Volatility is Increasing 6/12/13

Earlier I had posted that I saw a down signal on SPY and have withdrawn from the markets – closed my long positions. Yesterday I saw another down signal on SPY using my tested and tried slow changing system that is typically biased to the upside. Also notable is the down signal on the Advance – Decline line supporting the down signals on SPY, which is my proxy for the US markets. See charts below. My chart on volatility also shows an up signal indicating the Fear index is rising.

Needless to say, I see down signals on IIF, the India Fund, on EEM, Emerging markets, on TIP and TLT which are my proxy for the bond markets and in GLD which is the largest Gold ETF. Even the US dollar is back heading South. So one wonders, what if anything is going up?

Inverse funds are certainly rising. In addition I see UDN the inverse US dollar fund up. The Swiss Franc is looking strong, and that can be traded using FXY. I believe I will sit on the side lines for a while as I sit in a hotel room on business and hear about the Japanese markets dropping 5-6% tonight....

I am longer term bullish however. The US Shale oil production in North Dakota is going strong and we are heading to being the largest oil producer in the world. But for now, it is time to pause and let the retracement take place; without me in it… 

SPY – Has the Tune Changed? 6/5/13

I noticed a down signal tonight on SPY after market close. SPY is a proxy for the market. This means I will pull back and close out position in my 401K and R/IRA and wait till the market turns back around. A down signal does not predict how steep or how shallow a drop will occur. I am cautious and conservative, and I do not like to stand around waiting for a bounce to sell.

I have also noticed the sharp drops the real estate markets have recently taken – look at IYR or SPG. Same applies for JNK which represents Hi yield corporate bond funds. Bond funds have reeled and so has EEM Emerging markets. No shelter in GLD which I have written about earlier.

Let us watch and see how this shapes up. Meanwhile I will sit on the sidelines.

401K Monthly Analysis – How High Can We Go? 6/1/13

The market has shown incredible strength this year. The conservative rich may very well complain about the Government’s policies and hang right but they must be doing it smiling their way to the bank or whatever off shore accounts they have their tax-free money in. For the rest of us toiling people, we cannot help but what wonder when will the axe fall on the market? And what if we haven’t participated in these up times? Do we get in now? A soothsayer I am not. All I can call is the market tea leaves as they show today. I am also affected by the “nearness syndrome” which is what happened last Friday – a huge 200 point drop in the Dow.

Starting with the overall market charts we see that the market is still pointed up but  generated a short term sell signal (small arrow down on the chart below) while the primary signal remains Up. I would tackle this by taking some money off the table and not commit all my monies into the market. Don’t forget the old adage “Sell in May and go away”. I think you can come back in October. But this has been a strong year and I don’t think we are falling off a precipice. The Bond funds are looking weak and I have exited them all. When the market does signal down, I am not planning on hanging around; but that is for another day.

I synchronized all my folder funds with my employer’s current 401K funds. Over time they drop some and add others and I have been remiss in my updates so I did it this weekend. My top fund choice remains same as last month, WFA SPL MidCap VL with chart below. It has been breathing some rarified air as it has climbed and climbed while knocking down 52 week highs. Next choice is Fidelity Large Cap (chart attached) and then Fidelity Blue Chip growth as third. Behind these is the Royce Opportunity fund but I do not like to pick something that will charge me a redemption fee unless I stay in it for 90 days, so I won’t go there.

For my previous employer’s 401K the choices are Spartan Ext Mkt, Vanguard Explorer Admiral and Fidelity Low Priced Stock fund. Fidelity Growth comes in 4^th and all these are the preferred choices; but consider leaving some money in cash and one’s powder dry. 

Got a Nice TAN but not so good for GLD bugs 5/28/13

Last weekend was Race weekend. First the Indy 500, then Coca Cola 600 and June 1^st we will have the Detroit Grand Prix.. As I watch these guys and gals racing at 225 mph, I can’t help wonder what drives them to take the risks that they take? We are all built differently. Some of us are less risk takers than others. The stock market is a place where we have to take risks to make money. It is a gamble as all the technicals in the world will not guarantee what will happen the next day. Still in the long run it keeps you safer than no technicals.

So with that, I visit a few charts I have written about in the past and show you some that turned the right way and one that turned the wrong way. The good news is that with technical analysis, I did not linger in the failed one long.

Let us start with the ETF called TAN. I wrote about it on 5/17 and mentioned I had a position in it. Entry signal was when the minor signal is up along with the major signal also being up. That occurred on 5/13 at $22.00. Well, seeing the futures were up today, it was a good day to download half my position at $26.00. Profit of 18% in two weeks…
I got a nice TAN but it is quite volatile right now, so be careful if you are looking at it just now for entry.

Gold has been on a downswing for a long time. It is truly unfortunate for the gold bugs that refuse to use technical analysis as the ETF GLD has dropped almost 35-40% from its peak in the last several months. I am posting the chart on GLD. I am glad I was able to get an associate of mine out of his Gold position before some of the large drops.

Finally regarding Bond funds… I had an entry position in TLT and was wondering if TLT was perking up. Well that tune changed as you can see from the charts. I took a small loss and exited all my TLT position and have been out of bond funds based on the exit signals. Never know how long these down signals last. Today the bond funds again took a big hit. Best to stay on the sideline. When this tune changes, I will be back in; but not for now…

Time to Get some TAN? 05/17/13

Last week I traveled on business to Wisconsin, then Florida and Detroit before heading back home. I had two prototype runs happening in Florida. The first was considerably tough and is an innovation project I am working on with a major health care equipment manufacturer. After a successful end to the trial and on the way to the next one, I had a very nice dinner quietly by myself. After dinner I wanted a view of the sea. I hit it at a perfect time. The sun was setting. The beach had a few people there, all who came out to see the sunset. When was the last time I took time to see a sunset? Probably never. It was beautiful. The sun slowly dropped below the horizon. There were people sitting on chairs in the sand, enjoying the view. When the sun disappeared, everyone broke out into an impromptu clapping….It was wonderful. 

And what does any of this have to do with trading and investing? Is this the perfect time to get some TAN? TAN is a solar ETF (Exchange Traded Fund) consisting of stocks like FSLR (First Solar). If we look at the chart below, we can see the 50 day exp moving average (red line) slowly coming up to cross the 200 day exp moving average (the black line). That is a good sign. Also I see new higher highs being made after a long decline and consolidation. I purchased a position at the last minor buy signal.

This particular system that I am using has a major (bigger arrow) signal and also a minor (smaller arrow) signal. One safe way to trade it is take only positions when the major signal is up and also there is a minor buy signal. All the signals will not yield positive results; but the overall results are nicely positive if you just take buy signals in the direction of the trend. Time to get a TAN. 

Japan’s Currency War 5/12/13

One of my classmates from IIT was remarking about the high interest rates offered to Indians by their banks. I believe they get between 9 – 10% interest on their savings in Rupees. Question raised was can an ex-pat take his US dollars and convert to Indian currency to make more money than the rate of devaluation the Rupee sees over time against the US dollar? Needless to say, nothing is as simple as it looks, but it made me notice the quiet currency wars that are taking place.

You would hardly notice it on the streets; but there is a raging war going on. It has to do with currency manipulation to increase the health of countries. If China were to do it any further than what they already do, we would all take notice. But when it happens to our closest friend, Japan, we stay quiet and say nothing. Maybe even tacitly agree to the plan in some 5 nation summit. Agree quietly that helping one of the largest economies spur growth is good for the global economy.

What am I talking about? The controlled fall of the Japanese Yen. If you look at my chart on FXY you will see that it has dropped from its exit signal at $124.55 to $96.42 yesterday. That is a 22.5% drop in 7 months!! And don’t tell me that the chart looks like market random behavior! In fact it looks almost like Enron did at one time… Seems like Japan has taken a chapter out of Bernanke’s book.

So when are Japanese goods going to become cheaper and flood our markets? Too bad that the Japanese auto makers have all set up plants to manufacture cars in the US with US wages. Still, all the Japanese imported parts will be cheaper compared to local ones in the US. Japan is a country that thrives on exports. One exception will be its energy imports which just got a lot costlier. Free market we call all this… Hmmmm. 

And how can one profit from such sharp currency depreciation? Look at the chart on EWJ (Japan ETF).. lessons learned... a reverse of the chart from the Yen currency value!!!

401K Monthly Analysis – No Change 5/3/13

No change from last month’s 401K. 

SPY (S&P 500) remains pointed north and has overcome the price divergence against its indicator - the MACD.

When I look at my previous employer's 401K plan, the funds to be in are Vanguard Institutional Index and Vanguard Explorer Admiral and we are seeing Fidelity Div Intl and Real estate perking up as well.

With my current employer’s 401K, the strength goes to WFA SPL Midcap VL, Fidelity Growth Strategies, same as last month.

When is the “Sell in May and go away” going to kick in?

See attached charts... entry signals were back in Nov 2012 and we are still climbing!!!