Japanese Yen - FXY

The Japanese Yen index has crossed the resistance (green line) to the upside 2 days ago.
A bullish divergence appears between the price and the MACD lines: a sign that a trend reversal may have occurred.

I will buy the yen via the Rydex CurrencyShares Japanese Yen Trust ETF (ticker: FXY).
See the weekly and daily charts below.

Weekly chart:


Daily chart:


I plan to buy at a price of 103.20$ and add shares if and when price reaches n°2 on the chart (stop loss @ 100.00$).

Copper chart analysis

Let's have a look at this long-term (monthly) chart of copper prices:
1) Impressive downtrend of copper price since early 2008
2) Price touched a bottom at 130$ at the end of 2008
3) 130$ was interestingly enough the resistance level during the previous 20 years.
4) Price has now bounced back and is currently at 207$

Now let's close up to the weekly chart:

1) We can clearly see that the trendline has been broken early March at the price of 170$
2) Next resistance level is around 310-320$

Now let's examine the daily chart:


1) next buy trigger is at 220$
2) to invest in copper, you can focus on copper mining companies such as Freeport McMoran (ticker: FCX), listed on the New York Stock Exchange (see chart below), or on countries whose economy largely depends on copper mining such as Chile (see my previous post on ECH, the ETF that is tracking the Chilean stock market index).

Natural Gas (UNG) chart analysis

Chart analysis of natural gas:
1) the above monthly chart shows an impressive downtrend (roughly 75%) since mid-2008 !
Hedge fund manager John Arnold (a former trader at now-defunct Enron) made billions in fees for himself last year by betting on this downtrend using high leverage
2) Support (red zone) is around 1.500-2.000
3) Still time to short? my gut feeling says yes as the downside trendline has not been broken to the upside so far (see the daily chart below)


How can you short gas? either using futures or more simply by shorting the ETF US National Gas Fund (ticker: UNG). See chart below. I would short when it rallies back to 15.0.

Money market fund assets as a percentage of the SP 500 market cap

This chart makes for an interesting reading:

1) over the last 30 years, the yield on the US Treasury Bills has never been so low (0.38% as of April 4, 2009) while the amount of cash invested in money market funds has never been so high (54% as a percentage of the SP 500 market capitalization).

2) when a big amount of that money that is currently on the sidelines will be again invested in equities, the stock market could rise a lot like it did back in 2003.

So you'd better be prepared! ;-)

SP 500 Index

The S&P500 Index represents the 500 biggest companies listed in the US stock markets.

Let's have a quick look at the quarterly chart (the very long term view):
1) we had a formidable bull market from 1980 till 2000: 20 years of continued uptrend
2) the index is now in oversold territory (see the stochastics graphics). This did not happen since 2001 after the internet bubble krash.
3) the last candlestick on the chart (that small body with a long tail called a "hammer") is a bullish sign for the future if confirmed by a bullish candlestick during the next quarter.
4) My gut feeling? we are in a primary bear market for equities and that won't change for a while even if there might be some rallies from time to time. Story is different for China though: the next bull market has already started.

Let's look at the S&P500 daily chart now:


There is a resistance level that needs to be crossed to give rise to the next leg up. The buy trigger is at 875. If we can cross this level next week, the market should continue its move up.
My gut feeling: we will retrace to around 800 before continuing to go up.

China 2009-2010 forecasts

Goldman Sachs forecasts for China:

"We have raised our real GDP growth forecasts for 2009 and 2010 given that 1) policy stimulus has been more aggressive and 2) the domestic demand response has been stronger and has occurred earlier than we originally forecasted. Our new forecasts predict real GDP growth of 8.3% in 2009 (versus 6.0% previously) and more importantly, to reach 10.9% in 2010 (up from 9.0%), significantly above consensus We expect above-trend growth in 2010 to be largely driven by stronger investment growth, especially from private investment."

The Goldman Sachs report is available by clicking here.

One more reason to be bullish for a long-term investment in the iShares FTSE/Xinhua China 25 Index Fund ETF (ticker: FXI). See my previous post of April 11.

Summary of current positions

Chile Index Fund (ECH)

Further to my previous post on ECH, the price is still above the 200 day moving average and is accompanied by a huge spike in the volume of transactions. This is a bullish long-term signal. I buy this ETF at 37$ with a stop loss at 33$.

United States Oil Fund (USO)

The United States Oil Fund (USO) is an exchange traded security designed to track the movements of light, sweet crude oil ("West Texas Intermediate"). USO issues units that may be purchased and sold on the NYSE Arca.
Let's have a quick look at the chart:
1) In July 2008 we had a sell signal when the price crossed the 35-day moving average to the downside
2) Trendline was broken at the end of February 2009: a first buy signal
3) The moving average is now moving up after having gone down over the last 8 months.
4) Price has now crossed the 35-day moving average to the upside: another buy signal and an indication that oil price may have finally have reached its bottom mid-February.
I buy USO today at 30.28$ with a stop loss at 25.5$.

My readings this morning

- Soros Says Gain in U.S. Stocks Is ‘Bear-Market Rally’ : The “bugaboo of nationalizing banks,” which the Obama administration wants to avoid, means “we are nationalizing only one side of the balance sheet,” Soros said. “We gradually take over the deficits on the balance sheet. But we aren’t actually going to benefit from the banks recovering.”

- Skype founders seek to buy back company from eBay

- Dollar and the Euro to Go Toe-to-Toe. Investors Find It's No Longer Clear Which Currency Is Best in Terms of Risk

PowerShares DB Commodity Index Tracking ETF (DBC)

DBC is a rules-based index composed of futures contracts on six of the most heavily-traded and important physical commodities in the world: crude oil, heating oil, gold, aluminum, corn and wheat (more information at: http://www.dbfunds.db.com/dbc/index.aspx).

What can we learn from the chart analysis of this commodity index ETF?
1) A much higher volume of transactions over the last month: denotes stronger interest from investors.
2) A bullish divergence between the price and the MACD (Moving Average Convergence Divergence): the price has been decreasing since mid-2008 whereas the MACD lines moved higher since November 2008. It is a signal that a trend reversal is happening.
3) The 50 day moving average was acting as a resistance since July 2008. Now that the price crossed this moving average to the upside mid-March, it is acting as a support.

Conclusion? I buy at 21$ and plan to hold it as a long-term investment.

Chile Index Fund

1) The chart of the iShares MSCI Chile Index Fund ETF (ECH) has been making higher lows since last October.
2) The volume of transactions has been increasing substantially over the last 2.5 months.
3) Before buying this ETF, I want to see the price break the resistance and the 200 day moving average to the upside.

Shanghai Composite Index

A quick look at the weekly chart of the Shanghai stock market shows us that:
1) This index has crossed the 40 weeks (=200 days) moving average to the upside at the end of March '09
2) This is a major long-term buy signal
3) Last time this happened was at the end of 2005. After that, the index stayed above that moving average during the next two years (2006 and 2007)
4) My call? I will buy this market through the FXI ETF and hold for the long-term. China will be the first country to come out of this crisis.
5) FXI is the ticker of the iShares FTSE/Xinhua China 25 Index Fund ETF listed on the NYSE.

Market Volatility Index (VIX)

The volatility index shows the state of nervousness of the market. When it goes up, the market goes down and when it goes down the market goes up.
Let's look at the chart:
1) Index has now clearly dropped below the 200 day moving average (see yellow tag on the chart). This moving average (the blue line) is a proxy for the long-term direction of a market.
2) Does this mean that the bear market is over and that a bull market has now started?
3) Let's see if next week the VIX tries to retest the 200 day moving average. If at the end of the week, it is still below this average, I expect this market rally to continue.

Bovespa Index (Brazil): chart analysis

Let's have a look at the chart of the Brazil market index:
1) The index crossed the 200 days simple moving average on Thursday 9 April : this is a sign that long-term investors are watching before entering into a market (see yellow tag on the chart);
2) Major resistance (green line) was crossed to the upside a few days ago;
3) Index made consecutive higher lows since November 2008.
Do I buy Brazil? mmmhhh ... not yet. Waiting to see whether it's a fake move or not. I'll keep you posted when I enter into a trade.
How to buy Brazil? there are several ETF's out there such as the iShares MSCI Brazil Index Fund ETF (ticker: EWZ) listed on the New York Stock Exchange.

UK Sterling (GBP) chart analyzis

A quick look at the British pound index:
1) GBP index is currently stuck in a channel
2) 20 day moving average crossed the 50 day moving average to the upside (see the zone highlighted in yellow)
3) bullish divergence: price is decreasing whereas MACD lines are going up: this is a sign of a potential trend reversal
4) buy trigger: when the price goes above the resistance at 1.5000 (see the red line on the chart), be ready to go long.
If you prefer to avoid trading on the Forex directly, you can buy the Rydex CurrencyShares British Pound Sterling Trust ETF (FXB) (see chart below).