A Great Week for the Markets

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.
Markets continued their relentless move upward this past week, with the S&P 500 ending 1.62% higher. Global markets also regained their momentum as the MSCI Emerging Market Index rose 4.5%.
 
Negative news could not shake markets even as Standard & Poor’s threatened to declare Greece in “technical default.” The International Monetary Fund (IMF) also warned that "the euro crisis entered a perilous new phase," and lowered its global growth forecast for 2012. Yet, the financial markets gave a collective shrug on Tuesday and put the S&P 500 on track to have its best January since 1997.
 
Your Alpha Investor Letter portfolio had a stellar week, as well, with all but one of your positions moving up robustly. Your latest bet on Ford Motor Co. (F) soared 6.66% over the past five days. Asian markets have had a strong run with iShares MSCI Hong Kong Index (EWH) rising 6.26% and MSCI South Korea Index (EWY) up 5.91%. Your position in Listed Private Equity ETF (PSP) also rose 4.92%. Visa Inc. (V) was the only bad apple in the bunch, taking a slight loss.
 
Apple reported a huge earnings surprise on Tuesday that blew past the estimates of analysts. Markets will likely feel the glow for a day or two. That said, the market is well overdue for a general pullback. According to all technical indicators I follow, the S&P 500 has not been this overbought in the last five years. Only the run in the summer of 2010 comes close. Add to this reality significantly low volume over the past few weeks with trading on the New York Stock Exchange tumbling to its lowest level since 1999, and you have the makings of a considerable correction.

Portfolio Update

WisdomTree Japan SmallCap Dividend Fund (DFJ) rose 1.14% over the past week. With interest rates averaging 1% in Japan, small business should have an easy time borrowing for its business ventures. DFJ charged past its 200-day moving average last week and then fell back, coming to rest directly above this crucial level. DFJ is a BUY.
 
Las Vegas Sands Corp. (LVS) jumped 3.36%. The Chinese New Year (“Year of the Dragon”) just began and that is good news for the Macau region as Chinese folks start vacationing. Macquarie Capital recently listed LVS as its number one regional pick and estimated Las Vegas Sands’ revenue will grow by double-digit percentages in 2012. LVS will report earnings on Feb 2 and is a BUY.
 
MSCI South Korea Index (EWY) powered higher by 5.91%. Samsung recently increased its 2012 investment levels to an astonishing $41.4 billion. Samsung will hire 26,000 new employees in 2012, bringing the total to a staggering 350,000. With an army that size moving the company forward, EWY is sure to benefit as well. EWY is a BUY.
 
MSCI Malaysia Index (EWM) moved up 2.27%. EWM has rallied from its 50-day moving average over the past three weeks and is just shy of its 200-day moving average. Expect EWM to test this level in the coming weeks. EWM is a BUY.
 
Market Vectors Russia ETF (RSX) gained 3.85% last week. Thank Iran’s saber rattling over the Strait of Hormuz, and Europe for “just saying no” to Iran’s oil, for the nice move in RSX last week. Upward pressure on oil prices is always good for your position in RSX. RSX moved above its 50-day moving average a week ago and is a BUY.
 
iShares JPMorgan USD Emerging Markets Bond (EMB) rose 1.02% over the past five trading days. EMB experienced a modest rally recently as Greece drew closer to an agreement on its outstanding debt. EMB is now a BUY.
 
Market Vectors Indonesia Index ETF (IDX) had a great week, jumping 4.10%. IDX is displaying several positive technical indications. These include breaking out of a long-term “wedge” pattern to the upside, moving above the 200-day moving average, and encouraging indications from the Moving Average Convergence (MACD) line. IDX is a BUY.
 
iShares Singapore ETF (EWS) rose 3.36%. EWS has participated in the 2012 emerging market recovery and enjoyed a significant move. This exchange-traded fund holds 33 of the largest Singaporean companies, with the $38 billion Singapore Telecom accounting for 12% of the entire fund. EWS is a BUY.
 
Berkshire Hathaway (BRK-B) was flat last week, gaining 0.65%. Although BRK-B had a lackluster week, it was a big week for Warren Buffett and his secretary Debbie Bosanek. Ms. Bosanek was an invited guest at the 2012 State of the Union address, while Mr. Buffett rang in the Chinese New Year by playing the ukulele and singing “I’ve Been Working on the Railroad” on national Chinese television. Now that’s excitement folks. BRK-B is a BUY.
 
Listed Private Equity ETF (PSP) popped 4.92% over the past five trading days. The financial sector has been making a quiet, but significant, comeback in 2012. PSP is participating nicely, since it is a leveraged bet on the financial sector. PSP is a BUY.
 
iShares MSCI Hong Kong Index (EWH) climbed 6.26%. EWH continued its winning streak last week by moving swiftly to its 200-day moving average. Emerging markets have seen stellar moves lately, and Hong Kong has benefitted, as well. EWH is a BUY.
 
Freeport McMoRan Copper & Gold Inc. (FCX) rose another 2.09%. FCX reported solid earnings on Jan. 19, especially taking into account the headwinds FCX endured last quarter. FCX earned $0.67 per share and saw revenues of $4.16 billion. With significant labor difficulties behind it, all mines open and at normal production levels, and the strengthening of the copper market — you can expect further positive results for next quarter. FCX is a BUY.
 
Visa Inc. (V) lost 1.48% last week, pulling back slightly from a recent 52-week high. V announced Tuesday that it will be the preferred payment solution for the 1.5 million-employee WageWorks Inc., providing its prepaid employee benefit and health spending cards. This deal represents a significant volume in transactional fees. V will report earnings on Feb 8. V is a BUY.
 
Ford Motor Co. (F) surged 6.66% during its first week in your portfolio. Ford will announce earnings on Jan 27. Analysts estimate $0.27 earnings-per-share and profits to rise 6.1% year-over-year. Ford has “beat the Street’s” estimates for the past three quarters running. Ford will pay a $0.05 dividend on Jan 27. F is well above its 50-day moving average and just broke through a significant $12.60 Oct 2011 resistance level. F is a BUY
 

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The contrast between the collapse in global stock markets in August and their relentless rise since the start of 2012 is positively eerie. The S&P 500 has risen nine times out of 14 trading days, and is on track to have its best January since 1997. The collapse of the VIX -- the "fear index" -- from a high of 48 on Aug. 8 to 18.67 at the close yesterday is even more disorienting. The market's schizophrenia worries me. Last year was one of the most volatile years on record for U.S. markets

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