A Weak Start Turns into a Strong Week

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.
Markets spent the better part of last week dipping in anticipation of the Federal Open Market Committee’s (FOMC) Thursday comments. However, markets came to life on Friday as pent up buying demand kicked off a strong multi-day rally.
 
All the major indexes rose last week with the Dow Jones Industrial Average gaining 1.23% and the S&P 500 Index rising 1.60%. The technology and emerging market sectors did even better, posting gains of 2.60% and 2.99%, respectively.
 
With the end of the Q2 “earnings season” upon us, market traders are beginning to focus on important resistance levels looming for both the Dow Jones Industrial Average and S&P 500 Index. The Dow Jones is closing in on the 13,300-resistance level, a level that has confounded markets since March 2012, and the S&P 500 Index is very near 1,400 — another high point markets have not seen since April 2012. Investor’s reaction to these “lines in the sand” will likely set the tone for the rest of this month’s market action.
 
Your Alpha Investors Letter portfolio had a great week, yielding several big winners and virtually no losers. Stratasys, Inc. (SSYS) jumped another 9.45%, Statoil ASA (STO) added 5.72%, and Lennar Corp (LEN) rose 3.97% over the past five trading days. Market Vectors Indonesia Index ETF (IDX) was the only loser last week, dipping just 1.08%. WisdomTree Japan SmallCap Dividend ETF (DFJ) switched to a BUY, making all your Alpha Investor Letter positions “Buys”.
 
If the news cycle remains positive for the Romney campaign and the European crisis, Wall Street should feel confident enough to continue buying — even at these significant resistance levels. However, with the “dog days of summer” in full swing, markets may experience a pull back before the seasonal bullishness of the fourth quarter begins.

Portfolio Update

MSCI Malaysia Index (EWM) gained 1.25% last week. The Malaysian market is doing quite well this year, especially in the arena of initial public offerings (IPOs). Malaysia’s market spawned two of the top three global IPOs of 2012. EWM is a BUY.
 
iShares JPMorgan USD Emerg Markets Bond (EMB) added 0.66%. Since hitting a definitive low on June 1, EMB’s share price has done nothing but go up. Investors poured nearly $12.5 billion into emerging market bond funds in 2011. Nearly $11 billion has found its way into this investment category so far this year, and the year is only half over. EMB is a BUY.
 
Berkshire Hathaway (BRK-B) was flat for the week. BRK-B took a beating last Wednesday as the events of the Knight Capital Group trading debacle unfolded. However, BRK-B managed to recover by the end of the trading day, and on more than double the average daily trading volume. BRK-B is a BUY.
 
Visa Inc. (V) rose 1.03%. London’s Olympic visitors used their Visa cards to charge $716.7 million worth of goods and services — in just the first two weeks of the Olympics! V will pay a $0.22 dividend on Aug. 15 and is a BUY.
 
The TJX Companies (TJX) added 1.94% over the past five trading days. A recent National Retail Federation poll covering back-to-school spending for children ages 6 to 17 showed a year-over-year per-child spending increase from $603.00 to $688.00. TJX paid you a $0.115 dividend yesterday (Aug. 7), and is scheduled to report earnings on Aug. 14. TJX is a BUY.
 
Stratasys, Inc. (SSYS) churned out a third winning week, jumping another 9.45% on the back of a stellar earnings report. SSYS reported $0.32 earnings per share (EPS), which was in line with analysts’ estimates. Revenues were $49.4 million, handily beating a $46.4 million estimate. Stratasys, Inc. issued in line EPS guidance, and increased revenue guidance. SSYS spiked to a new 52-week high on the news. SSYS is a BUY.
 
iShares Nasdaq Biotechnology (IBB) ended the week flat. IBB ended its recent pull back from last week’s new 52-week high and started climbing once again. This price action appears to set up IBB nicely for another upward move. IBB is a BUY.
 
WisdomTree Japan SmallCap Dividend ETF (DFJ) added 0.97% over the past five trading days. DFJ made a concerted move above the 50-day moving average (MA) last week and changed from a Hold to a BUY.
 
Market Vectors Indonesia Index ETF (IDX) dipped 1.08%. IDX spent the week moving sideways just under the 200-dayMA, readying for a third attempt at breeching the 200-day MA. With the 20-day MA rising up from below providing support, IDX appears poised to continue upward. IDX is a BUY.
 
PowerShares Global Listed Private Equity Portfolio ETF (PSP) rose 2.58% last week. PSP managed to break the $9 resistance barrier last week after three previous attempts in the past month. With the 20-day, 50-day, 100-day, and 200-day MA all providing support, PSP has plenty of reasons to continue its rise. PSP is a BUY.
 
iShares Singapore Index ETF (EWS) gained 1.22%. EWS continued its run after breaching the $13 price level last week. EWS holds nearly 48% of its fund allocations in the financial services sector. Couple this with Singapore’s AAA credit rating, and EWS appears ready to continue its winning ways. EWS is a BUY.
 
Statoil ASA (STO) jumped 5.72% over the past five trading days. STO has been in on-going negotiations with other drillers in a consortium project to tap the Russian Arctic Shtokman gas field. However, negotiations expired recently and STO is now free of this project’s initial agreement that many felt was technically difficult and too expensive. STO is a BUY.
 
Lennar Corp (LEN) rose 3.97%. The CEO of Owens Corning, Michael Thaman, made several positive comments on the future of housing last week. Mr. Thaman relayed several company metrics pointing to a recovery in the housing market for the second half of 2012. Owen Corning produces several components Lennar uses in the home building process. LEN is a BUY.
 
iShares MSCI South Korea Index Fund ETF (EWY) added 1.87% its first week in your portfolio. EWY powered through the 200-day MA after failing an attempt early last week. EWY’s 200-day MA is above its 50-day MA, and EWY’s chart appears ripe for a run. EWY is a BUY.
 

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