US Market is Strong, PPG, EQIX, XHB

At the beginning of July, the short term trend of the general market turned up.  This trend, which began then, continues today.   Not only is the S&P 500 rising, it has been rising faster than other markets around the world, which is a thought I would like to explore with this next chart:

The chart above looks at SPY divided by several other iShares representing countries throughout the world and goes back 3  years.

The reason I like to look at the iShares is because they are ETFs that trade in the US and are denominated in US Dollars, which makes comparison to the S&P 500 an apples to apples comparison.

Anyway, the chart above shows that the US market, for whatever reason (it doesn't matter why),  is the strongest in the world.


Lastly, here are 3 stocks that my scans narrowed down this week:

This stock has recently hit not just a new 52 week high, but a new record all time high, which means to me that there is little overhead resistance.  Not only that, but the stock also gapped up, and this gap, I feel, may act as support.  I will be buying this stock at the open on Monday.

Next chart:

The chart above also looks very strong, with a constructive consolidation pattern within a larger long term up trend.

Lastly,

This ETF follows homebuilder stocks.   Since last October, this ETF has been outperforming the general market and is close to making a new high.

Trend Trading the Forex Market, SNA

A fairly quiet week for the general market this week - the S&P 500 was up about half of one percent.   Other markets, however, really moved this week.   Let's take a look at a few currency ETFs.

One great thing about being a trend following trader is that I don't have to be an expert on one market sector in order to trade it.   For example, I traded a US Bond ETF last month, yet I know nothing about US Bonds.  I also know nothing about the Euro, but I believe that trend followers can make more money trading it than any "expert" can.

It is possible to trade currencies even if you don't have a currency trading account through ETFs.  The ETF above rises when the Euro falls and has just hit a new high.  The above chart shows that the Euro has been weaker than the US Dollar.

The way I see it is that the US Dollar is also weak, it is just that the Euro is even weaker.

If you pair the Euro against a currency that is actually strong, such as the Australian dollar, the chart becomes even more impressive:

My analysis shows that the Australian Dollar is the world's strongest currency right now.  My analysis also shows that the Euro is the world's weakest currency.  Therefore, the AUD/EUR should naturally be in a major uptrend, which it is.

For those of you who are interested in trend trading the forex market, please check out this article I wrote a while back.  For those of you just interested in stock trading, here is the best stock my scans found this week:

New Breakouts for Trend Following Traders: PATK, INCY

Out of the perhaps 10,000 stocks that one can invest in, my scans have reduced that number to about 200 potential candidates.   Out of those 200, here are the 2 that I like the best:

The stock above, just like the general market, is in a short-term up trend as well as a long-term uptrend. At a minimum, that is needed before I can buy a stock, but there are hundreds of stocks that can meet that basic criteria.  It is my scans that narrow down the hundreds of stocks to just a few.

The next stock:

The stock above has just broken out to a new high and has pulled back to support. A very nice looking chart in my opinion.  I do own a piece of INCY through my current holding, the ETF IBB.

Lastly, VXX, the exchange traded fund that I wanted to short last week, was down over 6% this week and still looks prime for shorting:

I will be purchasing PATK on the open on Monday.   I will be risking 2% of my capital on this trade.

IBB Looking Good to Trend Following Traders

I wanted to short VXX this morning, and I did place an order to do so, but my broker rejected the trade since there was no inventory available.   I've shorted this ETF for months at a time in the past, but today, no such luck.

Moving on to plan B, I decided to go long something completely different, the exchange traded fund, IBB, which follows biotech companies:

Biotech companies have been popping up on my scans for a while now, and are clearly a strong sector. The chart above, to me, shows this ETF breaking out to new highs after a healthy looking consolidation period.

This impressive strength has not gone unnoticed by long time blogger and acquaintance Olivier Tischendorf who has also been charting this ETF.

S&P 500's Short Term Trend Turns Up, XTR.to, SRS, VXX

The short term trend of the S&P 500 turned up this week and with the long term trend also being up, this means that we are in a bull market: 

This, in turn, means that for me it is time to get out of bonds and to slowly make some bullish bets.  And getting out of bonds is what I did.  I sold my previous holding, TLT:

Not a huge gain here, but better than holding cash, I think.  Anyway, because we are now in a bull market, here are some bullish ideas.  The chart below shows the Canadian ETF, XTR.to, which is a monthly income fund:

This ETF, being a mixture of Canadian government bonds and Canadian dividend paying stocks, is quite conservative, which may pay off if this short-term uptrend changes course - something that could easily happen. 

Besides going long a stock or ETF, another way to make a bullish bet is to short an inverse ETF.  Based on thousands of hours of chart analysis, I have come to the conclusion that Ultrashort ETFs tend to inexorably drift towards a price a zero, although never able to get there, thanks to reverse splits. 

I've seen many other blogs complain about Ultra ETFs, but few take any action.  It is possible to short sell these ETFs and profit from their decline. 

The amount of money that one can make shorting is not limited to your initial investment - you can always add to your position, pyramiding on the way down.  And no, it is not possible to lose an unlimited amount of money on a short if you are smart and use stops. 

One final benefit of shorting ETFs is that you get paid the expenses.  All ETFs have fees or a management expense ratio (MER), which is deducted from the net asset value of the fund each month.  If you are short the ETF, you profit from this.

I have decided that for Monday at the open, I will short VXX, which was mentioned last week.   I will risk 2% of my capital on this trade.

VIX ETF Hits New 52 Week Low

If the general market is in a bull market, I can only go long stocks or ETFs, since I feel that puts the odds in my favour.  The only exception to that rule is that during a bull market, I can short sell inverse ETFs or the VIX index fund shown below:

Shorting VXX, shown above, is effectively like a bullish bet on the market, since the two are inversely co-related.  I've been following this ETF for years now, and in my opinion, it tends to perform very weakly most of the time, consequently being a consistent money maker for me in the past.