Taking 48% profits in Brazil, and Short Covering the U.K.

Nicholas Vardy

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

With global stock markets rallying sharply last week, it’s remarkable how quickly “greed” has replaced fear in the marketplace. That’s what makes bear market rallies so treacherous. When you have the biggest financial institutions in the United States almost doubling in value over the span of a single week, it’s no wonder that you may be feeling a bit dizzy.

That all said, your Global Bull Market Alert portfolio is in decent shape. All but two of your positions are profitable, with your short positions in the CurrencyShares British Pound Sterling Trust (FXB) and the iShares MSCI United Kingdom Index (EWU) and the long positions in the PowerShares DB Commodity Double Short ETN (DEE) and Petrobras (PBR) all boasting double-digit percentage gains. With Petrobras (PBR) rallying 12.5% last week, take profits on half of your July $30 call options for a 48% gain. Also, close your short position in the iShares MSCI United Kingdom Index (EWU) for a 16.8% gain.

Bullish news notwithstanding, I would be reluctant to call a bottom to the market. But time will tell. That’s why your portfolio is positioned with a combination of bullish, bearish and currency positions that together move independently of the stock market. While bullish positions like Petrobras (PBR) and iShares iBoxx $ High Yield Corporate Bond (HYG) soar along with markets, bearish positions tend to falter during sharp rallies. But here is what’s interesting. Your bearish positions — the SPDR Gold Shares ETF (GLD), the PowerShares DB Commodity Double Short ETN (DEE), and your bet against U.S. Treasuries through the Rydex Inverse Government Long Bond Strategy Inverse (RYJUX), were either flat or slightly positive last week. In a bull market, they would have sold off sharply.

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Portfolio Update

The PowerShares DB Commodity Double Short ETN (DEE) ended the week flat, after rallying to the $97.70 level on March 11. Nevertheless, it has held up surprisingly well for a position that is generally inversely correlated to the stock market. Hold on to it for now and keep your stop at $82.00.

Market Vectors Double Short Euro ETN (DRR) was down this week, as confidence ebbed back into European stock markets. That’s to be expected during sharp bear market rallies. Despite the European currencies strengthening last week, the pressure is still on the downside, with several analysts now predicting the euro will fall to the $1.10 level in the next few months.

Your short position in the CurrencyShares British Pound Sterling Trust (FXB) sliced through the $1.40 level, hitting a low of $136.92 before recovering toward the end of the week. With the Bank of England officially embarking on a policy of quantitative easing (printing money to buy up the government’s own bonds), the downward pressure on the British pound sterling has increased even more.

Your short position in the iShares MSCI United Kingdom Index (EWU) rallied sharply last week along with other global markets. With the sharp rally in the markets, I am going to recommend that you buy back EWU to cover your short position and eliminate it from our portfolio at a 16.8% profit.

SPDR Gold Shares ETF (GLD) rose 1.6% in its first week in the portfolio, confirming that there is demand for this safe haven.

The iShares iBoxx $ High Yield Corporate Bond (HYG) rallied sharply last week, and is once again nearing the $67.00 level. This position does well when market sentiment improves, while also paying a yield of 11.32%.

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Petrobras (PBR) rallied 12.5% last week, breaching the $30 mark for only the second time this year. Let’s not be too greedy and sell half your July $30 call options for a 48% gain.

The Rydex Inverse Government Long Bond Strategy Inverse (RYJUX) was flat for the week. That’s actually quite bullish for this position. If the market were more convinced of the sustainability of the current rally, this position would have sold off sharply.

P.S. Gain the knowledge and insights you need to make smart investment decisions at the most important investor gathering in 2009. Join me for this year’s Money Show Las Vegas, May 11-14, 2009 at the Mandalay Bay Resort and learn how the experts are finding profitable opportunities during the market crisis and how to position your portfolio for safety and growth. To register FREE, call 800/970-4355 and mention priority code 012653 or register online!

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With global stocks off to their worst start to the year since the 1930s -- and other asset classes from high-yield debt to commodities following suit -- it's tough to find an asset class to be bullish on anywhere in the financial markets.

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