May 8, 2009
The stock market staged another "upside
breakout" today.. The NASDAQ
the Dow added
to end the day at 8,575,
and the S&P
to 929. Oil closed
in anticipation of a recovery, while gold
dropped slightly to $914.90.
The VIX fell 1.39
The proximate cause of this celebration was the fact
that the suspense over the banks' stress test was over, and the non-farm
private unemployment was lower than it had been, and in line with 539,000
jobs lost (see below).
The S&P 500 is only 2% below its 200-day moving
average, while the Nasdaq Composite is a bit above its 200-day moving
average. Resistance has been predicted when the S&P 500 crosses its
200-day moving average.
Another promising investment possibility might be the
Proshares Ultra Basic Materials ETF, UYM.
At today's close ($19.14), it's down by a factor of almost 6 from its 2008
high of $110. Basic materials are going to rise in price if a global
recovery gets underway.
Another possible fallen-angel candidate is the
Proshares Ultra Real Estate ETF, URE.
It closed today at $4.16, down from about $55 two years ago (having
doubled from $1.99 since March).
Now that it looks as though the world is really, definitely heading into
an economic recovery, do you feel an urge to get back into the stock
market before it's too late? I do. Here I am sitting on a pile of cash
with the stock market continuing to climb, and with the last barriers to
recovery seemingly having been surmounted. However, my own experience, as
well as both of my timing advisory services, are counseling caution. There
are no certainties here. They don't know, and I certainly don't know
what's coming next, but my "best" advisory service is saying
(1) sentiment is decidedly too bullish,
(2) this market is somewhat overbought on a short-term basis,
(3) breadth, momentum, and trend are all moderately positive.
I'm waiting until later in the day to decide whether to
buy back into the Proshares Ultra Emerging Markets Fund (UUPIX)
today or to wait for a pullback.
Quantitatively, UUPIX has gone from a dividend-adjusted
peak of about $56
a share in October,
to a low of $4.26
to a March
close of $9.99.
Clearly, it still has a lot of headroom. (The minimum investment is $15,000.)
An alternative investment might be the Matthews India
Fund (MINDX). This went from a high of $25
share on January
to a close yesterday at $9.50
This doesn't have as great a potential for a rebound as does the Proshares
Ultra Emerging Markets Fund, but it allows for diversification.
Both of these funds would benefit from a falling U. S.
I have bought (so far, only one) January, 2011, $15
"deep-in-the-money" LEAPS (Long-term Equity Anticipation
on the iShares TR FTSE Index ETF (FXI),
and two January, 2010, $20 "deep-in-the-money" LEAPS on FXI (-YOFAT),
This is in addition to the money I've invested in the recommendations of
the Cabot China and Emerging Markets Report (which have risen smartly).
These will fluctuate in price about 1.75 times as much as the FXI index.
They aren't to be purchased unless one is pretty sure about a near-term
rise in the FXI index. (This is reviewed in the April
14, 2009, discussion of possible investment choices.)