Barron’s : March 7th , 2017
SP500 shows reversal signal at yesterday’s closing
Second such MACD reversal signal since US election , the first one (1st blue ellipse ) lead to market consolidation in the 2230-2280 range without major correction. I would set initial targets in the 50d MA 2280-2300 previous resistance zone . A move above recent 2400 top would negate current bearish sdignal (less likely scenario) .
Virt Portfolio :
Today’s action : Take profit on tactical positions on Health care tracker (XLV) (+/-12% profit in 3 months – chart shows triple top forming ) , ishares Nasdaq Biotech (IBB) (+/- 11% profit in 3 months ) and on Japan ETF ( +/- 15% profit in 4 moths – Nikkei strong resistance around 20000 level ) and so revert in a neutral positionning in the said sector/country allocations.
October 6th post : USD/JPY
October 10th post : EUR/USD
October 19th post : GBP/USD
October 25th post : Apple
November 7th post : SP500
November 17th post : NIKKEI
November 23rd post : GOLD
December 7th post : DAX
Virt.Portfolio : Closed Trades during Q4
Bristol Meyers Squibb stopped on Oct.10th – Loss 10%
USO (Oil tracker) closed on Oct.11th – Profit 6,5%
Apple closed on Oct.25th – Profit 20,43%
UBS Turbo Put NDX closed – Nov.2d & 3rd – Profit 41,83%
iShares Eurostoxx 600 Banks closed on Nov.28th – Profit 17,55%
ETf Dax Daily 2X closed on Dec 15th – Profit 18,40%
We had a limit on the iShares Nasdaq Biotech ETF (IBB) since Nov 9th post – « We are not going to chase the stock at such level but given the expected volatility to come we nevertheless adapt the limit to 265,50 . Why 265,50? The reason is that a gap will form at today’s opening compared to yesterday sclosing at 265 . Gaps are filled in around 80% of cases. »
Gap closed this week (See below chart) and order executed at USD 265,50 during Dec 7th session.
In the last 2 weeks booming global markets , we are losing some advance compared to our benchmark given our Precious metals ( Gold , Silver & GDX) « protection » positions and our 1/4 of PF cash level. Markets reaches extreme overbought situation but no clear sign yet of a reversal is to be seen. This positionning including Health care exposure – XLV + GILD – (Sector remains oversold) bought at chepa price should act as buffer when inevitable correction will come.
Virt Portfolio positions
Nikkei, thanks to a very weak JPY is the best performer this week. US small and mid caps including a majority of domestic companies not affected by a strong USD largely overperformed the rest of US markets since election. SP400 Mid Cap and Russell 2000 will probably continue to overperform SP500 in the next weeks . Russia and Brazil recovered this week after poor post election performance. Nasdaq stocks recovered most of heavy losses incurred in the days just after Trump was elected.
Italian referendum planned for December 4rd started to weigh on european stocks which did not profit at all from a weakening EURO ; Italy was down 3% , Dax and Eurostoxx50 were flat . There is a risk that populists voting concerns will continue to weigh on european stocks. Second worst performer was the Indian market (-2,70%) with government decision to demonetize high denomination bills persistently weighing on the local market. Conversely Indian bond markets is a big beneficiary of the move. Generally speaking EM including their currencies did poorly since the US election.
As shown on the weekly chart below, the Nikkei225 will probably break end of this week on the upside the 18 months down trendline resistance. This break has high probabilty to be significant as this TL had 5 touching points , 3 of them in the last month.
Japanese market held support on the 200 W MA in the after Trump election and has just crossed the 50 weeks MA. MACD is nicely up and crossed the 0 line recently. ADX (Second bottom chart) is showing positive signs as well : the black line indicating existence of a trend (if above 15-20 area) is reversing while the green one indicating positive trend is turning as well .
We keep – advise to buy for those who did not previously – in portfolio the iShares Currency Hedge Japan ETF (Ticker : HEWJ) that was bought in september (See Sept 21st post) . This tracker is a a currency hedgd one so a pure play on Nikkei performance and immune to JPY movements versus USD.
USD/JPY (103,90) … Bullish setup as 1 / the cross has taken out the downtrend channel that held since more than one year. 2/ Triple bottom around 100 level AND MACD bullish divergence. 3/ ADX (bottom chart) is showing up trend starting .
Upside potential looks high for the mid term BUT keep stops below 100 on weekly closing basis .
Note that JPY weakness is bullish for Japanese stocks – See in Virt Pf recent purchase of Japanese stocks exposure using Currency (ie JPY) hedged Etf : HEWJ.