Friday, February 26, 2010

China conducts stress tests for devaluation of the Yuan: Chinese currency ETFs

China is conducting "stress tests" in the export sector of the country to see how much appreciation of the yuan companies can support, according to local newspaper 21st Century Business Herald on Friday.

The newspaper quoted industry sources saying that the test results, conducted jointly with the Ministry of Trade and the Ministry of Industry and Information Technology, will serve as reference for future monetary policy of the Chinese government. These tests, according to the newspaper, do not necessarily mean that Beijing let the yuan appreciate.

According to initial results of the tests, which focused on exporters of textiles, shoes and toys, each percentage point of appreciation of yuan would take one point from their profit margin. That would be a serious blow to profitability, since often the net profit margin of exporters is only 3% to 5%.

Two ETFs that track Chinese currency are CNY and CYB, with CYB having much higher volume:

Tuesday, February 23, 2010

The $950B health care plan and the top pharmaceutical ETFs

Following president Obama's update on the $950B health care plan, BNN had a segment on pharmaceutical ETFs and how they are being affected.

The two main ETFs in this segment are  PPH and IHE.

PPH is much less diversified, wit its top three holdings representing over 60% of its value, and the top four making up 71.6%. These are the top holdings and their percentages:
  • Johnson & Johnson    24.82
  • Pfizer Inc    18.86
  • Merck & Co    16.79
  • Abbott Laboratories    11.2
  • Bristol-Myers Squibb Co.    6.73
  • Medco Health Solutions, Inc.    5.67
  • Lilly (Eli) & Co.    5.29
  • Forest Laboratories, Inc.    1.9
  • Allergan, Inc    1.87
  • Zimmer Holdings, Inc.    1.75

IHE Holdings:
  • Abbott Laboratories    7.09
  • Allergan, Inc    4.64
  • Bristol-Myers Squibb Co.    5.19
  • Lilly (Eli) & Co.    5.47
  • Forest Laboratories, Inc.    3.75
  • Hospira Inc    3.6
  • Johnson & Johnson    9.14
  • Merck & Co., Inc    7.68
  • Mylan Inc.    3.09
  • Pfizer Inc    8.54

BNN also reported on the very high number of options traded on these ETFs.

Watch video

Sunday, February 21, 2010

Best oil ETFs to buy and to sell

Oil prices have been quite erratic lately, in great part due to the volatility of the US Dollar. We looked at the RSI (relative strength) values of all oil ETFs in three time frames.

- Daily: short term
- Weekly: medium term
- Monthly: long term,

These are the values, ordered from low to high, i.e, from oversold to overbought.

Short term:

Most oversold are DTO, SZO and HOD.TO, all leveraged oil shorts.
Correspondingly, most overbought are USO, and UGA (long oil and gasoline)

Medium term:

Interestingly, the medium term order is the same as the short term.

Long term: 

In the longer time frames, DUG is the most oversold, while there are really no overbought ETFs (the closest being OIH).

Friday, February 19, 2010

FXE, Euro straddles results as of options expiration February

With prices as of 10:50AM, results of the FXE straddles previously posted:

Fed raises rates: using GLD for gold going up or down

With the Fed raising the discount window yesterday, gold took  a minor tumble. Below you will see straddles for the popular GLD ETF which tracks the price of gold. Gold is highly volatile and it could really be trading anywhere between $500 and $5,000 an ounce. This is why straddles are so attractive.

They are however risky as they may cause 100% loss if the underlying does not move ther indicated amount. These were calculated with StraddlesCalc tool.

Thursday, February 18, 2010

Currency ETFs have gone wild

Global currency ETFs are tracked at this site. Below are the tables and charts showing day trading ranges. Currencies used to be boring and stable. Now they are now extremely volatile. The Euro went up over 1% yesterday, and it's down over 1% today.

Wednesday, February 17, 2010

Euro ETF update

With concerns over Greece seemingly abating for some reason, the Euro has rebounded. We have updated the straddles for the FXE ETF February, March, and June 2010.

As always, options are dangerous, in particular because FXE is trading between strikes. However, the recent move is puzzling as the situation in Greece is far from over.

Monday, February 15, 2010

Top global ETFs for the week, what is overbought and what is oversold

We computed the relative strength values of all global ETFs in the market. These RSI values are very valuable in determining whether an ETF is oversold or overbought.

Here is the list, ordered by RSI daily, which is a short term indicator. The weekly (medium term), and monthly values are also shown.

The most oversold are PJO (Powershares Japan FTSE portfolio) and PEF (Powershares Japan FTSE portfolio)

There are no overbought ETFs. The two closest are are EWC (Canada) and GULF (Middle East).

You can see also that IDX (Indonesia) is the only overbought ETFs in the long term, with an RSI-M of over 80.

Friday, February 12, 2010

Buy or sell gold? Where gold and the GLD ETF are: Conflicting signals indicate a trading range

GLD is the most popular ETF that tracks gold is GLD. Here is the weekly candle bar chart:

As with gold itself, there are conflicting buy and sell signals. The monthly and daily alerts are BUYs, but the weekly is a SELL:

This video by video released yesterday discusses these conflicting signals and what they mean (a trading range, and a neutral position). Watch video.

Thursday, February 11, 2010

Cheapest ETFs in Canada

These are Canada's ETFs with the lowest MERs:
  • BMO ZCN: Titans 60 (largest 60 by market cap and trading volume): MER 0.15%
  • Claymore CLF, 1-5 ladder government bond 0.15%
  • iShares XIU (TSX 60) 60: 0.17%
Most expensive MERs are in the range of 1.1%, usually leveraged ETFs.

The median MER of all Canadian ETFs is 0.6%.

Performance of the lowest cost ETFs

This is not exactly stellar performance.
  • XIU has returned 18.8% (in CAD) since Jan 2009
  • CLF has returned -1.48% since Jan 2009
  • ZCN has lost 3.45% since October 2009 (its inception)
XIU 1 year chart:

Wednesday, February 10, 2010

Greece chaos and the Euro ETF

Here are straddles for the potential moves in FXE. The situation in Greece is dire, whether it is bailed out or kicked out, the Euro could move significantly.

The news today from the media is that European shares are rallying because of a potential rescue of Greece. The media does not report on the consequences of such action on the Euro.

These were computed with the online StraddlesCalc tool. The moves required may be smaller than indicated in those cases where there is lots of time to expiration.

While moves of 1.7% or 3% are quite small, in the world of currencies such moves can be quite large. Still, these may pay off quite well, provided FXE moves.

Monday, February 8, 2010

Analsys of signals on FXE, the popular Euro ETF shows ROI of +62%

FXE is the most popular ETF that tracks the Euro.Currently it is on a long term sell alert, triggered on January 21 2010. Retracement from its peak has now exceeded the 50% Fibonacci level.

These are the monthly buy and sell signals:

The ROI of these signals is shown on the table below:

Using the signals, the ROI is +62.45%, which compares very favorable to a buy and hold approach (+10.71%).

These signals and charts are generated by the INO alerts tool that we use (click for risk-free trial, you can try it yourself on any other symbol).

Saturday, February 6, 2010

Precious metals ETFs: what is overbought and what is oversold

Gold and precious metals have dropped significantly in recent weeks. The ETFs that track them have moved up or down considerably in response.

The RSI daily, weekly, and monthly values provide a very good indication of overbought and oversold levels, an investor can select the appropriate investment horizon, short term, medium term, and long term respectively.

Here they are ordered by RSI daily (short term):

Considerably oversold are:

JJM: Industrial metals
DBB: Base metals
SLV: Silver
AGQ: Ultra silver
DBS: Silver

Overbought are:

ZSL: Ultrashort silver
PTD: Ultrashort platinum

There is a very common team here with silver everywhere. The table above also shows the RSI weekly and monthly, for investors looking longer time frames.

These are the ETFs and their names and average volumes:

Friday, February 5, 2010

Going nuclear: Uranium ETFs

Editor note: Please note that we have expanded the coverage of nuclear ETF and companies in various more recent posts (click here). or here. We also track them live here.

For investors interested in uranium and nuclear companies, here are a couple of ETFs: NLR and U.


This ETF tracks nuclear companies. Its performance is +21% in 1 year.

Top 3 holdings are Constellation Energy, Cameco, and Uranium On.

Top 10 holdings:
  • AREVA CEI.PA 4.35%
  • CAMECO CP CCJ 7.96%
  • Electricité de France N/A 8.7%
  • Energy Resources of Australia Limited N/A 4.41%
  • JGC Corp. N/A 4.57%
  • Mitsubishi Heavy Industries, Ltd. N/A 7.47%
  • Uranium One Inc UUU.TO 4.98%


As for the commodity itself, U is the symbol for Uranium Participation Corporation in Toronto. This is an investment holding company which invests all of its assets in uranium oxide in concentrates and uranium hexafluoride (i.e., uranium)

Uranium is currently priced at $42 per pound, it was $150 in the past. Analysts expect it to go back to $150 in 2 years as there are supply constraints. Cameco's Cigar lake mine is no where near production.


Very long term will go into oversupply (2015 or later) as both Cameco's and BHP's mine production ramp up.


NLR: Market Vectors Nuclear Energy ETF (the Fund) seeks to replicate the price and yield performance of the DAXglobal Nuclear Energy Index (DXNE or the Index) by investing in a portfolio of securities that generally replicates DXNE. DXNE, calculated by Deutsche Borse AG, is a modified market capitalization-weighted index consisting of publicly traded companies worldwide that are engaged in the nuclear energy industry. Companies eligible for inclusion in Index should be engaged in various aspects of the nuclear energy business with market cap exceeding $150 million; should have worldwide daily average trading volume of at least $1 million over past six months and in each of the past two months, and should have maintained monthly trading volume of 250,000 shares over past six months. The Index includes seven major sub-sectors, including mining, enrichment, storage, equipment, plant infrastructure, fuel transport and energy generation. Its investment advisor is Van Eck Associates Corporation.

U: Uranium Participation Corporation (Uranium Corp) is an investment holding company. The Company invests all of its assets in uranium oxide in concentrates and uranium hexafluoride (collectively uranium). The objective of the Company is to provide an investment alternative for investors interested in holding uranium. Denison Mines Inc. is the manager of Uranium Corp.

Thursday, February 4, 2010

Investing in commodity ETFs for diversification

For investors interested in commodity ETFs, there are lots of them on the market. Many are tracked live here.

As with the global ETFs,  correlations are extremely important for proper diversification. Below is the updated table of correlations of all commodity ETFs that trade in the U.S. with values from December 1st 2009 to January 31 2010.

The green shaded cells hows those pairs of commodities that are highly positively correlated (over 0.85). Interestingly, the table also shows the negative correlations, which would be shown in red. There are none.

Regardless, what investors should look for are the non correlations, which are marked in blue text and shaded in light yellow.

These are the best pairs:
  • COW and JJA, GRN, JJO, RJA
  • DBA (agriculture) and JJT, GRN (global carbon)
  • JJS and DAG
  • PWND and GRN (wind evergy and global carbon)

GRN (global carbon) consitently comes up in the list of uncorrelated ETFs.

ETF symbols and names:

Top ETF picks for seasonality

Dan Vialoux presented his top three ETF pics for seasonality plays. Mr. Vialoux, from Timing the Markets, researches and analyzes the periods in a  year when stocks and comodities to their best.

1. ZEO, one of the new BMO ETFs discussed here for oil companies, but equally weighted. He emphasizes the equally writhed aspect. You do not want a market cap weighted index because one single stock would dominate the index. That would be Suncor in the oilers.

The seasonality is from Feb 25 to May 9, when this ETF scored positive 14 out of 15 periods.


2. ZMT: Base Metals, equal weighted, and currency hedged. The currency hedged aspect is because typically the USD does well from January to March, so investors elsewhere should hedge.

Seasonality is from Late Jan to early May, when15 out of the last 20 periods were positive.


3. PPLT: Platinum

Launched 3 weeks ago, the ETF is fully-backed by the metal (it is not a futures-based ETN which suffers from rollovers).

Watch video.

Wednesday, February 3, 2010

Dividend ETFs: looking for the right value

Here is the current stats of all dividend ETFs that trade in the U.S.

The table shows the relative strength values in three timeframes: short term (daily), medium term (weekly), and long term (monthly). These provide an excellent indication of whether the ETFs are overbought and oversold, and, accordingly, which are the best ones to buy or to sell.

Ordered by RSI daily:

We see that only the Canadian ETFs are bear oversold levels (XDV, CIH, CDZ), DHS being the closest US version.

The average RSIs are shown at the bottom of the table. These are around the 50 level, indicating neutral conditions.

These are the ETF names and their average trading volumes:

An ETF for coal: the new black gold

Note that all commodity ETFs are tracked live here.

Coal has been called "black gold", a name not only reserved for oil. In fact, coal has returned far more than oil since Jan 2009. The  ETF that tracks coals is KOL.

Top holdings, symbol and percentage of the ETF:

China Coal Energy Co. Ltd. N/A 7.28
China Shenhua Energy Company Limited N/A 7.69
Joy Global Inc. JOYG 5.21
PT Bumi Resources N/A 8.39
Yanzhou Coal Mining Company Limited N/A 4.21

Perfomance chart of all commodity ETFs (see the last bar at the right):

To be in the ETF holdings, the company has to have 50% of its revenue from coal.

Coal has cooled lately though:

Tuesday, February 2, 2010

New global ETFs: Poland, Indonesia, New Zealand, and China

Four new global ETFs are being launched by iShare:
  • iShares MSCI Poland Investable Market Index Fund (prospectus)
  • iShares MSCI China Small-Cap Index Fund (prospectus)
  • iShares MSCI Indonesia Investable Market Index Fund (prospectus)
  • iShares MSCI New Zealand Investable Market Index Fund (prospectus)
Please note that we track all global ETFs live. These will be added as soon as there is enough volume.

With the exception of the New Zealand-specific ETF, iShares is not the first to enter any of these markets. Its move testifies to growing investor interest in some of the booming segments of the global ETF space.
The iShares Poland is the 2nd ETF that cover the market, following PLND's lead.

The iShares China fund will invest in companies that fall in the bottom 14% of the Chinese equities market by market capitalization.

iShares Indonesia and New Zealand ETFs will invest in the largest market-cap companies listed in those countries. The New Zealand ETF is the first that cover that country (aside from the great currency ETF BNZ).

Profiting from oil going up or down

Oil has been trading in cycles of roughly 10 to 12 weeks (video). One way to profit from oil going up or down is through the use of options straddles and strangles.

Here are February straddles and strangles for USO, the popular oil ETF

The table above shows the maximum moves required for each position to achieve profitability, as well as the number of options to buy calls and puts) for a $2,000 investment in each position. The positions are 37-37, 38-36, and 39-35.

Actual moves needed may be smaller as there are still 17 days to expiration. So, if an investors believes oil will move 4 to 7%, either way, these are good ways to do it.

These options were computed with the Straddles Calc online tool.

Please do your own due diligence as options are very risky.

Monday, February 1, 2010

Technical Analisys: Using 21-day moving averages to predict market direction on ETFs

Greg Troccoli, director of DWS Investments, Deutsche Bank Group, explained on BNN TV today why he uses 21-day moving averages. It is 21 days because there are 20 to 22 trading days in  a month. It gives an indication of which way the crowds are positioned. He is looking for a 20-25% correction on the markets.

He shows this example for SPY, the extremely popular S&P500 ETF:

In the last 6 months there There were less than 12 days when the slope was negative., therefore it was time to be long the market. However, if we look at the trailing end of the curves, it has fallen, therefore he is currently short on the markets.

Here are the 21-day MA charts for the popular QQQQ (Nasdaq), XLF (financials), and IWM (Russel 2000) ETFS:

Clearly they all show similar patterns. Whether the move down is sustainable remains to be seen. The next 5 or 6 days are important if the slope turns back up then most rallies will be sold into.

Also discusses gold, where the key level is 1070.

Watch video.

Proper stock diversification with global ETFs

The table below shows the correlations of all country and global ETFs (tracked live here) for the period December 2009 and January 2010.

While many investors wish to diversify from the US dollar and into foreign markets, it is very important that investors look at the correlations between what they are buying. Correlations are a great tool for  diversification.

(please click to enlarge)

Those pairs shaded in green and red should be avoided. The best uncorrelated pairs are shared in light yellow with blue text. There are many great pairs and some very exotic combinations:
  • FXI and EIS and IDX
  • PJO and EWI
  • EWP and EWJ
  • ECH and EWG and EWK
  • GXC and EWJ
  • TUR and BRF
These are the ETF names and their average daily trading volumes: