U.S. markets opened the week with two consecutive days of strong gains. Asian markets rose as well, but with less conviction. The tech-heavy NASDAQ Composite leapt 2.8%, while the S&P 500 Index and the Dow Jones Industrial Average added 2.2% and 2.1%, respectively. The S&P 500 and NASDAQ indexes both bounced up off of their 200-day moving averages. The S&P 500 Index has not closed under the 200-day moving average since September 2010. A clear move above or below this level can have a significant effect on the market’s future direction.
Most of your Alpha Investor Letter positions remained flat over the past five trading days. Of special note were large gains in JinkoSolar Holding Co., Ltd. (JKS) and Las Vegas Sands Corp. (LVS). Each position posted gains above 7.5%. I have moved both of these positions to BUYs, based upon their having penetrated their 50-day moving averages, along with Market Vectors Indonesia ETF (IDX).
JinkoSolar Holding Co., Ltd. (JKS) rose 8.56% after positive commentary by analysts on the prospects of the Chinese solar industry. This moved most Chinese solar stocks up significantly. Las Vegas Sands Corp. (LVS) gained 7.65% over the past week. With rivals Wynn Resorts and Melco Crown posting significant year-to-date gains, LVS is simply a “good bargain” compared to its two major Macau competitors.
Several indicators continue to show markets as “oversold” and due for a bounce. The question is whether this bounce is sustainable? Most of the bad news spooking markets over the past seven weeks persists. The end of “quantitative easing” (QE2) is just around the corner, and QE3 is not on the table. Chinese inflation has remained stubborn, and the words “China” and “bubble” are now appearing together in the media like never before. The Greece situation does seem to be mitigating a bit, but a long-term resolution is still years away.
Yet, the markets seem to be shaking off all of this bad news. From a market sentiment standpoint, this is a bullish sign. Second quarter earnings season is due to begin soon and this will certainly have an effect on the market’s future. However, expect a weaker, more directionless market as we head into the “Dog Days of Summer.”
Although recent strong upward movements may make some investors feel at ease with the markets, caution is still the order of the day. Market movement is currently range-bound and it likely will be several more weeks before a defined direction emerges. It is certainly too early to become bullish.
Portfolio Update
WisdomTree Dreyfus Chinese Yuan Fund (CYB) gave back last week’s gain and fell 0.59%. CYB had quite a volatile week, and even managed to shoot above its 50-day moving average for a short period. This play on one of the world’s strongest currencies provides your portfolio with a good safety net. Currently below its 50-day moving average, CYB is a HOLD.
WisdomTree Japan SmallCap Dividend Fund (DFJ) ended the week flat with a gain of 0.05%. DFJ has managed to trade in a tight range over the past several weeks as global markets have fallen dramatically. This is a good indication that much of the dust has settled in the Japanese market. Closing just above its 50-day moving average, DFJ is a BUY.
iShares MSCI Singapore Index (EWS) lost 1.69% over the previous week. A recent article by Alex Rasmussen of “Seeking Alpha” places a very positive light on Singapore. Based on several relevant economic metrics such as “External Debt/GDP,” “Last Years GDP Growth,” and “Tax Revenue % of GDP,” which ranked each of the world’s 30 major countries, Singapore held the #1 spot. Currently below its 50-day moving average, EWS remains a HOLD.
iShares MSCI Malaysia Index (EWM) fell 0.46% for the week. Malaysia remains one of a handful of oil exporting countries unburdened by political unrest. As a trusted source of oil, the country is filling gaps in the global oil supply. Now trading above its 50-day moving average, EWM is a BUY.
iShares MSCI South Korea Index (EWY) gained back most of its loss from last week by rising 0.76%. EWY’s trading price has attempted to move above the ETF’s 100-day moving average four times in the past two weeks. Today’s breech of this moving average could signal the beginning of a sustained move upwards. EWY’s 50-day moving average is only $1.00 above its current $63.55 trading price. EWY is currently a HOLD.
iShares MSCI Taiwan Index (EWT) dropped 1.80% over the previous week. This position is suffering from a surprise interest rate hike recently instituted by Taiwan’s central bank. This action caught many investors off-guard, as this move was quite unexpected. Taiwan’s last interest rate hike was back in 2008. This position is now a HOLD.
Market Vectors Indonesia ETF (IDX) rose 1.49%. After spending a week testing its 50-day moving average, IDX finally made a strong push above it. This moves IDX to a BUY.
JinkoSolar Holding Co., Ltd. (JKS) jumped a whopping 8.56% this past week. JKS has posted some very strong daily gains recently. This pop in JKS is due to a report by analysts at Brigantine which was very positive on the entire Chinese solar industry. JKS will now likely enjoy a ride up along with its other solar stock brethren. JKS moved above its 50-day moving average and is now a BUY.
Las Vegas Sands Corp. (LVS) gained a solid 7.65% over the past week. Las Vegas Sands is currently the “cheapest” stock, based on valuation, when compared to its two other major Macau competitors. Bargain hunters should begin snapping up shares. LVS spent the past week “running” up to its 50-day moving average and is now a BUY.
