Every now and then I use mystery charts to source people's raw opinions and challenge my own thinking. Not knowing what a chart represents helps eliminate biases and any ideas we may already have in our heads. And so today I'm back, selfishly, looking for thoughts on the chart below.
So it seems a strong US Dollar has been bad for global stock market ETFs due to local currencies exposure. This has damaged the bullish trends in otherwise strong economies and the team here at All Star Charts has been looking to identify the global ETFs that are holding up best and likely to lead when currency headwinds abate.
A favorite to lead the charge is the iShares Emerging Markets ETF -- $EEM. Tom Bruni likes the bull thesis here, but I'm not so sure it'll be that easy. Have no fear, I've got the perfect way to play our contradicting opinions with options.
The US Dollar Index is up roughly 7.5% since it's February lows, a move that has hit many of the global stock market ETFs we follow due to their local currency exposure. The Frontier Markets ETF $FM is among those hit hardest, down roughly 16% since late January. With that in mind, we like to focus on strength and there are three global ETFs that continue to hold up well and should lead if/when strength in the US Dollar subsides.
I'm having a great time here in Mumbai at the 7th annual Traders Carnival. I had the opportunity to sit down with Navneet SalujaDsouza from Bloomberg Quint to discuss my process and approach to markets.
Options are a leveraged instrument, and if you're not careful, it's easy to find yourself exposed to more risk than what you're comfortable with. A subscriber to All Star Options pinged me this week with some questions and I thought our discussion might be fruitful to everyone...
I'm having a great time here in Mumbai at the 7th annual Traders Carnival. I had the opportunity to sit down with Navneet SalujaDsouza from Bloomberg Quint to discuss my process and approach to markets.
I was confused too. But no, $DQ is not America's favorite destination for shakes, malts, and blizzards. But it is sexy in it's own way -- it's an energy company named Daqo New Energy in one of the hottest sectors we think will be leading stocks higher this year -- Solar Energy. According to wikipedia, $DQ is a Chinese company "engaged in the manufacture of monocrystalline silicon, polysilicon, and silicon wafers, primarily for use in solar photovoltaic systems." OK, sounds cool? It really doesn't matter to us, we're just following price, and we're going to trade it with options in a defined risk spread.
Everyone always wants to talk about how high the stock they just bought is going, or how much money they're going to make on a new position. "JC I think Apple goes to a Trillion Dollar Market Cap!" or "JC Bitcoin is going to $100,000!". These are things I hear frequently, or at least some sort of variation of these comments.
This is perfectly normal behavior. We should not be afraid of it. But more importantly, I think we need to be aware of the implications of these feelings. The thing is, once we are already in a position, our emotions get involved. When our stress levels rise, we act emotionally, rather than logically. This is how we're hard-wired. It would be abnormal for us not to think this way. But again, the important thing is to be conscious of it and not let it dictate our actions.
Everyone always wants to talk about how high the stock they just bought is going, or how much money they're going to make on a new position. "JC I think Apple goes to a Trillion Dollar Market Cap!" or "JC Bitcoin is going to $100,000!". These are things I hear frequently, or at least some sort of variation of these comments.
This is perfectly normal behavior. We should not be afraid of it. But more importantly, I think we need to be aware of the implications of these feelings. The thing is, once we are already in a position, our emotions get involved. When our stress levels rise, we act emotionally, rather than logically. This is how we're hard-wired. It would be abnormal for us not to think this way. But again, the important thing is to be conscious of it and not let it dictate our actions.
It might sound like we're beating a dead horse here, but the Russell 2000 printed another new all-time high yesterday (I know, it ended up being a red day, but that volume tho...) and there's just no way I can view this with any bearish context. Sure, perhaps it's extended and due for a rest (or gasp, a pullback) but it's simply irresponsible to be spouting actively bearish broader market calls in this environment right now.
As such, the team at All Star Charts keeps digging into the sectors that are looking like candidates to lead the next leg of stock market gains higher. Today, we've got our eye on the Biotech sector.
The Financial Services, Energy, IT, and Consumer Goods sectors remain the leaders, while smaller sectors like Pharma and Media continue to lag the broader market. Our chart of the week is sticking with that theme by looking at the Nifty Metals and Nifty Infrastructure indexes, which collectively represent roughly 9% of the Nifty 500. Although these sectors have been consolidating near all-time highs for most of this year, recent developments suggest they may be vulnerable to further downside.
If you've been reading our content over these last few weeks, you've likely noticed we've been performing a lot of deep dives on the sectors we want to be involved in on the long side like Solar,Energy (premium), Retail, and Software (premium). Healthcare in general has been a laggard and the Medical Device space continues to lead, but now we're seeing Biotechnology start to break out as well. In this post we're focused on the equal-weighted Biotech ETF $XBI, as the cap-weighted $IBB is lagging significantly and remains weak. This out-performance by the equal-weight sector ETF signifies a broad-based rally is underway, so we're looking for the best names in the sector to take advantage of this theme.
