October 25, 2014 – Yes I know this posting looks a bit odd but I am posting from my buddy Pepe`s mac notebook sitting in my friend Guy`s apartment in beautiful Bordeaux France and so you get what you get. Also this mac is set to Spanish so you are going to need to forgive me, my spell check is not functional and many buttons are a tad confusing.
Of course in the market we are having a nice bounce that you all saw coming because I showed you that primary sell was bouncing off the bottom and VIX was way over sold.
It all shows up in the charts
The VIX is returning to risk on mode with the insiders taking off insurance.
Many have asked if this is a real bounce or just a dead cat. To that I point out OBV that remains strong. The insiders are buying as long as this red line keeps up.
One thing that had me deeply worried was the the NYSE high low was so damaged, well this week back it jumped. We are well into all clear, risk on.
So are there any concerns? yes, it is true that small caps were lagging the market, this shows that the ´what the hell...take a flyer´ crowed is still afraid of the market, but even there we see signs of hope if the current bounce continues. Here is a graph comparing the 2000 smallest companies vs the dow 30 titans. Notice a bit of under performance in the last few days.
To be fair there could be a small retrace here to base on the fact that we did have a pull-back Thursday and that the market has bounced up very hard off the bottom.
Of course in my prior blog I mentioned some plays that are likely to do well this week including ULTA ALXN DPZ WFC ITC CP(Canadian) PGR IRM TRIP MFHI
Canadian retailer Dollerrama DOL.to is still a great firm with an expanding price point as it move in to $3 goods and nibbles at WallMarts market share.L.to
Of course I am still long Canadian Pipelines and Banks.
I did buy some Visa, a wonderful company that is like a sort of low risk world wide tax on all retail sales. Already up 5%!
Next week I am in Madrid and might consider playing an oversold bounce in Spanish super bank Santander.
Spanish banks are in a sweet spot right now,funding costs are dropping and they are still managing to maintain asset yields. The recent Euro zone fear of more trouble in Greece and Spin has taken a big chunk out of value of what is in fact a well run bank. People do not understand there has been a steady improvement in the bad loan ratio since the financial crisis. Sure this is no class A bank like the Bank of Nova Scotia and Spain is not exactly thriving, but if you want to buy low, this bank is on sale. Lets say it looks like it suffered enough.
I bought heavily but very defensively this week, selecting index funds like in Canada CDZ and in the USA SDY. The nice thing is these ETF funds are easy to buy and sell without moving the market and it does not take a lot of thinking, so I can get back to important things like enjoying France while meeting proprietors of Vineyards and sampling wine.
Beautiful Chateau Pichon in longueville, a division of insurance juggernaut AXA.
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