Categories: Stock Market NewsThe Alpha Investor Letter Hotlines

Global Markets Wobble

The euphoria over the killing of Osama Bin Laden notwithstanding, global financial markets pulled back sharply over the past two days.

The traditional advice has been to “sell in May and go away,” as we head into a seasonally weak part of the year. Seasonal weakness notwithstanding, I believe that the general bias of the market is still upward. Major emerging markets did break out to the upside last week. Many of them — including the iShares MSCI South Korea Index (EWY), the Market Vectors Indonesia ETF (IDX) and the Global X FTSE Nordic 30 ETF (GXF) — hit record highs. Your top value play, WisdomTree Japan SmallCap Dividend Fund (DFJ), also ended the week higher. Overall, your holdings in Asia have remained remarkably resilient.

Your biggest gainer of the week was JinkoSolar Holding Co., Ltd. (JKS). The Chinese maker of solar products reported EPS of $2.10, easily beating views for $1.53. Revenue leapt to $326.7 million, also crushing forecasts. Yet with forecasts downgraded, I am turning cautious on this position and moving it to a HOLD. I have done the same with Las Vegas Sands (LVS), which this morning reported disappointing earnings.

That said, it is important to remember that, as a general rule, sharp movements in stocks or ETFs rarely have anything to do with the underlying health of the position and everything to do with market sentiment. On a day-to-day basis, it is Mr. Market’s mood swings that dominate price movements.

Recall our rule of thumb. If a stock falls below its 50-day moving average, I move it to a HOLD. If it goes back above it, it is back to a BUY. You’ll see below that I have moved several positions — including Vale S.A. (VALE) and Market Vectors Russia ETF (RSX) this week — to a HOLD, based on this rule.

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Portfolio Update

Agrium Inc. (AGU) pulled back 4.94% this past week. Having fallen below its 50-day moving average, Agrium is now a HOLD.

The WisdomTree Dreyfus Chinese Yuan Fund (CYB) rose 0.27% in the past week, and hit record highs. Trading above its 50-day moving average, CYB is a BUY.

WisdomTree Japan SmallCap Dividend Fund (DFJ) rose 2.69% last week, almost completely immune from the sell-off in global markets. After the Japanese earthquake, it’s hard to imagine any huge downside in this position. The cheapest market — and the most developed part of the world — remains a BUY.

iShares MSCI Singapore Index (EWS) fell 1.6% this past week, after hitting a record high. The Singapore dollar remained range-bound as caution dominated Wednesday’s Asia trading session, with markets awaiting cues from big events later in the week. EWS is a BUY.

iShares MSCI Malaysia Index (EWM) ended the week flat. The World Bank expects Malaysia’s GDP growth to hit 5.3% in 2011, before accelerating to 5.5% in 2012. EWM remains a BUY.

iShares MSCI South Korea Index (EWY) barely budged this week. The economy is currently on track to meet or slightly exceed the central bank’s forecast for 2011 of growth of 4.5%. EWY remains a BUY.

iShares MSCI Taiwan Index (EWT) ended the week slightly higher. Taiwan’s economy is growing faster than forecast, with first-quarter growth at 6.19%, above the median forecast of 5.25% growth. The “other China” remains a BUY.

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Freeport-McMoRan Copper & Gold Inc. (FCX) dropped 4.81% this past week. This is a volatile stock that is now right at its 50-day moving average. FCX is now a HOLD.

Market Vectors Gold Miners ETF (GDX) dropped 3.32% this past week. Falling through its 50-day moving average, I am moving GDX to a HOLD.

Global X FTSE Nordic 30 ETF (GXF) ended the week higher after hitting record highs on Monday. Sweden’s center-right government is saying tax cuts are likely this year and is predicting strong growth, low unemployment and a budget surplus. GXF remains a BUY.

Market Vectors Indonesia ETF (IDX) rose another 0.42% this past week, after hitting record highs. One of the strongest markets on the planet, IDX is a BUY.

JinkoSolar Holding Co., Ltd. (JKS) soared 3.67% this past week. The Chinese maker of solar products reported earnings per share of $2.10, easily beating views for $1.53. Revenue leapt to $326.7 million, also crushing forecasts. Trading at its 50-day moving average, JKS remains a HOLD.

Las Vegas Sands Corp. (LVS) disappointed investors with a lower-than-expected quarterly profit at its Singapore casino-resort, sending shares of the company down 10% in overnight trading. Lower-than-normal casino table game winnings hit its Singapore revenue by about $30 million (S$36.8 million) and its Las Vegas revenue by about $45 million. You won’t hit your stop price, but LVS is a now a HOLD.

Market Vectors Russia ETF (RSX) dropped 3.92% this past week. This one always gets hit on a spike in risk aversion. Trading back below its 50-day moving average, RSX is a HOLD.

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Universal Display Corp. (PANL) fell 4.16% this past week. Results for the first quarter 2011, ended March 31, 2011, will be released on Monday, May 9, 2011, after the market’s close. Trading well above its 50-day moving average, PANL is a solid BUY.

UltraShort Lehman 20+ Year Treasury (TBT) dropped 1.74% this past week. I continue to view the behavior of U.S. government debt puzzling. With TBT now trading below its 50-day moving average, it is a HOLD.

iShares MSCI Turkey Invest Mkt Index (TUR) rose 0.86% this past week, showing remarkable relative strength. The “unheralded” BRIC remains a BUY.

Vale S.A. (VALE) fell 5.27% during the past week. With the Brazilian commodities giant trading back below its 50-day moving average, it is back to a HOLD.

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Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world. He was the Editor of The Global Guru, a free weekly e-newsletter, and also edited the trading services Momentum Trader Alert, which focused on making short-term profits in the hottest markets in the world, and The Alpha Algorithm, which was designed specifically to deliver big, fast triple-digit winners, month after month. He was also the editor of Smart Money Masters, a monthly service focused on longer term investments recommended by the brightest minds in the business. Mr. Vardy has been a regular commentator on CNN International and the Fox Business Network. He has also published articles in The New Republic, The World and I, and The Baker & McKenzie Legal Review. The Global Guru/Nicholas Vardy has been cited in The Wall Street Journal, Newsweek, Fox Business News, CBS MarketWatch, Yahoo! Finance, and MSN Money Central. Mr. Vardy graduated from Stanford with a B.A. — with honors and distinction — in both Economics and History, and he also earned an M.A in Modern European Intellectual History. After winning a Fulbright Scholarship, he earned a J.D. degree at Harvard Law School where he was an editor of the Harvard International Law Journal. When not uncovering investment opportunities for his subscribers and investors, Mr. Vardy is a keep-fit enthusiast and an avid student of classical music.