Global Markets Consolidate Gains

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.

That said, by virtually all technical indicators, global stock markets are firmly in overbought territory and are due for a correction. Global markets are likely to enter a "consolidation" stage after the strong rally since March. We are also now firmly into the time of the year where global markets tend to trade within a relatively narrow trading range. The trick in markets like this is to balance locking in potential, short-term gains against sticking with positions supported by long-term trends.

My current bias is to the bullish side. Signs of green shoots are appearing everywhere across the globe. Over the weekend, finance ministers from the Group of Eight industrialized nations, meeting in Italy, acknowledged "signs of stabilization in our economies." And with so many institutional fund managers having missed the rally and substantial amounts of cash sitting on the sidelines, there is likely to be significant buying support for the markets on any pullback. More immediately, with the end of the quarter coming up, there is also likely to be substantial window dressing so fund managers can up their numbers in time for their quarterly reports. That may lead to substantial buying over the next couple of weeks.

We stopped out of iShares MSCI Taiwan Index (EWT) on the pullback in Asian markets this morning.

Portfolio Update

The iShares MSCI BRIC Index ETF (BKF) ended the week up 2.17%, after soaring all the way to $38.32 last Thursday. BKF remains a BUY.

PowerShares DB Commodity Double Long ETN (DYY) broke the $8.00 level and ended the week slightly up. Your leveraged bet on the commodities boom remains a BUY. Move your stop to $6.25.

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The iShares MSCI Chile Investable Market Index (ECH) rose another 1.5% this last week, closing just above the $45 mark, after hitting a high of $46.29 on Thursday. Chile remains a BUY. Move your stop to $39.90.

The iShares MSCI Hong Kong Index (EWH) fell slightly this week, as the Asian markets enter a period of consolidation. EWH is a BUY.

Both the SPDR Gold Shares ETF (GLD) and the PowerShares DB Gold Double Long ETN (DGP) are locked in a narrow trading range, falling about 1% and 2%, respectively, this past week. But with the dollar under pressure and fiscal deficits soaring, both GLD and DGP remain a defensive BUY.

The iPath DJ AIG Copper TR Sub-Idx ETN (JJC) soared 8% through last Thursday, before falling back slightly at the end of the week. This is a bullish sign for the global economy. “Dr. Copper” remains a BUY. Move your stop to $28.50.

Russia’s Mechel (MTL) dropped below the $10 level for the first time in three weeks. Mechel is a stock that behaves much like an option, and will soar on any positive sentiment. It remains a speculative BUY.

Your Rydex Inverse Government Long Bond Strategy Inverse (RYJUX) nudged below the $16 mark on Friday. Betting against Obama and the U.S. deficits may be the “no-brainer” trade of the year. RYJUX remains a BUY.

Shanda Interactive Entertainment Ltd. (SNDA) got off to a weak start as risk appetite increased in Friday’s trading. Like Russia’s Mechel (MTL), this will always be a volatile pick — among the most likely to soar, and the most likely to sell-off. If you have the appetite for volatility, this pick remains a BUY.

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The Rydex Weakening Dollar 2x Strategy H (RYWBX) ended the week slightly higher after flirting with the $19.00 mark again. Although currency markets are looking for direction across the globe, I expect the U.S. dollar’s long-term downtrend to resume. This remains a BUY.

Sincerely,

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Your Global Bull Market Alert portfolio continues to perform strongly. Gains on seven positions are in the double-digit percentages, with MSCI BRIC Index ETF (BKF), iShares MSCI Chile Investable Market Index (ECH), iPath DJ AIG Copper TR Sub-Idx ETN (JJC), iShares MSCI Hong Kong Index (EWH) and Mechel (MTL) showing gains of at least 20%. Your position in Mechel alone is up 42.5%, with MSCI BRIC Index ETF (BKF) not far behind with a gain of 35.5%.

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