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Market Comment May 11 2013

May 11 2013 --- Well what can I say, the market is roaring ahead. Just look at this week’s Economist magazine cover.

I can draw you a few charts, but you know things are popping this week. First off lets look at the YP Primary Sell indicator, wow up it goes.
(click any graphic to enlarge it)

Here we have the VIX, this measure fear and again fear has disappeared. Does it look a bit overconfident to you too?

We can also plot the market; here I have added a Keltner Channel, to show how we are way up the edge of parabolic buying and if you look to the left in 2012 you see how it is possible to be pegged at the top of this channel for a while. 

Clearly the Market wants to go up. The economy is not why these markets are rising, it is simply a case of tons of money flowing out of bonds, commodities, Europe, Asia and other global markets -- heading for the only game in town right now – US Equities. The other reason is the US Fed continues to boost the economy trying to bring back jobs. Read The New Momentum for details

When will it all end? Well as many hedge fund managers are lamenting at the SALT conference last week, it should already have ended. But as they say the Markets can remain irrational longer than you can be solvent. So you cannot bet against this mighty freight train of a market, but you can be prudent. For example I am this week in DVY, an ETF that buys big cap firms with large dividends. I have a trailing stop under my investment using a Chandelier Stops. I am hoping for growth but I am going to be “quick to grab the baby” if the market falls. You can use a plain old trailing stop too.  So to be clear, yes the market is overbought, but you must make hay when the sunshines. This is no time to be a hero, but I am back participating. 

Don't get me wrong, we are way overbought and I am cautious. I am also considering buying some VXX as a hedge if the VIX falls much further. (VXX goes up with the VIX climbing) A VIX under 12 seldom lasts very long. At Wednesday's closing bell, the S&P 500 hit 157 points (or almost 11 percent) above its 200-day moving average. The only time we have seen a wider gap between the S&P's 200-day MA and its closing level was back in March of 2000, just before the dot-com crash. Will history repeat or only rhyme, and in Yogi Berra's famous words, "Are you ready for déjà vu all over again?"

I still have some DUST short the gold miners, and as always, I am expecting Gold to do poorly. Looks like I am smarter than Billionaire John Paulson. There are lots of Gold short ETFs pick your favorite.

There is a lot of talk about the Japanese trade, buying the Japanese stock market but in US funds, effectively short Yen long Japanese Equities. You do this by buying the ETF DXJ, I had a lot of it, I wish I did not sell it before.

This trade has become so obvious and overdone  I even saw this cartoon on the web. But to my amazement the trade still works but be warned, this is one crowded trade!!

No Mr. Bond I Expect You To Die
Recently the Bond trade was declared dead. Read More Here:
Wall Street Journal - InvestmentNews
Bloomberg - Pimco
The word is leaking out that there is an end to falling rates and when that happens bondholders will hurt. That could be a great long-term pattern that could make slow steady returns for years.  If you want to play that move you could buy the inverse 20 year bond ETF called TBT:

What is Working Now
Some stocks are perking up, the theme is Risk On. We saw some interesting reactions from (china) BIDU (consumer) LLL.TO and (drugs) ALXN 

King of LED Light bulbs CREE, but careful with this stock they are about to go toe to toe with GE and Philips who will not give up 100 years controlling this  market easily.

Investors are still treading with care after this big run up to May, here is an ETF with a broad range of holdings based on the the Value plays RPV

There is a new Tiger in Asia, the Philippines

Tenet Health Care was first mentioned here April 1 it had a pull back and is riding the market up. 

Networking is doing well due to some good news at Cisco -- I bought some Juniper Networks this week for a short term hold.  

Here is great bit of news from this week:

One World Trade Center spire installed.  

 (Click for a great Video)