U.S. Markets Tread Water as Global Stocks Break out to the Upside

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.

It was a relatively quiet week for U.S. stock markets, with the Dow Jones up 0.85%, S&P 500 rising 0.72% and the NASDAQ eking out a 0.28% gain. The MCSI Emerging Markets Index, in contrast, jumped an impressive 4.32%.

Big gainers in your Alpha Investor Letter portfolio included the iShares MSCI Philippines (EPHE), which rocketed 6.10% higher, BYD Company, Ltd. (BYDDF), which rose 4.65%, and the Cambria Global Value ETF (GVAL), which popped 4.07%. Two positions, Google Inc. (GOOGL) and WisdomTree Japan Hedged Equity ETF (DXJ), each fell below their 50-day moving average and moved to a HOLD.

Cambria Global Value ETF (GVAL), Vanguard Global ex-US Real Estate ETF (VNQI) and Costco Wholesale Corporation (COST) all moved back to a BUY.

With the CNN Fear and Greed Index suddenly back up to 79, market sentiment has slowly crept back up to very bullish levels. Recall that this is a contrarian indicator and, as a general rule, stocks tend to do poorly at such extremes.

Such situations often result in false breakouts where stocks poke above recent highs, suck in short-term buyers, then reverse sharply.

A notable bright spot in your Alpha Investor Letter portfolio has been your global holdings, which have rallied sharply in recent weeks. But here again, it is particular stock or country bets — BYD Company, Ltd. (BYDDF) in China and the iShares MSCI Philippines (EPHE) — that are rallying, even as broader indices are behaving more like the U.S stock market.

This supports further my notion that this is a stock picker’s market, no matter where on the planet you are investing.

Portfolio Update

Vanguard Russell 2000 Index ETF (VTWO) added 2.16%. This small-cap exchange-traded fund (ETF) closed out a third week of gains as it continued to rally from its 200-day moving average (MA). With small-cap stocks being largely a domestic play, and not as subject to the swings of currencies, this sector is often a safe haven when the dollar swoons. VTWO is a BUY.

Cambria Global Value ETF (GVAL) popped 4.07% last week. GVAL tracks the Cambria Global Value Index, which has a heavy weighting in emerging market equities. With the iShares MSCI Emerging Markets ETF (EEM) also jumping over 4% last week, GVAL’s performance tracked the larger, market-cap-weighted index closely. GVAL moved above the 50-day MA and is a BUY.

AdvisorShares TrimTabs Float Shrink ETF (TTFS) added 1.15% over the past five trading days. TTFS enjoys a five-star rating from Morningstar and is the top-performing actively managed ETF over the past three years, according to the “On Wall Street” analytic firm. TTFS is a BUY.

Vanguard Global ex-US Real Estate ETF (VNQI) rose 2.90%. This global real estate holding has been drifting sideways indecisively since early May. Last week, VNQI jumped higher and is now trading near previous highs. VNQI also has an excellent yield and is beating domestic real estate investment trusts by nearly 1.0%. VNQI moved to a BUY early last week.

iShares MSCI Philippines (EPHE) soared 6.10% higher last week, mirroring a similar move it made one month ago. This position now boasts a nearly 18.5% gain over the past month alone. The Philippines’ new President Rodrigo Duterto has reignited the market. In addition, both inflation and interest rates are low, and wage growth is expected to continue higher into his presidency. EPHE is a BUY.

PureFunds ISE Cyber Security ETF (HACK) rose 1.82%. HACK has struggled over recent months, trading in tight ranges for lengthy periods. This could change, however, as HACK last week touched upwards to its 200-day MA — a level not visited since last August. This long-term play in online security remains firmly rooted as foreign-based cyber-attacks remain one of the future’s most pressing issues. HACK is a BUY.

Global X Guru ETF (GURU) gained 1.34%. Continuing a look at 200-day MAs reveals that GURU is in a very similar situation to the PureFunds ISE Cyber Security ETF (HACK). Trading below its 200-day MA since last August, GURU also traded upwards to touch this key price level just last week. GURU is a BUY.

BYD Company, Ltd. (BYDDF) rose another 4.65% last week, marking another winning week in its short history in your portfolio. Now up more than 13% in just over three weeks, this play on battery technology has been a strong winner right out of the gate. BYDDF is a BUY.


Nicholas Vardy

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