Global Markets in a Pressure Cooker

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.
Both global and domestic markets are taking a breather after their multi-month extended run. Explanations vary from concern over a Greek bailout; the slowdown in the Chinese economy; to the sharp sell-off in oil and commodities early in the month. Or you could put it down to simple profit-taking in a market that has enjoyed a strong run. Of course, the answer is a combination of all of these factors.
In any case, the endless spate of “Sell in May and Go Away” articles are turning warnings of sell-off into a self-fulfilling prophecy. So it’s no wonder so many stocks, exchange-traded funds (ETFs) and indices are feeling pressure. And your Alpha Investor Letter portfolio is no exception.
The Gold Miners ETF (GDX) position has been the sole bright spot in your portfolio over the past week; its healthy 2.91% weekly gain is another indicator of the fear and greed throughout global markets. The WisdomTree Dreyfus Chinese Yuan Fund (CYB), WisdomTree Japan SmallCap Dividend Fund (DFJ) and iShares MSCI Malaysia Index (EWM) all managed to eke out gains — or at least stay broadly flat. That said, with almost all of your positions falling below their 50-day moving averages, I have moved the bulk of your recommendations to a HOLD.
Last week, you were stopped out of the UltraShort Lehman 20+ Year Treasury (TBT) at a loss, as investors piled into safe haven assets. I am moving this position to our watch list.
As we enter a traditionally weak part of the year, you may want to take a more defensive stance in your portfolio. I recommended some specific positions in yesterday’s issue of “The Global Guru.” I’ll also be discussing some of these themes on your Quarterly Update call at 1 p.m. EDT. During this 60-minute, subscriber-only event, I’ll review our current portfolio and offer my perspective on which position(s) I believe will be the best performers through the summer and year’s end. I’ll also share which three sectors of the market I believe will be the most attractive for short-term trading opportunities. Finally, I plan to release a new recommendation for subscribers to put into play, immediately after the call.
My biggest concern is the possibility of contagion from the European debt crisis. At times like this, investors throw the baby out with the bathwater. Pessimists argue that just as the subprime crisis wasn’t contained to the United States, the crisis in Greece will have a knock-on effect to the rest of Europe’s periphery, and ultimately the global economy.
I think it is far too early to tell. But it’s important to maintain perspective. Florida’s economy is larger than Greece, Portugal and Ireland combined. And last year, the MSCI Emerging Markets Index endured two stomach-churning corrections, falling 13.96% in February, recovering to new highs, and then dropping another 16.26% in May. These two corrections shook out a lot of investors — most of whom later regretted panicking and selling out.
We are at a critical juncture. With both the DOW and S&P 500 indices currently at or near their 50-day moving averages, the coming weeks will be an important indicator of summer market direction.
Portfolio Update
Guggenheim Timber (CUT) ended the week down 1.49%. Having fallen below its 50-day moving average, your bet on timber is now a HOLD.
The WisdomTree Dreyfus Chinese Yuan Fund (CYB) took a slight 0.12% dip this past week. With China’s banks taking precautionary de-leveraging steps, even beyond minimum government mandates, Chinese banks are trying to head off problems that may affect the yuan before they occur. Holding tight just above its 50-day moving average, and with a stop price of $22.93, CYB remains a BUY.
WisdomTree Japan SmallCap Dividend Fund (DFJ) ended the week 0.92% lower. Bobbing just below its 50-day moving average, DFJ is now a HOLD.
iShares MSCI Singapore Index (EWS) fell 1.22% over the last week. The Singapore government is giving unprecedented support to gambling efforts and the gaming sector is expected to rise 25% this year alone. Having fallen below its 50-day moving average, EWS is now a HOLD.
iShares MSCI Malaysia Index (EWM) rose by 0.21% for the week. Likely to benefit from assisting a recovering Japan, EWM should move up nicely in the coming months. As EWM has moved below its 50-day moving average, I am placing it on a HOLD.
iShares MSCI South Korea Index (EWY) ended the week down 2.69%. While the Korean economy remains strong, the turmoil in the European markets has put pressure on all Asian markets, including this Tiger economy. Trading above its stop price of $59.50, but below its 50-day moving average, EWY is now a HOLD.
iShares MSCI Taiwan Index (EWT) dropped 1.75% this week. Slipping below its 50-day moving average, this tech-heavy ETF is now a HOLD.
Market Vectors Gold Miners ETF (GDX) popped this past week for a nice 2.91% gain. Although trading near its stop price, gold remains a solid bet moving forward through the weaker summer months. Trading below its 50-day moving average, GDX is still a HOLD while it builds a base for its next move up.
Global X FTSE Nordic 30 ETF (GXF) ended the week 2.08% lower. GXF is highly diversified play on some of Europe’s strongest economies. That makes about as safe a bet as you can get. Having fallen below its 50-day moving average, GXF is a HOLD. The stop for GXF is $19.50.
Market Vectors Indonesia ETF (IDX) fell 1.36% this past week. Trading between $31 and $32, and with a stop price of $29.00, IDX is poised to break out to the upside. IDX is still a BUY.
JinkoSolar Holding Co., Ltd. (JKS) gave back a recent large rise, falling 6.55% for the latest week due to an analyst’s downgrade. After testing, and then falling sharply below its 50-day moving average, JKS is back to a HOLD.
Las Vegas Sands Corp. (LVS) dropped 3.68% over the past week. Options traders have been making significant positive bets on LVS, betting on future gains in LVS. This stock remains a HOLD, while it trades below its 50-day moving average.
iShares MSCI Turkey Invest Mkt Index (TUR) dropped 2.40% this past week, and it is nearing its stop price of $59.00. The collapse in commodities prices is a positive for Turkey and is bullish for the prospects of this pick. Trading below its 50-day moving average, TUR is currently a HOLD.

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