THE FINAL NUMBERS
NEWS: The market closed mixed again with the NASDAQ leading the major indices. The tech-heavy index closed up 6 points or 0.25% to close near the high of the session. The Dow lost 3 points and extended its losing streak to 4 days and 6 out of 7. The S&P 500 gave back 1 point on the day after being down as much as 10 points.
THE BOTTOMLINE: From the time I was jogging on the treadmill this morning the stock market was in the red and it only got worse as more earnings hit the wires. When Bank of America (symbol: BAC) reported subpar numbers it had the Dow futures lower by 75 points and it appeared the US market was in grave danger of a big down day. But the bulls flexed their muscles mid-day and rallied the market back from the lows to close flat.
Just two weeks ago the major indices were at extreme overbought levels and the rally was beginning to slow. Today the Dow’s RSI reading is in the 30’s, the lowest reading in a month, and after falling 6 of 7 sessions the index is now oversold in the short-term. The combination of a technical bounce and the fact that most of the bad news that could occur during earnings season already hit the wires is a recipe for a rally to end the week. Wouldn’t it be nice to rally into the weekend on the 20th anniversary of Black Monday?
UPDATE: Google (symbol: GOOG) reported better bottom line numbers after the bell and is trading all over the board, but at last check was up a few dollars.
DAILY ETF BULLETIN (WWW.ETFBULLETIN.COM)
NEWS: If it is not the Chinese ETF’s at the head of the pack there is a good chance the commodities are leading. Today the ETF’s that track the price of oil rallied over 2.5% as crude moved within 50 cents of the $90 level. Benefiting from the rise in commodity prices was the Market Vectors Nuclear ETF (symbol: NLR) and the iShares Australia ETF (symbol: EWA).
THE BOTTOMLINE: There are a number of MegaTrends that investors must be aware of as they buy long-term positions for their portfolio. Both China and Energy fall into the MegaTrend category and are areas that investors should be including in their portfolios for the long-term. That being said, I do not recommend putting new money to work in either sector at this time. Even though the Chinese ETF’s were down today, the two sectors are very overbought in the short-term and are due for a pullback. When the next wave of healthy weakness occurs you have my blessing to run out and put some cash into both areas.
NLR was discussed earlier this week as a secondary play on high oil prices. EWA is also a play on rising oil and metal prices due to the makeup of the ETF. The ETF is composed 100% of Australian companies. Australia is a playground for the commodity junkies; it has gold, copper, uranium, oil, etc. But best of all, it is not far from the biggest buyer of all of the above – CHINA! A double whammy – a play on Energy and China!
BUY ALERT: A new buy alert was nearly sent today for the chart of the foreign ETF that was highlighted in yesterdays’ daily report. If we get a little weakness tomorrow, all ETF Bulletin subscribers should be on alert for an email with the name of the ETF. If you are looking for a new and exciting ETF strategy for your portfolio, head to www.etfbulletin.com or call 1-877-ETF-PENN and sign-up today for the newsletter and receive our latest buy recommendation.
(TEXAS) TEA TIME
NEWS: Oil closed the regular session at the highest price ever ($89.47) after rallying to the tune of $2.07/barrel. Both heating oil and gasoline rose over 1% as natural gas dropped 1%. Gold gained $6.40 or 0.8% to finish the day at $768.70/ounce
THE BOTTOMLINE: Continued speculation and a falling US Dollar led to higher prices for oil and gold. Gold is closing in on a 30-year high and continues to be looked at as a “safe haven” and anti-dollar play. Expect higher prices for gold, but a pullback should occur before the next big wave of buying begins.
Why does a weak greenback help push oil higher? Because as the US Dollar falls it makes the other currencies strong and therefore oil appears to be “cheap” to foreign investors. Big money from around the globe has been pouring into Texas Tea and with trillions of dollars of cash available around the world it may not stop anytime soon. Add in the breakdown of the US Dollar Index today to a new historic low and the perfect storm may be brewing.
Investors should be looking to add money to not only primary plays on higher oil prices, but also the secondary plays such as nuclear, green energy, and infrastructure. This will give investors exposure to high energy prices and at the same time lower the risk by diversifying. REMEMBER – It is all about reward vs. risk.
Have a great night,
Matt McCall