The Market Rolls along…

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.
The S&P 500 Index continued its rolling pattern as it recovered over 2% this past week. U.S. markets rose five straight days before pulling back on Monday and ending flat on Tuesday. Global markets were less robust with the MSCI Emerging Market Index (EEM) ending the week down 2.38%.
 
Your position in Market Vectors Indonesia (IDX) took a hit, ended the week down 8.62% and stopped out today. This movement has left me scratching my head as there was no news out of that market to explain such a move. Indonesia remains the top-performing global market of 2011. Nonetheless, we are out of the position for now but I will keep my eye on it for possible re-entry in the future.
 
With the exception of Indonesia, your Alpha Investor Letter portfolio positions held up well. Market Vectors Gold Miners ETF (GDX) bucked the tide of falling gold prices and made a good gain for the week. Las Vegas Sands Corp. (LVS) made a similar move. The rest of the holdings in your portfolio remained flat.
 
Your newest position in iShares JPMorgan USD Emerging Markets Bond (EMB) pulled back slightly. This is generally a low-volatility position that won’t be swayed by the ebbs and flows of the stock market nearly as much as your other positions.
 
PowerShares US Dollar Index Bullish Fund (UUP) — a bet on the U.S. dollar — has nudged up above its 200-day moving average. This ETF is currently a member of our Watch List and has not traded above this price level since September 2010. As this is part of your defensive “hedge” portfolio, I am not formally recommending that you enter this position at this time.
 
Overall, I am happy to maintain a defensive posture in the Alpha Investor Letter portfolio for the time being. We have plenty of candidates on our Watch List awaiting the call to action should a bounce occur in the markets. The sideways price movement of First Trust AMEX Biotechnology Index Fund (FBT) is of particular note. This ETF is forming a classic bullish stabilizing pattern as it closes on its 50-day moving average.
 

Portfolio Update

 
WisdomTree Dreyfus Chinese Yuan Fund (CYB) remained flat last week, posting a 0.12% loss. Consensus among experts is that China’s currency is roughly 40% undervalued. With the threat of inflation looming large, China could rapidly appreciate the value of the yuan (and your position in CYB) at will. CYB is nearing its 50-day moving average (MA), but remains a BUY.
 
WisdomTree Japan SmallCap Dividend Fund (DFJ) held its ground with a 0.16% gain for the week. DFJ’s price has been rolling consistently between $41.30 and $43.70 since the beginning of August as this ETF attempts to break out to the upside. DFJ did spend one day above its 50-day moving average last week, but remains a HOLD for now.
 
Las Vegas Sands Corp. (LVS) rose 1.40% over the previous five trading days. Good news continues in the Macau region, and this is reflecting positively in LVS’ stock movement. Macau casino revenues have increased 47% in 2011, in spite of the seemingly endless losses in global markets. LVS is well above its 50-day moving average and is a BUY.
 
Market Vectors Gold Miners ETF (GDX) gained 1.93%. Gold recently posted its biggest weekly loss since May. This has given you a good chance to add to your position at fire sale prices. Gold continues to build support into its chart and, overall, the trend remains quite bullish. GDX is a strong BUY.
 
iShares JPMorgan USD Emerging Markets Bond (EMB) dipped 0.81% during its first week in your portfolio. This popular choice among investors has gained nearly 5% year-to-date. Moreover, with the exception of the market sell-off in early August, EMB has accomplished this with a fair level of safety and consistency. EMB is a HOLD for now.
 

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This remains a very volatile and mood-driven market. The good news is that the early August lows have held up after being tested two weeks ago. That suggests that despite the current choppiness, the market has steadied, and is readying for its traditional strong finish to the year. Short term, with the U.S. market up five days in a row, I expect a pullback over the next few days.
 
So, this week offers an excellent opportunity to give you a “big picture&rdqu

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