SPX multtime frame trend chart

SPX has come to 1264 levels after breaking from the 1300 levels. We posted earlier that any break of 1300 levels can lead to straight fall. Link

The index has broken the first support of 1275 and is heading to 1250 levels.

In our multi time frame trend indicator we had a sell from 1330 levels. Attached is the chart.It shows how the bullish trend was captured and then the decline also. There were 2 whipsaws one long and one short. But the loss was not much. The trend followers look to capture the larger trend like the first bullish signal while keeping the losses minimized.

Emerging Markets ETF

Emerging markets are generally regarded as the risker trade then the SPX. They are generally leading indicator of the change in the risk perceptions around the world.

The EEM etf is a good way to track the performance and perception about the emerging markets.

This etf has been in range for some time after breaking out from the resistance of 48 but then it reverted back to channel just when the commodity selloff started. This was also partially attributed to the QE2 end when risk reduction started globally.

The ETF now is holding the grounds quite well as it held the last range support of 45 and now has formed a falling wedge kind of pattern from where the breakout is happening.  The bullish breakout is confirmed above the 48 levels as it will be then above the range high.

Worth noting is the change in slope of relative performance w.r.t SPX.

Does this indicate the change in perception to risk especially when the US indices are falling?
As the emerging markets have both growth and domestic consumption not depend on US economy.

US Sector Rotational Strategy XLE loosing leadership

US Sector Rotational Strategy XLE loosing leadership

Energy sector has been a favorite of this Bull Run and has been the outperformer among all the sectors.

That though is changing now as the relative strength of this sector has not only broken the uptrend but also has declining strength vs SPX now.

The new leaders are Consumer Durables, Staples and Utilities.

Strategy What happens when QE2 ends Part 1

The QE2 has been supporting markets a lot when it started in Nov 2010. The global markets made a fresh after that. The program is going to end in June 2011 and probably that's why the global markets  are changing their trends.

 In next few posts I will try to explore how to benefit from the upcoming macro event.

First lets see define the timelines

QE1 Start :  Jan 2009        QE1 End : Mar 2010

Ben Speech on QE2 Aug 2010  --> Indication on starting another round of QE.

QE2 Start : Nov 2010   QE2 End: June 2011

Everyone knows that the QE1 ended a bear phase and started bull run and most of global markets made highs in Jan 2010.

Most of the markets struggled during the QE1 end to start of QE2 period.

Attached is the chart with SPX and EEM with timelines.

The above chart clearly shows all the trend for US and Emerging markets.

Worth noticing is the markets show jitters 1 month before end of QE as it is unwinding of trades based on QE.

And I feel that the recent free fall in commodities was more or less attributed to end of QE2.
The increase of margins just added fuel to fire. The effect is clearly visible on CRB index charts.

So there is increased probability that when Fed withdraws the "Helicopter Printing Press"   (Visually)  then we can see a range market for quite some time.

Nifty and SPX in X O view

The Emerging market ETF EEM has broken out of the consolidation. Read the post here.
The etf is relatively bullish than SPX which is a major turn in the assets allocation globally.

Lets see how Nifty is performing relatively.
First Nifty vs EEM in a relative chart:

The ratio has been in range for quite some time and has is at the resistance trendline.
The 50 SMA is getting flat which is a good sign.

This shows that India is still underperformer in emerging markets.

Now hows the Nifty vs SPX. Well that's showing bullishness.

There is first breakout from the double top of X's which is highlighted. Though it is still below the bearish trendline but the ratio has rising bottoms.

So overall Nifty is for sure signs of bullishness but the months of under performance still lingers and that itself can be good trigger for buying by funds.

EEM: Emerging Markets new high of 2011

Emerging markets etf EEM has made a new high of 2011 and has broken out of band of 48 and 44 levels.

The breakout has come with bullish gaps and above average volumes which is a bullish sign. The range gives a target price of 52 levels.

Worth noting is the recent uptick in the relative performance with SPX index.

Chart:

Earlier post on EEM
Charting the Emerging Markets path

Charting the Emerging Markets path

Emerging markets have been in focus a lot in this decade. They should be as the last decade returns have been spectacular. Tracking from 2003 onwards they have outperformed the SPX index by 3 times in returns.
Their ETF's are hugely popular in US with the key emerging market ETF being in top 10 in NYSE ETF.

Coming to Emerging Market ETF there are signs of weakness which should matter a lot at this juncture. The US index is hitting new highs so the investors as the buying more of their home equities which is getting reflected in the outflows in emerging markets.

The relative ratio chart:

The uptrend breakout in the ratio has come in 2011 just when the US equities has their one of the best January.

This is reflected in the chart of ETF in which the key signals are highlighted.

The top inside the bands in early Jan, increase in volumes on down days, crossover of 20 and 50 DMA and now break of lower band while bands are sloping down.

The support is at 44 levels which the ETF should hold for the bullishness to continue.
Just have a look at the key emerging market indices here. Follow up of the BRICS chart link here.

Only Taiwan and Russia are holding the 50 DMA as of now.

US Sectoral Trend: Energy momentum powering ahead

Looking at the US sectoral trend for year to date, XLE i.e. S&P energy ETF  has outperformed SPX by 4% and is best sector.
The other two sectors giving +ive returns were Technology (XLK) and Industrials (XLI).

The snow effect is visible in Cons Staples and Cons Disc sectors as they were under performer by 4% and 2%.

The Utilities has been down for quiet some time. Financials which were leading are now performing in line.

Worth noting is the consistent leadership of Energy sector for last 6 months. There is a momentum theory in play here.