Sinovac Biotech: +56% today !

BEIJING, Aug. 31 /PRNewswire-Asia/ -- Sinovac Biotech Ltd. (NYSE Amex: SVA),
 a leading provider of biopharmaceutical products in China, announced 
today that Sinovac's H1N1 vaccine has passed the experts evaluation 
organized by State Food and Drug Administration (SFDA).
The vaccine is expected to obtain the production license within this week.

Sinovac Biotech

Since early March, Sinovac stock has made an increase of more than 400%!

In June, Sinovac received the first order in China to supply its pandemic influenza A (H1N1) vaccine to the Beijing government. The initial order consisted of vaccines for 2 million people; delivery is expected by the end of September with additional orders expected to commence in October.
In August, Sinovac announced it was the first company in the world to have completed H1N1 human vaccination trials.
It also announced mid-August that its profits jumped 76% year over year. Over the past five years, the sales growth has been more than 1500%!

According to the latest data, the World Health Organization estimates that nearly 2 billion people will be affected by Swine Flu in the next twelve months. China might need as many as half a billion swine flu shots in the next 6 months. This is excellent news for Sinovac.

I am a buyer of Sinovac (AMEX ticker: SVA) once price pulls back to a zone located between the 13 day and the 22 day moving averages.

--

What you can read on their website (www.sinovac.com):

Sinovac Biotech Ltd. (also known in China as Beijing Kexing Bioproducts) specializes in the research, development, commercialization, and sales of human vaccines for infectious illnesses such as Hepatitis A and Hepatitis B, influenza and “SARS”. Sinovac is one of the leading emerging biotechnology companies in China. On August 18, Sinovac announced positive top-line results from the completed clinical trial for its internally-developed H1N1 vaccine. The clinical data unblinding conference was held in Beijing on the afternoon of August 17, 2009. Notably, Sinovac is the first company worldwide to complete clinical trials for the H1N1 vaccine.

The analysis of the clinical trial results showed that the H1N1 vaccine developed by Sinovac induces good immunogenicity after one dose. The seropositive rate, seroconvertive rate and GMT increasing multiple have reached the international criteria for vaccines, which indicates that Sinovac’s H1N1 vaccine has good immunogenicity and offers protection.

Gold chart analysis

Gold price has been moving inside an ascending triangle since the beginning of this year.
From a technical analysis point of view, probabilities favor a move up of gold price. Initial buy trigger is above $975. Pressure seems to be building to go above the $1000 psychological price level.

Baltic Dry index versus S&P 500 index

The Baltic Dry Index tends to act as a leading indicator.
We face here a major divergence between this index and the S&P 500 index. Either the S&P500 goes down at some point or the Baltic Dry Index goes up again. The month of September should give us the answer.

Shanghai Composite Index versus S&P500

The Shanghai Composite index has acted in the past as a leading indicator of what would happen later in the other stock markets worldwide.
It reached a bottom in early November 2008 whereas the bottom was reached by the S&P500 in early March 2009.
Here is the scenario I have in mind regarding the S&P500 (look at the chart above).
Since its high early April, the Shanghai index fell of about 20%. Is that what is going to happen to the S&P500?

EUR/USD chart analysis

A quick update on the EUR/USD:
1) uptrend is evident
2) resistance at 1.44 (look at the zone highlighted in yellow)
3) safe buy trigger? if we go above 1.45
4) there is always a risk of another false breakout like those that happened in the previous weeks
5) watch what the stock markets and crude oil do: if they go down, this puts pressure on the EUR/USD currency pair to go down as well.

Light crude oil chart analysis

If we look at the chart of light crude oil:
1) Since the end of February, light crude oil has been in a clear uptrend by making consecutive higher lows.
2) 75$ appears to be the next resistance to overcome to buy again
3) 65$ is the sell trigger as it corresponds to the crossing of the uptrend line (in red) to the downside
4) the current downtrend of the US dollar keeps making pressure on oil to the upside

US Dollar index chart analysis

Let's take a look at the chart of the US dollar index:
1) I use 2 simple moving averages in my system: 20 and 50 days
2) the last sell signal occurred in early April: the 20 day moving average crossed the 50 day movnig average to the downside: it was time to sell the dollar
3) today, the USD index is still below the 50 day moving average, so we're still in a downtrend for the US dollar
4) if stock markets go down, the US dollar might get traction again as investors will sell stocks and rush to cash (thus dollars) as a risk-averse strategy: if the 20 day moving average crosses the 50 day moving average to the upside, it will be time to go long the USD again. But so far we're still in bearish mode.

Readings, natural gas, Bernanke

Some readings tonight:
- SEC warns investors on leveraged ETF holdings

- What the stress tests didn't predict

- Stiglitz Calls for New Global Reserve System

- Emerging Markets in the New Normal

EUR/USD still stuck below the resistance at 1.4400. Time will come to go long. We just need to be patient.

Ben Bernanke was reappointed as head of the Federal Reserve, meaning to me that we will go for high inflation in the USA in the years to come as Bernanke will probably keep interest rates too low for too long, which will induce a reflation of asset bubbles everywhere.

I added to my portfolio a small position ($2500) in natural gas through the UNG ETF at a price of 11.50$. I plan to invest $2500 more if UNG falls to $10.0, then $2500 more if price of UNG goes to $8.5 and again $2500 if it goes to $7.0. Natural gas price has reached a 7 year low and the ratio of crude oil to natural gas stands at 25 to 1, the highest level ever seen in 19 years! I expect to hold this trade for several months, maybe even more than a year.

Will be taking some time off this Thursday and Friday and will be back at my trading desk on Monday.

Weekly comment

The stock markets have been very bullish last week. Is it the start of a new bull market?
Let's examine the "usual suspects":

1) S&P500 is reaching a new high since its low made last March. It reached 1026 after 4 consecutive days of increase

2) Oil did break out at 73.89$

3) US dollar index is testing its previous low located at 77.5.

4) EUR/USD is at 1.4330. Resistance is at around 1.4400. I am getting prepared to enter a long position.

5) The Shanghai composite index, after falling 19% since its high of 3478 on August 4, started to rebound.

Update of portfolio positions

S&P500 chart analysis (SPY ETF)

Markets are falling today. I issued a warning in a previous post.

There was a gap down today on many indexes. Fall was especially brutal in the BRIC markets (Brazil, Russia, India, China).

See the hourly chart above of the SPY ETF (linked to the S&P 500 index). The support at 99.4 has now become a resistance.


On the weekly chart above, the resistance at 101.72 could not be crossed. See my previous post on this topic. The question is now: How big will be the correction to come?

Sold FXB @ 162.9$

VIX signals downleg on the S&P500

(Bloomberg) -- Options traders are increasing bets that the steepest rally in the Standard&Poor's 500 index since the 1930s won’t survive September, historically the worst month for U.S. equities.
Traders were betting the VIX, a gauge of expected stock swings, would increase 13 percent in the next five weeks, according to futures prices at the end of last week compiled by Bloomberg. That’s the biggest spread since August 2008, before the S&P 500 suffered the steepest two-month plunge in 21 years. The indexes have moved in the opposite direction 81 percent of the time over the past five years, Bloomberg data show.

EUR/USD volatility

Let's examine the weekly chart of the EUR/USD currency pair:
1) the Average True Range (ATR) indicator is designed to reflect and measure the volatility of a trading instrument. It measures the average movement of the currency pair during the time frame that is being measured (in this case the weekly chart)
2) I used here a default period of 14 weeks for the ATR
3) The above EUR/USD currency pair shows an ATR of 0.06000 at the end of 2008, which would translate to an average weekly range of 600 pips. This means that for the past 14 weeks, the pair has moved on average 600 pips per week.
4) From mid 2008 till mid 2009, the volatility was at extreme levels never seen before during the previous 10 years.


Now let's move to the daily chart:
1) The ATR indicator shows that the highest volatility was reached in June 2008 and then started to decrease until now. The ATR reached 0.03400, which means that the average daily range of the EUR/USD was 340 pips per day!
2) The ATR currently is at 0.01470: for the past 14 days, the EUR/USD pair has moved, on average, 147 pips per day.
3) We can expect an increase of the volatility when the EUR/USD will exit from the ascending triangle in which it is currently located, no matter in what direction the EUR/USD finally decides to go. That will be a good time to trade and profit from the volatility breakout.

My readings tonight

- Tudor Investment Calls Stock Gain a Bear-Market Rally (Bloomberg):
Tudor Investment Corp., the $10.8 billion hedge-fund firm run by Paul Tudor Jones, said equity markets could decline later this year, creating buying opportunities. Slowing growth in China and the return of front-page stories on swine flu may be “further catalysts for global equity markets to pause in September,” the Greenwich, Connecticut-based firm said in an Aug. 3 client letter, a copy of which was obtained by Bloomberg News. (...) Tudor said the 47 percent gain in the Standard & Poor’s 500 Index of the largest U.S. companies since March 9, when it fell to a 12-year low, is a “bear-market rally.”(...) “Impressive counter-trend rallies are a feature, not an oddity, of secular bear markets,” Tudor said. “We are not inclined to aggressively chase the market here. Many doubts remain about the sustainability of this recovery, most prominently the weakness of household income growth.” (...) Tudor’s biggest hedge fund, the $8.9 billion Tudor BVI, gained 10 percent this year through July after losing 4.5 percent in 2008. Hedge funds on average lost a record 19 percent last year, according to Chicago-based Hedge Fund Research Inc. (...) Tudor said it expects the U.S. dollar to fall by the end of the year as money managers diversify their currency reserves.

- Templeton's Mobius Says Stocks Face 30% Correction (Bloomberg):
Mark Mobius said global stocks will drop as much as 30 percent following their recovery from last year’s rout as companies take advantage of the rebound to sell more shares. “When you have these rapid increases, almost without correction, you will definitely have a correction at some point, so we can expect a lot of volatility,” Mobius, the executive chairman of Templeton Asset Management Ltd. said in an interview in Kuala Lumpur today. “Increases of 70 percent will be followed by decreases of 20 to 30 percent.” The so-called correction “can happen anytime, probably this year,” Mobius said. “It may not be all at once, you may not see a decrease of 20 percent suddenly, it could be 10 percent here, and a rise of 5 percent then another 10 percent, you’ll see this kind of volatility in the markets.” He added that he was referring to shares “globally.”

Stopped out today of my long EUR/USD position at 1.4330

Baltic Dry Index

The Baltic Dry Index (BDI) tracks worldwide international shipping prices of various dry bulk cargoes. The index provides "an assessment of the price of moving the major raw materials by sea.
Because it provides an assessment of the price of moving the major raw materials by sea, this index provides both a window into the shipping market and an accurate barometer of the volume of global trade devoid of political and other agenda concerns.
This index has often in the past acted as a leading indicator of what would happen later on the stock markets.
Let's look at the above chart that compares the price movements of the BDI and the S&P500: the BDI reached its bottom early December 2008 while the S&P500 reached the bottom 3 months later, in early March 2009.
If the BDI falls under 3000, this gives us a warning signal about what could happen to the S&P500.

My readings today

- China Warns Developed Nations of Inflation, Currency Threats (Bloomberg): "China’s central bank warned that monetary easing by developed nations threatens to cause “severe” inflation and currency volatility."

--> I like when they say "currency volatility", this means it will be good for trading on the Forex ;-)

- The Great American Bubble Machine (Rolling Stones magazine): From tech stocks to high gas prices, Goldman Sachs has engineered every major market manipulation since the Great Depression - and they're about to do it again.

--> a must read ! very well documented article that generated a lot of controversy

- Bank of England boosts Quantitative Easing programme to £175 billion (Financial Times)

--> this unexpected news led to a fall of the British pound today

- The liquidity pipes remain clogged. Banks seem to be unwilling to use the money pouring into the system (Financial Times)

--> "Numerous small or risky corporate ventures in the west currently complain that they cannot get loans. Consumers are facing rising borrowing charges too. Thus, in the West, as in Japan a decade ago, the liquidity is still not necessarily flowing to those who need it most. Those pipes remain clogged, even as water is forced in."

- Chinese group buys voluntary carbon credits

Summary of portfolio positions

S&P500 chart analysis (SPY ETF)

Let's look at the daily chart of the S&P500: it's highly overbought now. Just look at the RSI (Relative Strength Indicator) that is above 70 and compare it to the very oversold situation last March when the rally started. I am expecting a strong pullback soon. I am starting to hedge my long-term investment positions with SDS (double leveraged short S&P500 ETF).

Have a look also at the 60-minute chart of SPY below: since July 13 the SPY has been trending up continuously above the blue line. But there is a bearish divergence between the SPY price and the MACD + RSI, which means a correction becomes highly probable.

SEC to Ban Flash Trades of U.S. Stocks

SEC to Ban Flash Trades of U.S. Stocks:
The U.S. Securities and Exchange Commission will seek to ban flash trades that give some brokerages an advance look at orders, Senator Charles Schumer said, citing a conversation with SEC Chairman Mary Shapiro.
(...)
The proposal may be a sign regulators are moving to stricter oversight of so-called high-frequency trading, in which brokerages using advanced computers execute thousands of transactions in a second. Those strategies may account for 70 percent of trading volume.
(...)
While flash orders make up a small fraction of high-speed transactions, they have drawn the most criticism from investors and traders.

S&P500 chart analysis (SPY ETF)

SPY is the ticker of the SPDR S&P500 Trust Series ETF that follows the S&P500 index.

Let's examine the above weekly chart:
1) since its low of 666 in early March, the S&P500 has increased up to 1008 today, that is a 51% impressive bounce in about 5 months!
2) the Fibonacci lines on the chart help us visualize the levels where resistance and support are present.
3) the S&P500 will be reaching the 38.2% Fibonacci ratio at around 1017. This price might act as a resistance and lead to a trend reversal. Else, if it goes above that price, the next resistance is at
around 1123 (50% Fibonacci ratio) and then at around 1230 (61.8% Fibonacci ratio).
4) On the above chart, one candle represents one week of trading. It is interesting to note that the size of the candles over the last 4 weeks (see the circle in pink on the above chart) has been progressively decreasing, meaning that the bulls are becoming tired, which could announce a trend reversal.
5) I am now focusing on the 1017 key level to see if the SPY will cross it to the upside or not.

EUR/USD

I reenter a long position in EUR/USD @ 1.4388
Stop: 1.4330 (- 58 pips)
Target exit: 1.4500 (+ 112 pips)
Risk/return: 1:1.9

Summary of portfolio positions

EUR/USD

I exit my long positions in EUR/USD @ 1.4410. I prefer to take some profits off the table now rather than keep an overnight position.
I had entered at 1.4351. Profit: 59 pips.

If there is a pullback tomorrow, I plan to reenter a long position. Stay tuned.

UK Sterling (GBP) chart analysis

I refer to my previous post made end of June where I warned that I would go long the UK Sterling if it breaks out above 1.6600.

This precisely occurred last Friday. And GBP/USD is now trading at 1.6937 !

I buy the ETF CurrencyShares British Pound (ticker: FXB) at 169.15.
Stop loss: 164$

New trades

EUR-USD: Like mentioned in a previous post, as EUR/USD went above resistance at 1.4330, I went long at 1.4351 today.

BZF (ETF Long Brazilian Real): bought today at 24.5$

FXA (ETF Long Australian Dollar): bought today at 84.0$

Rice price

Weekly chart:


Daily chart:


The consumption patterns for rice show that it is the number one food staple for over 50% of the world. The vast majority (over 90%) of global rice is grown and consumed in Asia.

Typically the growth cycle of rice is between 3 to 6 months. Growing rice requires on average a relatively high temperature and crucially a very reliable supply of water. It takes 5,000 litres of water to produce a kilo of rice!

Given the sensitivity of water as a scarce resource, future changes in weather pattern due to climate change may have a significant impact on production levels and hence on rice prices.

The top 5 producers in the world are China, India, Indonesia, Bangladesh and Vietnam, and the USA comes in 11th position, producing less than 2% global rice production , but responsible for 12% of world exports.

Around 85% of world exports come from just six countries, led by Thailand as the largest, followed by Vietnam, India, USA, Pakistan and China.

--

On the charts above, a resistance appears at a price of 1400. A rise above that level would trigger a buy signal.
You can trade rough rice through futures on the CBOT (Chicago Board of Trade) which specializes in agricultural and soft commodities.
To the best of my knowledge there is no ETF dedicated to rice but you can gain some exposure through generic ETFs that invest in agricultural commodities including rice.

The fundamentals for rice have not changed: global demand will increase because more people will need to eat and supplies are limited.

WisdomTree Dreyfus Brazilian Real Fund ETF (BZF)

WisdomTree's Dreyfus Brazilian Real Fund seeks to earn current income reflecting money market rates in Brazil, as well as provide exposure to the movement of the Brazilian Real relative to the U.S. Dollar.

This ETF has earned 36% since its low end 2008-early 2009 and is in a strong uptrend.
I will take a position on Monday at 24.5$ with a stop loss at 21.5$.

Rydex CurrencyShares Australian Dollar Trust ETF (FXA)

Check out the above weekly chart of the ETF linked to the Australian Dollar index.
This currency has made +33% since its lows in January 2009.
This makes it one of the strongest currencies in the world. The resistance around 81-82$ was broken this week.

I will enter in a position on this ETF on Monday with a limit of 84$. My target exit is at least 95$
Stop loss @ 75$.