Mexico … Time to buy ! – Virt Portfolio

 

Mexican Peso :   The Mexican Peso has lost around 18% against USD since the day before Donald Trump’s election  and  38% since 2014  . This latter numbers might look huge but it has to be put into perspective considering that currencies like EURO, GBP and NOK,..  have respectively lost 24%, 29% and 28% against the Dollar in the same period. In the last 3 years, the Peso has suffered like most other currencies from general USD strength and on top of that was slaughterted by the so-called “Trump”effect especially when in Q2 2016  odds to see Trump as the Republican candidate for the US election started to increase . Even tough the Trump administration might dramatically hurt mexican economy, MXN recent weeks acceleration to the downside (Up for USD) is clearly an exxageration. Do not forget that as The Economist pointed 2 weeks ago,  40% of inputs in goods sold from Mexico to US comes .. from USA !! If Trump wants to punish Mexico, America itself will be hurt.

Technically,  MXN has reached last week the upper side of its 1 year range and being in overbought position it looks difficult to see the 22 level broken at this stage. The trend is slowly reversing as shown by the macd curve and bearish (for USD) divergences do appear between price and momentum indicators (here macd).

There is room for correction here in favour of the peso given that “Trump” effect will likely fade and that USD has entered a consolidation (nice word to say weakness) period .

Short term MXN bonds can be found with 5 to 7% yields in very good names . For example a Rabobank  maturing in Jan 2018 has a approximate 6% Yield , a 3 years EIB with 7% yield .

 

Mexican Stocks :  The mexican stocks valued in USD as shown by the Ishares Mexico here below (ticker EWW) have lost 20% since November 8th ( by the way Russian stocks have GAINED the same percentage) . Stocks like the currency seem to have bottomed from an range (USD 39 -USD 42 – see long term chart link below ) that acted as strong support in the last 10 years . Like for the MXN I add MACD reversal and price/ momentum divergence as technical evidences of a potential rebound .

Action : Buy 1 unit of EWW Max price 43.25 USD // SL : usual 10% closing basis .

 

Long term EWW chart :    http://schrts.co/ZY8wGG

 

Virtual Portfolio Update – January 20th 2017 – Portfolio + 15,08% – YTD + 1,04%

 

All principal DM indices are flat or down on the week : SMI -2,09%, FTSE100 -1,90%, CAC40 -1,46%, Eurostoxx 50 -0,80%, Nikkei -0,77%, Nasdaq -0,34%, SP500 -0,15% & DAX +0,01%. The best performers are EM with Turkey +1,89%, Brazil +1,37% & Shanghai +0,33%.

Markets are in a low volatility/consolidation period since more than one month and a break out of recent ranges (see last post for SP500 specifically) will define next direction .

 

Trump’s inauguration : A trigger for SP500 ? Watch a close > 2275 for upside and < 2134 for downside.

 

+4,60 % is  SP500 performance since November 9th with financials and cyclicals as star performers …

 

…the major part of the up move was concentrated in the first 5 weeks till mid december . As one can see below, since then the market as a whole is flat (+0,07%)  and has consolidated between 2140 and 2175.

 

 

After a consolidation comes a substantial move up or down . Given following current technicals – 1/ Resistance and no closing above 2275.  2/ bearish divergences RSI and MACD versus price.         3/ Current level is very near the 9 months upward trend 4/ contrarian high bullish sentiment –  my favoured scenario is a trigger (if close below 2135) on the downside with targets in the 2125 -2175 area. Any close above 2275 would be more positive for a test of 2310-15 . So 5 to 6% potential for the downside versus 2% on the upside.

The less likely scenario of a sustained (more than 1 or 2 days ) move above 2320 would be very bullish.

 

Gold at USD 1215 .. back above USD 1200 … bullish !

 

On November 23rd (Link here below) I wrote : “USD 1200 support gives away and if prices does not go back quickly above this level/stabilizes at current level (USD1190) more pressure on the downside to USD 1150 – 1100 range  might be expected.”

http://www.investorid.one/2016/11/23/gold-breaks-the-important-usd-1200-support/

Since then Gold prices bottomed at  USD 1122 and nicely reversed , crossed the 50D MA and  re-broke the key 1200 level . More potential does exist from here as long as price does not go back quickly below the USd 1200 mentionned level .

Daily Gold chart :   http://schrts.co/bE3Qi0

 

Virt. Portfolio Update / Techs Stocks rally exhausting

 

Techs stocks (here Nasdaq 100) have been very strong since December 31st catching up poor performance in the aftermath of US election. The rally is tiring with recent decreasing volumes (Red lines) . NDX100 slowly reaches the 70 overbought RSI level and the upper part of an up trendline traced since early 2016 (Blue line ). After having seen on the US markets a “Buy the News” after Donald Trump election , we might see a “Sell the Fact” as we approach the inauguration.

The tactical hedge (on SP500) currently represents 1% of portfolio (0.2 Units).

Action : Buy another 1% (0.2 units ) of hedge via the CITI Turbo PUT Nasdaq100 KO strike 5179 (ISIN : DE000CX63TM6) at current price of 1.29 EUR (17/1 – 13:30 CEST)

 

Virtual Portfolio Update – January 13th 2017 – Portfolio + 15,40% – YTD + 1,32%

 

Nasdaq hit all times high this week . Generally speaking , most assets/indices/..  who overperformed in the last weeks of 2016 are consolidating or underperforming since 31/12 : Industrials, energy and financials sectors in US, US small and mid caps , Eurostoxx50 , Utilities in Europe , USD, China . On the contrary those who underperformed in November, December tend to overperform so far in 2017 : Technology , Health care (in US), Emerging markets with Brazil , Turkey (In TRY only) and India amongst the best performers, EURO, precious metals and  US treasuries .

 

EUR/USD : Triple Bottom ?

 

Technicals : A EURO triple bottom on a 2 years period is taking shape in the 1.0350 -1.05 area ; in the last 4 weeks this area has been tested 4 times with NO success (green ellipse on weekly chart). On daily chart trend slowly reversed to positive since december and bullish momentum/price do appear (blue lines on daily chart).

The USD post election rally seems to fade , not only against EUR : The USD/JPY is at 114.50 after having hit 118.50 recently. With US inflation and expectations picking up USD real  rates are being pushed further into negative territory.  Relatively speaking European economic data have improved quite strongly recently with continuous job market improving, increased industrial production and better PMI’s. Headline inflation having turned in Europe could trigger the ECB to (start to ) reverse its QE policy, a major factor of last 2 years EURO weakness. On top of that lots of negatives on potential outcomes in Netherlands and France elections seem to have been priced already in the common currency.

EUR/USD outlook starts to improve and the 1.0450-1.0600 might be a good level to buy EUR in USD portfolios / hedge USD in non USD portfolios. i believe one can refocus on targets in the 1.10-1.13 area especially should the 1.0650 50days MA be broken.

A weekly close below 1.0350-1.0300 would retarget the parity (less likely scenario at this stage) .

 

EURUSD 2 Years Weekly Chart

EURUSD 6 months Daily Chart

Virtual Portfolio Update – January 11th 2017 – Portfolio + 15,83% – YTD + 1,70%

 

The Portfolio is up 15,83% since inception nearly 1 year ago and up 1,70% Year To Date.

The average performance of positions we hold (out of the hedge which is 1% of Portfolio) since 31/12 are up 2,90% so the 25% cash we hold as ammunition in case of market correction is clearly weighing on performance.

The Oil tracker bought in December was stopped at USD 11,07 yesterday evening – Loss 4,73%. WTI Oil is back below the often mentionned very important Resistance/Support level of USD 52,50 : Technical picture is weak again with daily trend showing more downside and bearish weekly chart. Price might revisit bottom of last 9 months trend in the USD 45-46. More positive could be expected if prices reverses back to above USD 52,50. Oil markets fundamentals, oil producers intents and divergent effective real actions do not help to have a clear vision on what happens next.

Take profits levels have been added for EasyJet and The Biotech tracker.