Trading portfolio

Here is an update of my trading portfolio :
10 stocks only big caps or trackers, no cash, no intraday transactions (only close), fees 0.35%.
High turnover and long only.

Today I sold Dassault Syst.because of profit warning and bought Andritz.

Vallourec is also losing momentum but I decide to keep the stock for now.

Technical weekly 29102007

Equities
After a typical short term-pullback, equity markets rebound strongly on support zone.(arrow on the chart of the DJ Euro Stoxx 50)

Overall this event confirms our mid-term bullish view and we believe technical conditions are still healhty.
Moreover the seasonal trends are turning bullish for the end of the year.
It is important to keep in mind that this a mature bull market and that market breadth indicators have been lagging prices since the start of the recent recovery.
Signs of selectivity is seeing everywhere and we continue to favour :
-big caps over small caps
-growth over value
-telecoms, basic resources, oil&gas sectors over banks, real estate and Health care sectors.
So for now the correction observed this summer did not jeopardise the mid-term bull trend and we do not think it will before year end, even if new pullbacks occur

Bonds
No change, as long as the long- term support rising trendline is not broken we do not favor more downside.
Yields may continue to trade sideways in the coming days/weeks.

Bloomberg’s bond yield forecast.

Brent
The Brent validates a bullish breakout from a triangle pattern above an important resistance.The first target (according to fibonacci extension) was already reached last week. The next one around 94$( this is also target of the triangle pattern) could be reached in the coming weeks.

The chart below shows our long term projection target of 150$ for the Brent for the beginning of 2009.

Commodity ranked returns.(year to date)

Euro
Reaching our target of 1.44.The uptrend still prevails but profit taking is expected in the coming days

Major currencies ranked returns versus € (year to date)

Hindenburg omen?

Last week the US market produced a "Hindenburg Omen" (HO), which could be an early warning signal of a bigger correction.
The Hindenburg Omen is a technical analysis signal that attempts to predict a forthcoming stock market crash.More infos :http://en.wikipedia.org/wiki/Hindenburg_Omen

Scoring

Technical scoring for the Stoxx sectors based on different moving averages.

Uge divergences but nothing new : still avoid real estate, media, health care, banks and financials.

Buy telcos, utilities, food&beverage and basic&oil stocks.

DJ Euro Stoxx 50

The Dj Euro Stoxx 50 is testing support today (lower range of uptrend channel) around 4330.
A critical moment to see whether we stay in our August-uptrend or we could drop below and face some difficult days/weeks.
The coming days will give us an indication of what it is necessary to do.

Technical weekly 19102007

Equities
In the long-term , the general technical environment is in degradation but we do not observe sell signals validated on this horizon.
On a mid-term basis, a bull consensus (from an inverse head and shoulder pattern) is still in place.
This technical rebound aims at bringing back the indices to the height of their preceding high points.
During this movement of recovery, profit-takings occur and we need to monitor carefully the support zone.(arrow)
Daily technical indicators are already bearish so that the odds favor more downside in the coming days.
All this can be seen on the chart of the DJ Euro Stoxx 50 below.

The danger for the equity markets could be coming from India as the Sensex index recently validates a sell signal.
A break below the ascending support line would push the index more than 10% lower.(dot red line)

Bonds
Yields have fallen this week but as the long- term support rising trendline is not broken we do not favor more downside.Yields may continue to trade sideways in the coming days/weeks.

Brent
The Brent validates a bullish breakout from a triangle pattern above an important resistance.On the daily chart the first target according to fibonacci extension is above 86 and the next one around 94$.( this is also target of the triangle pattern)

Euro
No change, after having test the 1.40 support level, the €/$ resume its uptrend.
The upside target is 1.44 and the support zone 1.40.

Correlation between the Nasdaq and Emerging markets

If history is of any guide we can wait another 16 months.
Lots of reason to draw a comparison between the TMT bubble and the emerging market one. Post LTCM the easing of monetary policy has fuelled the TMT bubble and attracted easy money on th basis that the internet revolution was a growth theme, immune to the economic backdrop. Today the conventionnal wisdom is assuming that emerging markets can weather any softness in the US and the rest of the world…. Still unproven.
"click on the chart to enlarge"

SP 500 Small Traders

The US small traders (dumb money) seem to be expecting some kind of crash again.
In the S&P 500 futures and options, they now have a larger net short position as a percentage of the open interest than at any time since 1995.
May be good news for the end year rally!

Trends rotations

The chart below shows some sectors and trends in realtive versus the Stoxx index. (this a great tool for spoting trends rotations!)
As you can see since 2002 emerging markets (mxef) and basic resources stocks (sxpp) strongly outperformed (bubble?).
Construction (sxop) and small caps (scxe) are looking toppish and real estate is still falling (epra).
Telecom is improving (sxkp) while oil&gas (sxep) and especially health care (sxdp) are still underperforming the Stoxx index.(base line)

Brent

Today the Brent validates a bullish breakout from a rectangle pattern above an important resistance.
On the daily chart the first target according to fibonacci extension is above 86 and the next one around 94$.

On the weekly chart, according to the Elliott wave theory, we are now in the beginning of wave 3, which is usually the largest and most powerful wave.
If we copy exactly (amplitude and rate of ascent) the last upward movement of the preceding wave 3, we arrive at a target of 150$ for February 2009!
This corresponds to the higher uptrend-line of the long term rising bull channel.

Trading portfolio

Here is an update of my trading portfolio.

10 stocks only big caps or trackers, no cash, no intraday transactions (only close), fees 0.35%.

High turnover and long only.(I recently sold AHOLD and NOVO and bought AKER and SYNGENTA).

Technical weekly 12102007

Equities
Equity indices have maintained a positive trend since last week but are now vulnerable to profit taking.
On the chart of the DJ Euro Stoxx 50 you can see that the risk/reward is not so optimal for the bulls as the index is now close to our first objective of 4540.(dot green line)Moreover the daily Macd indicator is diverging from price and close to give a sell signal.

Most sentiment indicators indicate that investors are becoming complacent on the stockmarket.
The VIX index (RSI 30 day-red line) is now on the rise again.

And the US retail investors turned more optimistic with bullish sentiment back to its highest level since February .(red line)

Bonds
No change, yields may continue to trade sideways in the coming days/weeks but as long as the long term support rising trendline is not broken , I favour an upside target of 4.6%.

Brent
Last week we said that the Brent was not able to make a clean break through the 78-80 resistance zone and that short-term sell signals have just been registered.
In the short-term I think oil may continue to consolidate and test the resistance level.

Euro
After having test the 1.40 support level, the €/$ resume its uptrend.
The upside target is 1.44 and the support zone 1.40.

ASIA

For those of you who think Asia is going to crash, check out this chart coming from the foundation for the study of cycle.

According to them opportunity are going to be found in Asia for the next 483 years!
In the same time, the current P/E ratio of the Shanghai Composite is 52.56, not cheap by any means.
But 50+ P/Es are not new for the index.
As shown below, it reached these levels back in 1999 and 2000 and stayed relatively high until the end of 2003.
Hindsight shows that things got ridiculously cheap back in 2004 and 2005 compared to earlier levels.

This table below is a summary of different indicators for the members of the DJ Euro Stoxx 50.

Actually trending indicators are bullish but trading indicators are overbought.

This tells me that equity markets have a good chance to break above new highs (end year rally) but that they must correct
their overbought status first.(some consolidation is expected over the next few days).

Technical Weekly 05102007

Equities
The stock market continued to gain ground and equity indices are now testing new highs but most of them are now overbought.
The powerful breakout from the inverse head and shoulders pattern confirms that investors have embraced risk once again.
In addition, seasonal patterns are turning favorable as we enter the best four month stretch of the year to own stocks.
I have also noticed some change in trends during the recent weeks.
Small caps stocks for instance have not benefited from the recent recovery in
equity markets.(chart 1 Stoxx Small-red line and Stoxx Small vs Stoxx-black line).

Banks have been the top performers this week while profit taking was seen on oil&basic resources stocks.
Does this sudden sector rotation mark the end of turmoil in the bank sector?
Maybe not. Take a look at the charts below.The first one is the bank sector and the bank sector versus Stoxx.(black line)

As you can see the relative chart is still bearish.
This seems to be a technical bounce in a downtrend.
The second one shows the basic ressources sector.
The overall trend remains positive but a correction is occuring due to overbought status.

Bonds
Yields may continue to trade sideways in the coming days/weeks but as long as the long term support rising trendline is not broken (arrow), I favour an upside target of 4.6%.

Brent
Was not able to make a clean break through the 78-80 resistance zone.

Short-term sell signals have just been registered, but the long term trend remains bullish.

Euro
Recently, the rate validates a bearish signal, which cancel our target of 1.44.
A lot of short term sell signals appear (red arrows on chart) so that a retest of the 1.40 is likely but I do not expect a major trend reversal.

Banks

A lot of breakouts on banks.(short term bull).

But the technical scoring remains weak.(mid-term picture)

€/$

Yesterday the rate validates a bearish signal which cancel the target of 1.44.
A lot of short term sell signals appear (red arrows on chart) so that a retest of the 1.40 is likely.

Subprime

The reaction to the Citigroup and UBS news might indicate that investors were expecting a lot worse.
Moreover, the news puts forth more information related to the subprime, suggesting some uncertainty is removed.
As you can see on the 2 charts below, those stocks are trying to rebound (base building) from a very oversold situation.(lots of green arrows)
Strong volumes may also indicate an accumulation phase.
Finally, yesterday was the start of the fourth quarter, a bullish seasonal period for stock.

Commitment of traders report

In terms of US sentiment indicator, one very bullish signal occurred last week. In fact, Commercials (usually right) have closed lots of short futures positions and are now net long in absolute terms.

This is a very bullish signal. Even more so when one considers that small traders (usually wrong) have recently taken the opposite position, i.e. net short.