sells into rallies. On April 26, 2010, the world entered into a debt deflation bear market on fears over the European sovereign debt crisis; and on June 18, 2010, the world entered into global competitive currency deflation, as the US dollar, $USD, fell under $86 causing the Russell 2000, IWM, to fall below 66. These financially sensitive shares have experienced deflation, only to rally recently, being brought up in sympathy with the European Financial shares, EUFN. Therefore according to the maxim of selling into rallies in a bear market, I suggest that the institutional investor invest in the Direxion 300% inverse of the Russell 2000, IWM, with TZA.
The chart of Australia, EWA, shows the destruction which comes from a number of sources: currency traders going long the Swiss Franc and short the Australian dollar, a proposed natural resource tax, and banks under stress.
The chart of Japan, EWJ shows what happens to a productive country when the leaders decide to lend to carry trade investors at 0.25% forcing its citizens to invest in gold and its pension funds and banks to invest in Japanese Government Bonds. Carry traders creating a demand for Yen, FXY, have unsettled the banking shares resulting in an ongoing destruction of the small cap value stocks, RZV, and the Russell 2000, IWM.
Commodities Gained On Carry Trade Investment
Most Currencies Gained And The US Dollar Fell
BZF 0.9% The Brazilian Real has returned to its April 26, 2010 high
SZR 1.0% The South African Rand is near its April 26, 2010 high
FXF 0.7% The Swiss Franc has exceeded its April 26, 2010 high; it has been the basis of the “long part” of many carry trades such as the Swiss Franc long and the Australian Dollar Short; that is FXF:FXA
$USD -0.9% to close at 82.62.
The End Of Credit And The End Of Demand For US Sovereign Debt Is Coming Soon
Disclosure: I am invested in gold coins