Saturday, January 30, 2010

The Nasdaq has broken down: ETFs to use

The NASDAQ Composite index (COMP) has broken its trendlines and is headed down, way down. The analysis was made by INO in this excellent video (click link to watch)

The above image capture shows the trendline touching three points, and at the right corner  the price breaking below the trendline.

Potentially the index will go down all the way to 1,671, or 1,796.

ETFs to play this:

ONEQ is a Fidelity ETF that tracks the COMP, and the popular QQQ is closely related (it's the Powershares version of Nasdaq 100 index). Here are the charts for both of these showing trendlines and their corresponding Fibonacci levels (please watch video for the meaning of those).:



You can use this tool yourself through a trial.

Thursday, January 28, 2010

A new gold-hedged S&P500 ETN

A new ETN started trading today, symbol SPGH, the UBS S&P 500 Gold Hedged.

It tracks the S&P500 while providing a hedge against a declining U.S. dollar, gold hedged index.

SPGH will track the S&P 500 Gold Hedged Index, a benchmark designed to measure the performance of an investment strategy long the S&P 500 and hedged against fluctuations of the dollar relative to gold prices.

The gold futures are not held to maturity, but roll to the next designated contract on the fifth-to-last business day to expiration. The “roll” process occurs five times per year, however the ETN is rebalanced monthly so that notional value of the gold futures is equal to the value of the equity positions.

While monthly gold contracts are available, futures expiring in February, April, June, August, and December tend to be the most liquid

The Gold Hedged Index will outperform an unhedged S&P 500 when gold appreciate relative to the dollar and and underperform when gold depreciates. It has outperformed the unhedged S&P 500 by 9% per year since year 2000.

FAS FAZ losses pile up: $3.4B. Next "eclipse" $30.62

FAS and FAZ are the infamous financial 3X leveraged ETFs that have cause so much grief and losses to their investors. As of today, the losses are just over $3.4B (out of an initial market cap of $6B).

FAS and FAZ had splits in July 2009. At that time, several 'eclipses" had ocurred (when the nominal prices were identical). After the split, FAS went to $40, and FAZ to $60. They soon had an eclipse, when FAS went higher and FAZ dropped, please see initial crossing on chart below.

As these instruments lose value over time, it is only a matter of time for another eclipse to occur. The next eclipse , computed at 11AM today, will be at $30.63.

FAS * (1+x) = FAZ (1-x)
x= 0.568

Therefore, as of right now, the next eclipse will occur when FAZ rises 56.8%, and FAZ drops 56.8%, bringing both to a price of $30.62. (FAS is currently at $70.98, and FAZ is at $19.53)

These values of course change every minute, as FAS and FAZ contnue to go up and down, losing more money. You can bet that the next eclipse in fact will be much lower than $30.62.

Wednesday, January 27, 2010

The Fed and the GLD ETF

The FOMC has decided to hold interest rates steady and indicated it will remain low for an extended period. In light of this, much volatility is expected to continue with gold.

Here are straddles on the popular  GLD ETF.

These were calculated using StraddlesCalc, which shows the maximum move required to achieve profitability. For example, if GLD moves 6.80% by April expiration, then the April straddles will make money. Please do your own due diligence.

Tuesday, January 26, 2010

Analysis of USO, oil ETF

USO is the best know oil (commodity) ETF.

Long term signals are still bullish:

Short term signals are bearish:

Moving Averages:
  • The 20 and 50 day moving averages indicate that USO may be in a bullish trend. This is because the 20 day moving average is above the 50 day moving average.
  • USO is trading below its 20 day moving average. However, this moving average is trending higher which shows that there has been buying interest in this stock.
Bollinger Band:
  • USO is trading near its lower Bollinger Band. This means that the stock price is cheap relative to the action over the last 20 days.
  • The MACD is presently offering a bearish signal because it is below the signal line, a 9 day moving average, and less than 0, which means that the underlying moving averages are trending lower.
OBC - On Balance Volume
  • The On Balance Volume indicator (OBV) presently offers a bearish signal. This is because the slope of the indicator is negative and shows that there is a lack of buying interest.
Stochastic Oscillator

  • The Stochastic Oscillator is registering a weak bullish signal as the %K has crossed above the %D. However, the oscillator is currently below the critical value of 20, identifying USO as oversold. Watch for the oscillator to move above 20 which will increase the bullishness of this signal.

Daily, Weekly and Monthly values indicate that short term USO is slightly oversold, medium and long term is neutral:


Volume Rate of Change
  • The Volume Rate of Change is not presently giving a clear signal.

Access alerts tool here (absolutely risk-free trial) or the alerts sent by email.

    Monday, January 25, 2010

    New BMO Canadian ETFs

    BMO has just launched several new ETFs. The other Canadian banks continue to be asleep at the wheel.

    There are several new attractive ETFs, including junior gold companies, and the QQQ hedged to Canadian dollar.

    Here they are:
    • ZFS Short federal bond
    • ZPS Short provicial bond
    • ZCS Short corporate bond
    • ZLC Long corp bond
    • ZGB Canadian govt bond
    • ZAG Canadian aggregate bond
    • ZHY High yield us corp bond hedged
    • ZDJ DJIA hedged to CAD
    • ZUE US equity hedged to CAD
    • ZQQ Nasdaq hedged to CAD
    • ZDM Intl. equity hedged to CAD
    • ZEM Emerging markets
    • ZGI Global infrastructure
    • ZCH China equity hedged to CAD
    • ZID India hedged to CAD
    • ZMT Base metals hedged to CAD
    • ZCN Canada Titans 60
    • ZEB Equal weight banks
    • ZEO Oil & gas
    • ZUT Utilities
    • ZGJ Junior gold

    New Chinese ETF: CHIM

    Note that all Chinese ETFs are tracked here.

    There is a yet new Chinese ETFs on the market, launched last week: CHIM, with an expense ratio of 0.65%.

    Global X's China Materials ETF tracks the S-BOX China Materials Index, which comprises 28 securities of companies operating in the material sector in China.

    Since inception, CHIM has only lost money:

    Then again, its launch date was the worst possible.

    From a subsector level, about 66% of the index is allocated to metals and mining companies, and the remaining tied to chemical names.

    Largest holdings include Sinofert Holdings, Fufeng Group, Aluminum Corp. and Shougang Concord International.

    Prospectus is here.

    S&P500 current technical analysis - through SPY

    SPY is the ETF that tracks the S&P500 500. It is the most heavily traded ETF.

    SPYs current RSI 7 values are 25.15 on the daily, indicating that ii is oversold in the short term, 46.55 in the weekly, and 63.11 on the monthly. So it is still close to overbought on the long term.


    Trade Triangles Alerts

    Here are the current monthly and daily signals:

    Clearly, the long term trend is still a buy, however, the short term is sell. Backtesting of the signals:

    The ROI since October 2006 is +15.9%, compared with -7.65% of buy and gold.
    You can run the tool yourself by using this link for a risk-free trial.

    P/E, and Book Indicators:

    Moving Averages:
    • The 20 and 50 day moving averages indicate that SPY may be in a bullish trend. This is because the 20 day moving average is above the 50 day moving average.
    • Last Wednesday, SPY closed below its 20 day moving average. This is generally considered to be an indication of a bearish trend.
    Bollinger Bands:
    • SPY is trading below its lower Bollinger Band. Relative to recent price action, the stock is currently overextended to the downside and due for either a pause or retracement.
    • SPY has been relatively stable recently. This is evidenced by the width of its Bollinger Bands which are tighter than is normal due to the low volatility.

    Stochastic Oscillator:
    • The Stochastic Oscillator is registering a bearish signal as the %K is below the %D. However, the oscillator has dropped below the critical value of 20 and SPY is now oversold.
    On Balance Volume Indicator:
    • The On Balance Volume indicator (OBV) shows that longer term accumulation has given way to near term accumulation selling pressure.

    • The MACD is presently bearish because it is below the signal line, a 9 day exponential moving average, and shows that upward momentum has begun to wane. However, it is still above the critical level of 0 that defines when the underlying moving averages are bullish or bearish.

      Note: The last chart is Volume Rate of Change, which is not presently giving a clear signal.

      Saturday, January 23, 2010

      The XLF ETF: buy and sell signals

      XLF is the popular financials ETFs. Year-to-date is has returned -1.8%, which is really not such a large drop in spite of the recent news affecting banks. This would indicate that stocks remain overbought.

      XLF's current RSI values are 25.93 (daily), 41.5 (weekly), and 49.59 (monthly). This indicates a short-term oversold condition, but not so in the long term, where it is actually neutral.

      To get these signals for XLF, or any other stock, please just enter the symbol in the trend indicator tool (click to access). or use this link for a tool trial (100% risk-free).

      Friday, January 22, 2010

      Profiting from silver going up or down

      SLV is the ETF that tracks silver. Please click here to get buy/sell alerts on SLV.

      These are the current short term and medium term straddles as of 11:20AM. These allow investors to profit whether the underlying moves up or down, as long as it moves.

      These were computed with StraddlesCalc tool (click to access), which shows the maximum move required to achieve profitability.

      The short term move needed is just over 7%, and the long term move is approximately 18%.

      South America: A tale of two countries; Which country is hot?

      Which country is hot in South America? Brazil?


      YTD (Year-to-date) performance:

      EWZ (Brazil ETF): -7%
      ECH (Chile ETF): +7%

      Now Brazil has been affected by currency moves as the Real has dropped nearly 4% this year. This should have boosted EWF further however.

      In the case of Chile, the great SQM company has a lot to do with it as it makes up quite a chunk of the ETF.

      Thursday, January 21, 2010

      Options for the GLD ETF, February, June, and 2010

      The GLD ETfs is the most popular gold ETF. It returned 25% in 2009:

      Is gold going up or down? Here are straddles for February and June of 2009, and January 2010. These allow the investor to profit either way, as long as gold moves the required amount.

      We used StraddlesCalc to compute the maximum moves required for profitability. If GLD moves that amount by the date indicated, the position will be profitable.

      Current best gold and metal ETFs to buy and to sell

      Gold has suffered a correction since mid December 2009. below are tables showing the current status with all gold ETFs in terms of valuation. We computed the RSI daily, weekly, and monthly values.

      Short term:

      By ordering the RSI daily values we can obtain a measure of what is overbought and oversold in the short term:

      In the short term we see that PTD, GDX, and the Canadian HGU are oversold. There are no overbought ETFs in this list.

      Long term:

      Similarly for the long term, we use the RSI- monthly values:

      We can see that ZSL, GLL, DZZ and DGZ are oversold. here are several overbought ETFs, including the most traded of all, GLD. The worst are PGM and DBB.


      Over takes into account all time frames, averaging all three RSI values.

      Overall, only PTD is oversold.


      Here are the ETF names and average daily volumes:

      Wednesday, January 20, 2010

      ETFs for mining companies and metals, BHP, Rio Tinto, Vale; Copper, Nickel

      Today BHP announced a new $220M Canadian project for Phosphate. Looks like fertilizers are very high on these companies radars. Last week, VALE announced its intentions to acquire the phosphate assets from BG in Brazil.

      BNN had a nice segment today on ETFs and ETNs that track mining companies, as well as the metals themselves,

      Watch video

      Tuesday, January 19, 2010

      New physically-backed platinum and palladium ETFs launched

      PPLT and PALL are two new precious metals just launched. Both are backed by the physcial 9real) metals stored in vaults.

      Their MER is 0.6%.

      HardAssetsInvestor's Lara Crigger reports that "by the end of the first day of trading, assets in the ETFS Platinum Trust and ETFS Palladium Trust  swelled to over $100 million, with over 400,000 shares traded in PPLT and 295,000 shares traded in PALL. 

      Ms. Crigger asked the issuer a great question on how the ETfs can affect the market:

      "Crigger: To that end, the platinum and palladium markets are much smaller than gold, and even silver. Are you running into concerns that your funds might actually move their markets?
      Tuckwell: No, not for the sort of amount that we're anticipating. To move the market, you'd really have to have millions and millions of demand - and a market that hasn't seen the demand fall off in the underlying metal.
      These are the sorts of markets that are smaller, and therefore if that demand gets large enough, it could start to be an issue. But we've obviously been in dialogue with the SEC on this issue, just to make sure investors are protected. The last thing we want to see is any short squeezing in the market, because all that can ever lead to is prices temporarily jumping and then coming back, and the fund won't do well as a result. So we have every interest to make sure that there's a free market out there, and that it's a properly priced market, too".

      New currency-hedged global ETF: protect foreign investments when the US Dollar goes up.

      Investors seeking to diversify holding into foreign markets have been flocking to global ETFs (live tracking). However, because the US dollar nearly collapsed in 2009, a rebound may happen at any time. At that point, any holdings in foreign currency could suffer big losses. This happened in late 2009 when the US dollar rebounded a little.

      So WisdomTree has just launched a currency-hedged ETF. it is actually an ETF of ETFs, investing in WisdomTree Europe Total Dividend Fund DEB, WisdomTree Japan Total Dividend Fund, DXJ, WisdomTree Pacific ex-Japan Total, DND.

      One of the potential issues with ETFs is the correlation of the underlying components. In this case, here it is for Q4 2009:

      Two out of 3 is not bad. DND and DEB are correlated.

      In term of currencies, this the exposure:

      1. EUR
      2. GBP
      3. JPY
      4. AUD
      5. CHF
      6. SEK
      7. SGD
      8. NOK

      As you can see, the Euro makes up for nearly 50%.

      HEDJ is still quite illiquid, see chart below:

      Its MER is 0.58%.

      WisdomTree's COO Bruce Lavine said "there are more than 250 international-stock ETFs on the market, but all come with foreign-currency exposure. The dollar has fallen quite a bit, but if the economy improves some think we could see a stronger dollar,"

      ETF description:

      WisdomTree International Hedged Equity Fund seeks investment results that closely correspond to the price and yield performance, before fees and expenses, of the WisdomTree DEFA International Hedged Equity Index.

      The Fund employs an investment approach designed to track the performance of the WisdomTree DEFA International Hedged Equity Index. The Index and the Fund are designed to provide exposure to equity securities in Europe, Far East Asia and Australasia, while at the same time hedging exposure to fluctuations between the value of the U.S. dollar and selected non-U.S. currencies in these regions. The Index and the Fund seek to track the performance of equity securities in these developed markets that is attributable solely to stock prices without the effect of currency fluctuations.

      The WisdomTree International Hedged Equity Fund operates as a “fund of funds and attempts to achieve its investment objective by investing primarily in other WisdomTree exchange traded funds . Instead of investing in several hundred securities, the Fund now invests primarily in the WisdomTree Europe Total Dividend Fund, Japan Total Dividend Fund and Pacific ex-Japan Total Dividend Fund. By investing in these ETFs the Fund will achieve exposure to the securities in the WisdomTree DEFA International Hedged Equity Index.

      Monday, January 18, 2010

      A look at global ETF: the most overbought and the most oversold

      The RSI 7 values of all global ETFs were computed, and then sorted by monthly values. This provides an very good indication of the top oversold and overbought countries. Here they are:

      Top 20 most overbought:

      IDX (Indonesia) is the most overbought of all.

      Top 20 most oversold:

      FXP is the China double short, not really a good ETF to follow for the long term. The next most oversold is GULF (middleEast dividend).

      These are the ETF and their average daily volumes:

      Friday, January 15, 2010

      USO, UNG, and now... a new multi commodity ETF

      The same company that brought us USO, UNL, UGA and UNG ,  U.S. Commodity Funds, intends to launch a diversified commodities ETF. The paperwork was field with the SEC in late 2009. The ETF will be based on an index created by SummerHaven Index Management.

      Let's hope it will not suffer for the terrible contango effects and that it does not roll over contracts every month like UNG!

      The SummerHaven Dynamic Commodity Index (SDCI) is an actively managed commodities futures index with positions in energy, precious metals, industrial metals, and agricultural commodities (livestock, grains and softs).

      Each month, 14 commodities are chosen from a pool of 27, based on fundamental indicators, weighting the selected commodities equally in the portfolio. The index is rebalanced monthly, making the SDCI the first "long-only active benchmark for commodity investors."

      Thursday, January 14, 2010

      The currency ETFs status

      Reports today suggests that the Brazilian central bank will have to raise rates later this year to combat a very hot economy. The ETF to track the Brazilian real is BZF.

      The table below shows all currency ETFs in terms of their overvalued and overbought status.

      As you can see, UUP is very nearly oversold by all measured (long, medium, and short terms), as is EUO (ultra-short Euro).

      At the other side of the spectrum, nearly overbought on all measures are AYT (Asia 8), ICN (Indian Rupee), FXA (Australia), and FXC (Canada).

      BZF is in the middle of the table but is long term nearly overbought.

      Focus on China ETFs (Video)

      Speaking of China ETFs, BNN had a segment exactly on China ETFs.

      Watch video.

      Wednesday, January 13, 2010

      All About China ETFs

      China has just decided to curb lending sending stocks crashing. This post lists all ETFs that invest in China. There are nearly 20 ETFs now, including the dreaded leveraged 2X and 3X versions.

      Here they are, with the ROI since Jan 2009 and January 2010. Pleace click to enlarge.

      Descriptions, where available:
      • CYB: The investment seeks to achieve total returns reflective of both money market rates in China available to foreign investors and changes in value of the Chinese Yuan relative to the U.S. dollar. 
      • EWH: The investment seeks to provide investment results that correspond generally to the price and yield performance of publicly traded securities in the Hong Kong market, as measured by the MSCI Hong Kong index. 
      • FXI: The investment seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the FTSE/Xinhua China 25 index.
      • GXC: The investment seeks to replicate as closely as possible, before fees and expenses, the total return performance of S&P/Citigroup BMI China index based upon the Chinese equity market. The China index is a market capitalization weighted index that defines and measures the investable universe of publicly traded companies domiciled in China, but legally available to foreign investors.
      • HAO: The investment seeks to replicate, net of expenses, the AlphaShares China Small Cap Index. The fund will invest at least 90% of assets in common stock, ADRs, GDRs, ADSs and IDRs that comprise the index
      • PGJ: The investment seeks results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the Halter USX China index. The fund normally invests at least 80% of total assets in equity securities of companies deriving a majority of their revenues from the People's Republic of China.
      • TAO: The investment seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the AlphaShares China Real Estate index. 
      • XPP: The investment seeks daily investment results, before fees and expenses, which correspond to twice the daily performance of the FTSE/Xinhua China 25 Index. 
      • FXP: The investment seeks daily investment results, before fees and expenses, which correspond to twice the inverse of the daily performance of the FTSE/Xinhua China 25 index. 
      • CZI: This fund seeks daily investment results of 300% of the inverse (or opposite) of the price performance of the BNY China Select ADR Index (the China Index). 
      • CZM: this ETF seeks daily investment results of 300% of the price performance of the BNY China Select ADR Index (the China Index).

      Access site shows shows all China-related ETFs, their performance for the day, as well as YTD and since Jan 2009 where available.

      Canadian dollar pushes to parity - again: an ETF to profit from

      The Canadian dollar is almost reaching parity level with the US dollar - again. It touched 97.5c yesterday.

      BNN had a segment on the loonie's push to parity. The loonie dropped a little today after the Bank of China increased reserved requirements to curb lending. Fundamentally, however, the Canadian dollar remains in a bull market.

      The biggest risk is rewards favors short CAD now, but if it pushes 98 cents it could go to 1.02.

      Watch video.

      An easy way for USD-based investors to use the CAD is through the FXC ETF. Here is the 5 year chart, also showing are the buy and sell monthly alerts.

      A buy and hold strategy would have returned a reasonable 9.25% since 2006.

      However, by using the buy and sell alerts of the tool, the performance rises to 40.71%, which is excellent for currencies. Please click to enlarge:

      To use the tool, please use this link for a risk-free trial. You can use it on any currency ETF, or any stock actually.

      Tuesday, January 12, 2010

      The effect of ETF fees on their performance and ROI

      This study shows the ROI from Jan 2 2009 until today of all ETFs on the market ordered and grouped by management fees.

      There are three group separations we considered: in groups of 100, in groups of 200 and in two groups of 350 each.

      The lowest denominated groups have the lowest management fees. For example, these are the cheapest 40 ETFs:

      These are the most expensive 40 ETFs:

      These are the performance results:

      In groups of 350:

      The most expensive ETFs have a slightly better performance than the cheapest half, but the difference is insignificant

      In groups of 200:

      The 2nd and 3rd most expensive groups perform better than the cheapest group, however, the worst performers are actually the most expensive group.

      In groups of 100:

      Similarly, the 2nd to and 2rd to last most expensive groups perform better than the cheaper group, by as much as 14.51%. However, the most expensive group (actually only the top 67) performed very poorly, almost 40% worse than the best group.

      Note that some of the 3X ETFs are not included as their exact fees could not be determined. Performance of 3X ETfs are terrible in the long term. With this caveat, this data suggests that there is value on higher management fees in ETFs, as long as thiose fees are kept below a certain threshold. In this case the threshold is around 0.75%.