Check out this link to a document that defines the most common option strategies, including Naked Calls and Puts, Butterfly Spreads, and Condor Spreads. It's a table that tells you the position to set up and standard margin fees. (NOTE: Most brokers will require application to a special class that allows certain types of option trades; check with your broker for their requirements.)
http://spreadsheets.google.com/ccc?key=0Alepi4WyE4K_dFR3Y2Voa0hIdUxnYklZalRmQUNFdmc&hl=en
Sunday, January 17, 2010
Saturday, June 20, 2009
Wednesday, June 10, 2009
Should You Be Buying Banks Right Now?
I finished up my article early this afternoon for this week's Tycoon Report and within minutes I got a request from the editor for a different article. Since I had an audition (for PETER PAN, for those of you interested), I didn't have time to attack it and, as it turns out, they went with my original article anyway. But they whet my appetite with the darn title question, above, so I came home and got sidetracked from more important things (like cleaning the house for my guests for tomorrow night, since I'll be working tomorrow day).
Lucky you.
Anyway, here are my thoughts.
Above is the list of Sector Hunter alerts for the Banks sector, the most recent being the March 19th 30% alert.
Now in the past I've cautioned against the 30% alerts, since the market has been too extreme. I liked playing the 70% sell signals, and many of you have made great money with the 10% buy signals (I know because you've told me -- by the way, feel free to leave a comment or a question at this post at any time, like Nathan did under "Tools for the Sector Hunter"; check it out -- thanks, Nathan!).
What's interesting here is that the sector has been on a Relative Strength Sell Signal since the July 14, 2008, alert at the bottom of the list above, and there was a Rotation Alert Issued on March 4th, when the 10% Buy Signal came out. However, the sector's relative strength did not shift to a Buy Signal. In fact, a Relative Strength Sell Signal alert came out the very same day, which cautions us to treat the position as a trade.
If you'd bought then, you'd have done well. Here's the Banks BPI as of today:
We can see that, if you'd missed the 10% signal and played the 30% signal, you'd still have made some money. (Caveat: The alternative securities in the 10% and 30% alerts were different, except for two ETFs.) I've highlighted the bottom support level and the resistance levels. Notice that the current 58% reading is at the last point of resistance. (The next resistance level is around 66%, from Aug 2005 to May 2006.)
So would I buy bank stocks now? If I were looking only at the BPI I would wait until that resistance was broken and the BPI shot higher. I would give up a little profit for the sake of a bit more certainty. And I'd keep an eye on the 66% level.
I would keep tight stop losses and cash out when I felt the profit was sufficient, because the sector's still on a Relative Strength Sell Signal.
Now, for something completely different, let's look at a weekly line chart of the BPI over the last ten years:
Ooohh!! Pretty colors!!!
Applying technical anaylsis to the BPI, I've highlighted in orange the areas that were historically above both the 100-day and 200-day moving averages, and the corresponding sections of the MACD below. (Okay, I missed one in late 2005 where it just poked out above the MAs, but you get my drift.) I've left the RSI for comparison for those of you interested in taking it furter (hint: color in the areas when the RSI breaks from below 50 to above 50 and stays there). The most recent two are labeled "July 18 - Sept. 19" (2008), and "Dec. 12 - Jan. 9", spans of two months and one month, respectively.
The most recent period, since March 20th, is colored in yellow. This three-month period is the longest run above these moving averages since the five-month period between October 8, 2004, to March 4, 2005.
The difference, however, is the sheer pitch of the recent angle upward, and the fact that the MACD has started a downward trend (paralleled by the RSI). Now the MACD could bounce, but I wouldn't hold my breath for that.
So "Would I Be Safe Buying Banks Right Now?"
Banks are still the unwanted child of the stock market and, until the credit crisis resolves itself, I can answer that question for myself:
I wouldn't bank on it.
Lucky you.
Anyway, here are my thoughts.
Above is the list of Sector Hunter alerts for the Banks sector, the most recent being the March 19th 30% alert.
Now in the past I've cautioned against the 30% alerts, since the market has been too extreme. I liked playing the 70% sell signals, and many of you have made great money with the 10% buy signals (I know because you've told me -- by the way, feel free to leave a comment or a question at this post at any time, like Nathan did under "Tools for the Sector Hunter"; check it out -- thanks, Nathan!).
What's interesting here is that the sector has been on a Relative Strength Sell Signal since the July 14, 2008, alert at the bottom of the list above, and there was a Rotation Alert Issued on March 4th, when the 10% Buy Signal came out. However, the sector's relative strength did not shift to a Buy Signal. In fact, a Relative Strength Sell Signal alert came out the very same day, which cautions us to treat the position as a trade.
If you'd bought then, you'd have done well. Here's the Banks BPI as of today:
We can see that, if you'd missed the 10% signal and played the 30% signal, you'd still have made some money. (Caveat: The alternative securities in the 10% and 30% alerts were different, except for two ETFs.) I've highlighted the bottom support level and the resistance levels. Notice that the current 58% reading is at the last point of resistance. (The next resistance level is around 66%, from Aug 2005 to May 2006.)
So would I buy bank stocks now? If I were looking only at the BPI I would wait until that resistance was broken and the BPI shot higher. I would give up a little profit for the sake of a bit more certainty. And I'd keep an eye on the 66% level.
I would keep tight stop losses and cash out when I felt the profit was sufficient, because the sector's still on a Relative Strength Sell Signal.
Now, for something completely different, let's look at a weekly line chart of the BPI over the last ten years:
Ooohh!! Pretty colors!!!
Applying technical anaylsis to the BPI, I've highlighted in orange the areas that were historically above both the 100-day and 200-day moving averages, and the corresponding sections of the MACD below. (Okay, I missed one in late 2005 where it just poked out above the MAs, but you get my drift.) I've left the RSI for comparison for those of you interested in taking it furter (hint: color in the areas when the RSI breaks from below 50 to above 50 and stays there). The most recent two are labeled "July 18 - Sept. 19" (2008), and "Dec. 12 - Jan. 9", spans of two months and one month, respectively.
The most recent period, since March 20th, is colored in yellow. This three-month period is the longest run above these moving averages since the five-month period between October 8, 2004, to March 4, 2005.
The difference, however, is the sheer pitch of the recent angle upward, and the fact that the MACD has started a downward trend (paralleled by the RSI). Now the MACD could bounce, but I wouldn't hold my breath for that.
So "Would I Be Safe Buying Banks Right Now?"
Banks are still the unwanted child of the stock market and, until the credit crisis resolves itself, I can answer that question for myself:
I wouldn't bank on it.
Saturday, May 16, 2009
All Not So Quiet on the Western Front
Hey, gang,
I wanted you to know that I know that I've been rather quiet lately. It's not because there's not a lot happening. I've just been extremely busy in my "other" life. Also, I've been doing some sector analysis in my Tycoon Report weekly articles that would normally have been posted here (admittedly with a little more detail).
With the recent spate of 70% signals, we have an unprecedented opportunity to make some big bucks. From the looks of the dialogue in the online Community, it looks like many of you have done your homework and are ready to take advantage of the SH alerts.
I'll be posting again in the near future. Until then, happy hunting!
I wanted you to know that I know that I've been rather quiet lately. It's not because there's not a lot happening. I've just been extremely busy in my "other" life. Also, I've been doing some sector analysis in my Tycoon Report weekly articles that would normally have been posted here (admittedly with a little more detail).
With the recent spate of 70% signals, we have an unprecedented opportunity to make some big bucks. From the looks of the dialogue in the online Community, it looks like many of you have done your homework and are ready to take advantage of the SH alerts.
I'll be posting again in the near future. Until then, happy hunting!
Tuesday, February 24, 2009
Tools for the Sector Hunter
In this information age, access to information is easy. You can spend countless hours reading innumerable articles about the market, about the economy, about the best place to put your money -- let's face it, you could live online 24/7 and still never read all there is to read about any particular subject.
Access to information is only half the battle. Weeding through what information is valuable, helpful, easily navigable, and free is a task. Who wants to spend their days sorting through web pages, tirelessly seeking out that one site that will be most useful to the investor willing to take his financial life into his own hands?
Well, some of us apparently have nothing better to do.
So today you get to reap the benefit of my search for the most helpful sites for the ETF trader. I'll be the first to admit that this list is not comprehensive, and I invite any and all of you to add to the list by sharing a link below in the Comments section. But these are the sites I find myself continually going back to on a consistent basis.
I'll start with the general and spiral in toward the specific. These first few sites provide super tools for anybody.
Yahoo Finance
You've heard about Yahoo Finance here before, but if you haven't visited the Stock Research Center lately, you're probably missing out. Take a look at what they offer:
Plus they have a free stock screener and alert service. A great resource to check out is the Options Analysis Tool, where you can rate available options by risk, Greeks, ratios or stochastic volatility. And of course, as Teeka has often mentioned, they have an excellent Exchange-Traded Fund Center here. Browse the site -- you won't be disappointed.
I like the layout and look of the Google Finance site, but I have to say Yahoo blows 'em out of the water. Except for this cool little thingie (which you can add to your iGoogle page):
This gizmo gives us a representation of the movement within a sector. The dark green section of the bar is the percentage of companies that are up by more than 2%. For example, 68% of the constituent stocks in transportation are in this category. The light green is the percentage of stocks up from between 0% and 2%. The light red shows the percentage of companies that are down from 0% to 2%. And the dark red shows the percentage down more than 2%. It's a quick and dirty visual with less information that a sector Bullish Percent Index, but it's a nice quick overview, sort of like the Sector Tracker I've included in my Confessions of a Sector Hunter series.
Which brings us to our next site, the home of the Sector Tracker.
SmartMoney
The ETF Tracker here is pretty lame, but I still love this site, mainly for two reasons, and they both have to do with visual aids. If you're like me, spending too much time with numbers makes your eyes start to glaze over. A picture is still worth the proverbial thousand words, and two tools provided here are great for quickly sizing up things.
The first you may have seen before. It's a pictorial representation of the market.
This Map of the Market lets you see over 500 stocks at once. As you scroll over the map, each area will bring up a company and its change at the close of day (or for a bleak picture, choose "Show change at 52 weeks" on the control panel at the right.) The representative size is relative to market capitalization. If you click on a rectangle (as I did in the picture above), you have other options at your disposal, including a similar representation of the stock's sector.
But the sweetest visual that SmartMoney.com offers is the chance to see how an ETF is broken down. Here's a page from the site on a recent recommendation by Chris, the Singapore Index Fund, EWS:
The pie charts tell you at a glance the make-up of the ETF, and the weightings per sector -- very helpful when trying to determine if a particular ETF is a pure play in a sector.
NASDAQ
For a quick and dirty screener, comparison tool, and other cool stuff check out the NASDAQ ETF and Index Fund site. They have a snapshot of the day's top winners and losers:
On the ETF home page you'll find this menu with quick links to ETF articles and short-cuts to specific categories of ETFs:
Notice also that they have an excellent library of ETF Annual Reports, ready for the downloading.
New York Stock Exchange
The NYSE Euronext site (successor to amex.com) has a more robust ETF (and ETN) Screener that allows you to search by issuer and fund classification. This is also a great site to find the issuer of an ETF by plugging in the ticker symbol and clicking on the "Profile" tab.
wsj.com
The Wall Street Journal site has a full-featured ETF screener that is very easy to use. The criteria can be checked or left unchecked and include beta, dividend rates, P/E, to name a few. (A parallel screener can also be found here: www.marketwatch.com/tools/etfs/html-adv-screener.asp.)
ETF Screener
This site has a highly configurable screener that will keep even the most fanatical geek happy. You enter field descriptions, logic and values to sort through ETFs to your specifications. Also compare this visual of the day's best and worst with the one above:
They have little in common in terms of their picks, so further research into how they make their lists is necessary.
They also have many lists to choose from (e.g., 252-day highs and lows) plus a very cool Relative Strength Trends page that factors in a fund's performance over a year. There's no gloss and snap here -- the information is provided in a simple and lo-tech way, but it's valuable stuff.
ETF Connect
If you want to narrow in on Closed-End and Index ETFs, this is the site to search.
Stock Encyclopedia
This is a terrific site that includes lists of ETFs by category, including 19 sectors under "Industry" with bunches of subsectors. The link above is to the Comprehensive ETF Guide where you can find a whole slew of choices, from Bearish ETFs to Ethical ETFs -- tons of subcategories here that'll keep you poking around, exploring investment possibilities you didn't even know existed!
ETF Trends
This site I love. It's got relevant and insightful articles and an ETF Analyzer that provides a lot of information in a spreadsheet-like chart that is sortable by category. The report reproduced below is a top-down list of YTD results (65.8% for SKF).
And finally, when you're trying to find what ETFs hold a particular stock, www.xtf.com provides an ETF Insider module that lets you pop in a ticker symbol and pops out a listing of all ETFs that contain that security. The only irritating thing about this site is that you have to register.
That's it, but I'd really love to hear your suggestions below. There's too much out there in the electronic universe for me not to have missed something grand.
Have fun hunting.
The Big D
Access to information is only half the battle. Weeding through what information is valuable, helpful, easily navigable, and free is a task. Who wants to spend their days sorting through web pages, tirelessly seeking out that one site that will be most useful to the investor willing to take his financial life into his own hands?
Well, some of us apparently have nothing better to do.
So today you get to reap the benefit of my search for the most helpful sites for the ETF trader. I'll be the first to admit that this list is not comprehensive, and I invite any and all of you to add to the list by sharing a link below in the Comments section. But these are the sites I find myself continually going back to on a consistent basis.
I'll start with the general and spiral in toward the specific. These first few sites provide super tools for anybody.
Yahoo Finance
You've heard about Yahoo Finance here before, but if you haven't visited the Stock Research Center lately, you're probably missing out. Take a look at what they offer:
Plus they have a free stock screener and alert service. A great resource to check out is the Options Analysis Tool, where you can rate available options by risk, Greeks, ratios or stochastic volatility. And of course, as Teeka has often mentioned, they have an excellent Exchange-Traded Fund Center here. Browse the site -- you won't be disappointed.
I like the layout and look of the Google Finance site, but I have to say Yahoo blows 'em out of the water. Except for this cool little thingie (which you can add to your iGoogle page):
This gizmo gives us a representation of the movement within a sector. The dark green section of the bar is the percentage of companies that are up by more than 2%. For example, 68% of the constituent stocks in transportation are in this category. The light green is the percentage of stocks up from between 0% and 2%. The light red shows the percentage of companies that are down from 0% to 2%. And the dark red shows the percentage down more than 2%. It's a quick and dirty visual with less information that a sector Bullish Percent Index, but it's a nice quick overview, sort of like the Sector Tracker I've included in my Confessions of a Sector Hunter series.
Which brings us to our next site, the home of the Sector Tracker.
SmartMoney
The ETF Tracker here is pretty lame, but I still love this site, mainly for two reasons, and they both have to do with visual aids. If you're like me, spending too much time with numbers makes your eyes start to glaze over. A picture is still worth the proverbial thousand words, and two tools provided here are great for quickly sizing up things.
The first you may have seen before. It's a pictorial representation of the market.
This Map of the Market lets you see over 500 stocks at once. As you scroll over the map, each area will bring up a company and its change at the close of day (or for a bleak picture, choose "Show change at 52 weeks" on the control panel at the right.) The representative size is relative to market capitalization. If you click on a rectangle (as I did in the picture above), you have other options at your disposal, including a similar representation of the stock's sector.
But the sweetest visual that SmartMoney.com offers is the chance to see how an ETF is broken down. Here's a page from the site on a recent recommendation by Chris, the Singapore Index Fund, EWS:
The pie charts tell you at a glance the make-up of the ETF, and the weightings per sector -- very helpful when trying to determine if a particular ETF is a pure play in a sector.
NASDAQ
For a quick and dirty screener, comparison tool, and other cool stuff check out the NASDAQ ETF and Index Fund site. They have a snapshot of the day's top winners and losers:
On the ETF home page you'll find this menu with quick links to ETF articles and short-cuts to specific categories of ETFs:
Notice also that they have an excellent library of ETF Annual Reports, ready for the downloading.
New York Stock Exchange
The NYSE Euronext site (successor to amex.com) has a more robust ETF (and ETN) Screener that allows you to search by issuer and fund classification. This is also a great site to find the issuer of an ETF by plugging in the ticker symbol and clicking on the "Profile" tab.
wsj.com
The Wall Street Journal site has a full-featured ETF screener that is very easy to use. The criteria can be checked or left unchecked and include beta, dividend rates, P/E, to name a few. (A parallel screener can also be found here: www.marketwatch.com/tools/etfs/html-adv-screener.asp.)
ETF Screener
This site has a highly configurable screener that will keep even the most fanatical geek happy. You enter field descriptions, logic and values to sort through ETFs to your specifications. Also compare this visual of the day's best and worst with the one above:
They have little in common in terms of their picks, so further research into how they make their lists is necessary.
They also have many lists to choose from (e.g., 252-day highs and lows) plus a very cool Relative Strength Trends page that factors in a fund's performance over a year. There's no gloss and snap here -- the information is provided in a simple and lo-tech way, but it's valuable stuff.
ETF Connect
If you want to narrow in on Closed-End and Index ETFs, this is the site to search.
Stock Encyclopedia
This is a terrific site that includes lists of ETFs by category, including 19 sectors under "Industry" with bunches of subsectors. The link above is to the Comprehensive ETF Guide where you can find a whole slew of choices, from Bearish ETFs to Ethical ETFs -- tons of subcategories here that'll keep you poking around, exploring investment possibilities you didn't even know existed!
ETF Trends
This site I love. It's got relevant and insightful articles and an ETF Analyzer that provides a lot of information in a spreadsheet-like chart that is sortable by category. The report reproduced below is a top-down list of YTD results (65.8% for SKF).
And finally, when you're trying to find what ETFs hold a particular stock, www.xtf.com provides an ETF Insider module that lets you pop in a ticker symbol and pops out a listing of all ETFs that contain that security. The only irritating thing about this site is that you have to register.
That's it, but I'd really love to hear your suggestions below. There's too much out there in the electronic universe for me not to have missed something grand.
Have fun hunting.
The Big D
Tuesday, January 6, 2009
Is it Time to Plunge into Ice Cold Steel?
First of all, a wonderfully happy new year to all of you. My sincere wish for 2009 is that you may realize many of the hopes you harbor in your hearts.
And my wish for myself is that I can be cured of the carking crime of alliteration!
8]
Now let's look at the Industry Bell Curve:
Although there are four sectors above 70%, today I'm going to focus on Steel & Iron, the only sector registering above 80% on its BPI.
As we've seen before in previous posts (August 20th & October 1st below) , this is one heck-of-a volatile sector. Above we can see that this month it broke through two earlier resistance levels at 80% and 84% (the purple lines).
Now let's look at the Industry Bell Curve:
Although there are four sectors above 70%, today I'm going to focus on Steel & Iron, the only sector registering above 80% on its BPI.
As we've seen before in previous posts (August 20th & October 1st below) , this is one heck-of-a volatile sector. Above we can see that this month it broke through two earlier resistance levels at 80% and 84% (the purple lines).
"That doesn't mean anything, does it? Didn't Teeka say that BP charts can stay overbought for a long time?" Indeed he did. He also that, "Generally speaking, sectors will spend more time in an overbought state than they will in an oversold one." (ETFMT Companion Guide, slide 184)
But the action in the Steel & Iron sector BPI doesn't really have to do with the overbought/oversold issue -- and here's the lesson for today: It has more to do with the history of the sector, and this is why it's so important to study the BPI for clues to the past performance and patterns.
Some sectors can spend months above 70%. For example, in June-July of 2003, the Gaming sector moved above 70%, tested resistance once, then climbed to 92% by January 2004. It wasn't until April or May that it dipped below 70% again. That's almost a year.
In contrast, Steel & Iron doesn't hang out long above 80%. The last three times it crossed above that threshold, it stayed there for about two weeks in the first two instances (April and May 2007, circled in green) and for one week in the last (May 2008, also in green). The earlier instance, circled in orange, shows it lingering in the 80s for a little over a month (it's difficult to gauge exactly because the Investors Intelligence BPI chart differs a bit from its line chart). So this sector has a love/hate relationship with that 80% line.
Does this mean that it will drop any second now? I'm not in the habit of predicting the future, but I think the steel sector presents a great potential shorting opportunity.
So do some homework for yourself now: Make your picks for best candidates (for instance, the November 6th CASH Alert on this sector listed the ETF SLX and the stocks AKS, X, and MT).
Then when that 70% CASH Alert Sell signal comes, you'll be ready to profit.
Sunday, December 21, 2008
DNA and the Stock Market
Since I'm a creature of genetics (and since Carl C asked me to), I'm going to look at the Biomedics/Genetics sector today. But first, let's see what's happening in the market by taking a look at the Industry Bell Curve.
This is more like it. This is almost normal! I'm not saying that means that the market is back to normal; all I'm saying is that it's acting more normal. Time will tell if we've arrived at a bottom. I tend to side with two gents whom I respect very much, John J. Murphy, the chief technical analyst for StockCharts.com, and Dr. Marvin Appel, author of "Investing with Exchange-Traded Funds Made Easy". They think the S&P 500 will retest its low of 750. Here's a 10-year chart of SPX:
Murphy points out that the S&P is now testing the lows of 2002. "There are two ways to view it," he says. "This could be a huge trading range that began eight years ago. If that's the case the market will stabilize in this area." The other view - if the S&P breaks through its 2002 lows, is not so rosy: "[T]he entire eight-year pattern is nothing more than a huge double-top pattern -- which is very negative. We're kind of hoping that doesn't happen."
"Kind of hoping" -- I wonder if he's also playing the short side! :)
Appel thinks the retest will come in 2009 when other sectors are influenced by the current credit crisis. But back to the sector at hand.
The first thing I notice about the Biomedics/Genetics BPI chart is that the last time there were this many column changes was back in 2002. The purple boxes to the right also show us that the majority of the moves this year occurred from September onward. We've got two successive double tops (Oct-Nov and Nov-Dec). These point and figure buy signals are significant on a P&F chart for a specific securtiy, but on a BPI chart they don't mean so much. What's more important is the level (it's at 30%) and whether it's in a column of X's or O's (because of the 6% reversal rule).
We know from our ETFMT Buy / Sell Status list that this sector is on a Relative Strength Buy signal, so we can make a long-term play or consider trading. Let's look at the peer performance chart of the Sector Alert picks from the November 21st 10% alert:
A couple of preliminary things:
(1) The order is XBI, IBB, BBH, IMCL, SQNM, EBS, NYSE, and SPX.
(2) I've included SPX & NYSE as references. In this case the SPX is the baseline for comparison. (See the grayed out box up top? That means it's selected as the baseline. The arrow at the bottom right shows us that it's at 0%.)
(3) This is the 180-day chart. The 92-day chart is below (for some reason, I couldn't pull up a 90-day chart; I'm guessing it's a scaling issue and the comparisons were too great).
We can see that BBH is the consistent leader in ETFs. Sequenom and and Emergent BioSol, if you scroll through the time periods, are jockeying for top position. But we're going to restrict our discussion to the ETFs. So why did Sector Hunter place BBH third in the list?
Here's some info on each of the holdings (with links so you can see for yourselves):
XBI = SPDR S&P Biotech Fund of 21 stocks. Top Ten make up over 55% of total holdings (Top Five (29.32%): Gilead Sciences - 5.99% , Cephalon - 5.98%, PDL BioPharma - 5.95%, Amgen - 5.75%, and Myriad Genetics - 5.65%)
http://quicktake.morningstar.com/fundnet/Holdings.aspx?Country=USA&Symbol=XBI&fdtab=portfolio
IBB = Nasdaq Biotechnology Index Fund of 139 stocks. Top Five make up over 42% of total holdings (Amgen - 13.12%, Gilead Sciences - 10.80%, Celgene - 7.41% , Teva - 6.31%, and Genzyme - 4.39%)
http://us.ishares.com/product_info/fund/holdings/IBB.htm
BBH = Biotech HOLDRS Fund of 14 stocks. Genentech makes up 42% of the fund (remember Teeka in the DVDs?), Amgen 22.5%, Gilead Sciences 16.8%, Biolgen Idec 7%, and Genzyme 5.7%.
http://www.etfinvestmentoutlook.com/etf_holdings.php?s=BBH
Ah-ha! Elimination by nondiversification. So we're back to the Sector Hunter first choice, XBI. Let's have a look-see!
XBI is looking decent. It recently rose as high as its resistance in the October and November rallies (in the $54-56 range). If it can break through, it could resume its previous uptrend. If it doesn't, there's a pretty good chance that it will test its most recent support level at $50. A drop below $50 would not be the end, however, since it's found previous support at each step from $46 to $48.
A column of O's to $50 and a subsequent reversal to X's would continue the Bullish Support Line established in November. As such, this could also prove to be an excellent candidate for the Bull Line Trade.
But how accurate was the 10% CASH alert? Looking at the stochastics in view of the November 21st alert:
We can see that the alert called a perfect entry point. Once the signal was given, the stochastic method would have led us into a position that was the lowest price for XBI since 2006. (This is a one-year chart, but look at a longer term chart yourself; you'll see that the ETF hasn't been this low since August 2006.)
That's it for now. Y'all have a happy (and safe) holiday, and may your new year brim with success.
o<|B-D Bobby D
This is more like it. This is almost normal! I'm not saying that means that the market is back to normal; all I'm saying is that it's acting more normal. Time will tell if we've arrived at a bottom. I tend to side with two gents whom I respect very much, John J. Murphy, the chief technical analyst for StockCharts.com, and Dr. Marvin Appel, author of "Investing with Exchange-Traded Funds Made Easy". They think the S&P 500 will retest its low of 750. Here's a 10-year chart of SPX:
Murphy points out that the S&P is now testing the lows of 2002. "There are two ways to view it," he says. "This could be a huge trading range that began eight years ago. If that's the case the market will stabilize in this area." The other view - if the S&P breaks through its 2002 lows, is not so rosy: "[T]he entire eight-year pattern is nothing more than a huge double-top pattern -- which is very negative. We're kind of hoping that doesn't happen."
"Kind of hoping" -- I wonder if he's also playing the short side! :)
Appel thinks the retest will come in 2009 when other sectors are influenced by the current credit crisis. But back to the sector at hand.
The first thing I notice about the Biomedics/Genetics BPI chart is that the last time there were this many column changes was back in 2002. The purple boxes to the right also show us that the majority of the moves this year occurred from September onward. We've got two successive double tops (Oct-Nov and Nov-Dec). These point and figure buy signals are significant on a P&F chart for a specific securtiy, but on a BPI chart they don't mean so much. What's more important is the level (it's at 30%) and whether it's in a column of X's or O's (because of the 6% reversal rule).
We know from our ETFMT Buy / Sell Status list that this sector is on a Relative Strength Buy signal, so we can make a long-term play or consider trading. Let's look at the peer performance chart of the Sector Alert picks from the November 21st 10% alert:
A couple of preliminary things:
(1) The order is XBI, IBB, BBH, IMCL, SQNM, EBS, NYSE, and SPX.
(2) I've included SPX & NYSE as references. In this case the SPX is the baseline for comparison. (See the grayed out box up top? That means it's selected as the baseline. The arrow at the bottom right shows us that it's at 0%.)
(3) This is the 180-day chart. The 92-day chart is below (for some reason, I couldn't pull up a 90-day chart; I'm guessing it's a scaling issue and the comparisons were too great).
We can see that BBH is the consistent leader in ETFs. Sequenom and and Emergent BioSol, if you scroll through the time periods, are jockeying for top position. But we're going to restrict our discussion to the ETFs. So why did Sector Hunter place BBH third in the list?
Here's some info on each of the holdings (with links so you can see for yourselves):
XBI = SPDR S&P Biotech Fund of 21 stocks. Top Ten make up over 55% of total holdings (Top Five (29.32%): Gilead Sciences - 5.99% , Cephalon - 5.98%, PDL BioPharma - 5.95%, Amgen - 5.75%, and Myriad Genetics - 5.65%)
http://quicktake.morningstar.com/fundnet/Holdings.aspx?Country=USA&Symbol=XBI&fdtab=portfolio
IBB = Nasdaq Biotechnology Index Fund of 139 stocks. Top Five make up over 42% of total holdings (Amgen - 13.12%, Gilead Sciences - 10.80%, Celgene - 7.41% , Teva - 6.31%, and Genzyme - 4.39%)
http://us.ishares.com/product_info/fund/holdings/IBB.htm
BBH = Biotech HOLDRS Fund of 14 stocks. Genentech makes up 42% of the fund (remember Teeka in the DVDs?), Amgen 22.5%, Gilead Sciences 16.8%, Biolgen Idec 7%, and Genzyme 5.7%.
http://www.etfinvestmentoutlook.com/etf_holdings.php?s=BBH
Ah-ha! Elimination by nondiversification. So we're back to the Sector Hunter first choice, XBI. Let's have a look-see!
XBI is looking decent. It recently rose as high as its resistance in the October and November rallies (in the $54-56 range). If it can break through, it could resume its previous uptrend. If it doesn't, there's a pretty good chance that it will test its most recent support level at $50. A drop below $50 would not be the end, however, since it's found previous support at each step from $46 to $48.
A column of O's to $50 and a subsequent reversal to X's would continue the Bullish Support Line established in November. As such, this could also prove to be an excellent candidate for the Bull Line Trade.
But how accurate was the 10% CASH alert? Looking at the stochastics in view of the November 21st alert:
We can see that the alert called a perfect entry point. Once the signal was given, the stochastic method would have led us into a position that was the lowest price for XBI since 2006. (This is a one-year chart, but look at a longer term chart yourself; you'll see that the ETF hasn't been this low since August 2006.)
That's it for now. Y'all have a happy (and safe) holiday, and may your new year brim with success.
o<|B-D Bobby D
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