Author Archive for FocalEquity
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Nicholas Santiago
Chief Market Strategist
www.InTheMoneyStocks.com
Recently before the stock market bounce in early July the majority of
traders and investors were frightened by the so called death cross on
the Dow Jones Industrial Average and the S&P 500 Index. This is
when a major moving average on a chart crosses over the larger moving
average to the downside. Many regard this so called death cross as a
very bearish stock market signal. At the same time as the death cross
there was also a massive head and shoulders top in place that was
publicized on every business news channel and radio program around the
world. Obviously when everyone is talking about the same thing rarely
will the stock market accommodate and allow that bearish pattern to
play out as expected. While every trader and investor is talking about
these negative chart factors they should really look at the real kiss
of death for the market.
The equity market is a leading indicator in many ways. Sometimes its movement anticipates the actual reality six to eight months ahead of time. The present divergence between the Chinese real estate stocks and its real estate prices is raising red flags.
Since the Chinese National Development and Reform Commission (NDRC) began to publish its housing price index in late 2005, we can see that the first year over year percentage change in Chinese real estate prices peaked by the end of 2007. However, the CSI real estate stock index peaked about three months ahead of time and by the time the physical real estate property began to fall, the stocks already plunged over 20%. Then the CSI real estate stocks bottomed by early October of 2008 post the Lehman collapse and began its recovery. However, the physical real estate property price continued to fall until early February of 2009. Again Chinese real estate stocks led the actual real estate market by about three months.
The current situation between the Chinese real estate stocks and the Chinese real estate is interesting and it clearly breaks the previous pattern. As we can see, the CSI real estate index concluded its uptrend by the beginning of June in 2009 and has since plunged close to 40% from the June 2009 peak. However, the Chinese real estate market continued to surge and breached 12% year over year price appreciation by March of this year. This is a time lag of over 9 months, much longer than the previous two occurrences. In addition, the reality gap between the real estate stocks and the real estate market has more than doubled.
Author: Gareth Soloway
Chief Market Strategist
www.InTheMoneyStocks.com
The markets gapped higher again today, trying for a third straight up
FocalEquity now has the resources to stay very active even during weekends. We will continue to publish free articles relating to the global stock markets as well as macroeconomic topics on Saturdays and Sundays. So whether if you just became a fan or a long time follower of our site, we hope you will stay with us throughout the weekends and actively participate on our site. Thank you for your continued support.
Since March 15th, S&P 500 index dropped 10.37%. The broader Barclay Equity Long/Short index is pretty much flat. FocalEquity Long/Short Strategy delivered via FocalEquity Alerts & Analytics managed by Idan and Tze delivered a 5.6% overall portfolio return YTD with an annualized return of 19.10% net of transaction fees.
We closed 62 positions – 30 long positions and 32 short positions. Nine of them were closed with losses and 53 closed with gains, making the overall success rate 85.48%. The average holding period per position is 10 days. Below is the full list of our closed positions as of 06/30/2010
The events that are unfolding right now makes perfect sense from a global struggle for supremacy point of view. Specifically, the United States will likely emerge from the financial crisis since 2008 once again as the strongest country in the world within the next few years. The plan seems simple – trigger a domestic financial crisis that will shock the rest of the world. The United States took the hit first, and in turn causing a much worse financial/economic collapse in Europe and then likely in Asia.
The unstoppable plunge of the Euro is already taking place and the prospect of 1:1 USD/Euro exchange rate is already in sight. Country after country, Europe will fall into economic ruins fairly quickly. So far the casualties are Greece, Iceland, Portugal, Spain and now Hungary. The sovereign debt crisis will spread like a plague soon infecting other European nations as well.
With the Memorial Holiday approaching, all of our open positions are closed today. We launched FocalEquity Alerts&Analytics on March 16th, 2010. As of today, we have been running our service for 71 days. We closed all of our 42 trades as of today. We have 7 trades at a loss and 35 trades at a gain, making our success rate at 83.33%.
Our original $1 million portfolio after close to 100% turnover and net transaction cost is now sitting at $1,041,637.34. Thus, the real return on our portfolio so far is 4.16% YTD in 71 days making our annualized return at 21.386%. We are certain that there are many traders/investors out there that are doing much better than this but what we are proud of is really the discipline and proven investment model that we follow, making our success rate consistent and volatility of our portfolio very controlled.
The 42 positions we closed are listed below:
If you want to become our subscribers and follow and execute our future trades in real time, please consider joining our service FocalEquity Alerts&Analytics. We need your support and testimonials to build our brand name investment service.
It is getting increasingly hopeless for the bulls right now. Looks like the next support is at 9750 on the DOW.
For Crude oil, $60 seems to be a strong support.
Cardwell RSI EDGE Update.
Friday, May 21st
Crude Oil:
The trend remains down and the next levels for support would first 65.00 and
then 61.00- 60.00. The rally to new highs in late April failed to move about the
60 level on the daily RSI. According to our “Range Rules”, (Bull of 80 and 40 and
Bear of 60 and 20), the reversal in price was not a surprise.
Dow Jones:
The market has probabaly made it’s high for the year. I know it’s a bold statement,
but the technical evidence of the “Range Rules” and the SMA 9 on close turning
down below the value for “The #” (the center line of the bands we have on the bar
chart) suggest the pathe of least resistnace will be down. Nearterm resistance
should be first 10380 and then 10520. Our downside targets for now are at 9750,
9200 and then 8950.
I spoke to Andrew Cardwell, the RSI guy, this weekend. Andrew has been occupied with personal issues for the past few months and was not able to contribute on FocalEquity.com. Now with most of those issues out of the way, Andrew will be actively contributing to our site. He will be mainly covering commodities and currencies. FocalEquity.com’s followers will undoubtedly benefit from the wisdom of this legendary trader and educator.
Andrew’s Chart on the DOW and SPX. Notice that his proprietary CFG (Andrew’s own version of the RSI) is now clearly in a downtrend and it’s struggling to get much further than the 50 level. In addition, Andrew’s Histogram is now about to cross below the neutral line.
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