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The Fred Report - Weekly August 9, 2010

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author/source: Fred Meissner, CMT

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The FRED Report - Financial Research, Education & Data

Volume 2, Issue 63
Trading Week Starting August 9, 2010

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Summary of Market View

So far, the SPY has failed to move above resistance, but other indexes have gone through. We would be a bit defensive here, and use risk management, but frankly would be surprised if the market has peaked short-term.

On page 3 we show international bonds and the Euro (FXE). We like BWX (SPDR Barclays Capital International Treasury Bond ETF) on pullbacks, should it occur. 

We have had numerous questions on agricultural commodities and wheat, and note that this is the time when they are strongest seasonally. It is unlikely that agricultural commodities have a lot more upside from this juncture.

We note that Asia is perking up and Japan could have a decent run as the Yen looks a bit toppy. 

We like gold as well, but a big move may not happen until late fall.


Stock Review

Last week, with the exception of Friday, was a pretty good week in terms of the indicators. While the market bounced back nicely at the close on Friday, so far we have failed at the resistance and until we move through 114 on the SPY, the SPY is in a downtrend. Conference level subscribers note that stops were raised on all stock and ETF idea generation positions to manage risk. We think we will exceed resistance in the coming sessions, but it is possible that we will fail and should that occur we want to be out of the market quickly. We also note that several key indexes have moved through the equivalent of SPY 114 already. 

We show charts of the NYA (New York composite – all of the common stocks traded on the NYSE, a broad index) and the XMI (20 of the biggest blue chips). Both of these indexes have broken above that resistance – and this suggests the SPY also will do this.

Areas to watch below the market: gaps at 110 and the 107 area. Should we exceed the 114 area tests of 117, and then 120, would be expected.

 


Fixed Income Review

We have no change in our fixed income opinion, but will use today’s weekly to highlight the BWX (SPDR Barclays Capital International Treasury Bond ETF). This ETF had severe trouble when the Euro (see chart below) was weak in May. The key area on this chart is the 55 area that was violated on the downside as the Euro bottomed and has not been penetrated on the upside. We mention this ETF at this time because it looks to us as if a retracement of the advance could occur and we believe this would be a buying opportunity for international bonds. See the monthly later today for more information.

 


Commodity Review

We have had a number of questions on the agricultural commodities. This is interesting because the agricultural complex often makes its’ highs for the year in August. There are two ETF’s we follow, one of which deals more with the physicals (JJG – iPath DJ-UBS Grains ETN), and the other deals more with stocks of companies working in that area (MOO – Market Vectors Agribusiness ETF).  

Both charts are a bit overextended. MOO has outperformed since 2009, however JJG is a nice base, which could pull back, however. Given the seasonality involved in this case, for clients who simply have to be in – we would suggest using MOO, as some of the underlying stocks look attractive as well. It makes sense to look at the JJG later in the year, likely in November, after November Soybeans go off the board.

 


International Review

We highlight Japan this week. In our Monthly Report, due out later today, we discuss the Yen, which could consolidate in this area. The Yen has had a great run, and this has hurt Japanese equities. We show charts of the weekly EWJ (Japanese large caps), and the JOF (Japanese small caps), and suggest that these markets have held support and are likely to advance over the next few months. Both have held support and have already started to move up a bit. 

 


Weekly Chart of Interest

We show a daily chart of the FXI (China) below. Our accumulation model is very positive on this market and we note that in the recent correction this market held well above the May/June lows, while the SPY went below them. This suggests that the Chinese economy is set to outperform over the next few months.

 



 

 





Disclaimer:


DISCLAIMER: 
Fred Meissner is primarily responsible for the research in this report and certifies that: (1) all of the views expressed in this research accurately reflect his personal views about any and all of the subject securities or issuers; and (2) no part of his compensation was, is, or will be directly or indirectly related to the specific recommendations or view expressed him in this research.
 
This report is for your information only and is not an offer to sell, or a solicitation of an offer to buy, the securities or instruments named or described in this report.  Interested parties are advised to contact the entity with which they deal, or the entity that provided this report to them, if they desire further information.  The information in this report has been obtained or derived from sources believed by Fredco Holdings, Inc. to be reliable, but Fredco Holdings, Inc. does not represent that this information is accurate or complete.  Any opinions or estimates contained in this report represent the judgment of Fredco Holdings, Inc.  at this time and are subject to change without notice.  Fredco Holdings, Inc.  or its employees, officers, directors, principals, agents, affiliates or adviser may from time to time provide advice with respect to, acquire, short sell, hold or sell a position in, the securities or instruments named or described in this report.
 
Fredco Holdings, Inc. does not have investment banking relationships with any of the companies mentioned in this report and does not conduct investment banking business, in general.  Fredco Holdings, Inc.  and its employees do not receive compensation of any kind from any of the companies in this report.  Fredco Holdings, Inc. , its directors,  officers, principals, agents, advisers, affiliates and employees may maintain a financial position in the securities mentioned in this report, provided however that no buying or selling  activity will be taken with respect to a security referenced in a report by such parties within three days of such report’s publication.
 
The information contained herein was prepared by Fredco Holdings, Inc., which is solely responsible for the contents of this report.
 
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