Making Money Alert
The Black Cross Society
02/24/2010
In technical analysis parlance, a black cross (sometimes known as a death cross) occurs when an index’s falling 50-day moving average meets its rising 200-day moving average. And as the ominous name suggests, this is not a positive development for a sector. In fact, it usually signals the return of a very serious bear market.
Well, let’s take a look at the chart below of the iShares FTSE/Xinhua China 25, the key index that measures the health of China’s stock market. As you can see, the 50-day moving average (blue line) has fallen down to just about where the 200-day moving average (red line) has climbed.
This near black cross could be a very bad sign for stocks in what until recently has been one of the hottest financial markets in the world. If we do see this black cross take place on FXI, then inverse exchange-traded funds (ETFs) that move higher when the Chinese market falls will be the place to collect some really big profits.
Right now, subscribers to my ETF Trader advisory service are perfectly positioned to take advantage of the potential collapse of the Chinese markets. We’re also well-positioned to take advantage of the wider sell-off in emerging markets tied to China’s fortunes.
If you want to get your portfolio out in front of the black cross, then simply click here.
Back Home in the U.S.A.
Back home in the U.S.A., we have a much different technical picture. After sinking below its 50-day moving average, the S&P 500 Index now has fought its way back to the 50-day average. But before this broad measure of the markets can break through this short-term, technical resistance mark, we’ll have to see a lot more buying on convincing trading volume.
In my ideal market world, I would like to see the S&P 500 pull back to its long-term, 200-day moving average. I think that kind of shakeout would set investors up for a very nice buying opportunity. So, if you’ve been waiting to put money to work, then I would certainly recommend that you stay patient and wait to see if we do get that most-advantageous market pullback.
Of course, there is more to assessing the markets than just the S&P 500. Two other key measures I’ve been telling you about during the past several months are the value of the U.S. dollar vs. rival foreign currencies, and the direction of long-term Treasury bond yields.
In the chart below, we see that the U.S. dollar has mounted an impressive rally since it hit its December lows.
The move higher in the greenback is not good news for international equities and, as such, it behooves you to make sure you don’t have a lot of international equity exposure in your portfolio right now.
Finally, we can see that yields also have been on the move since December. The chart below shows the 30-Year T-Bond Yield just below its 52-week high.
The surge in yields, and the concomitant decline in long-term Treasury bond prices, tells us that there is tepid demand for bonds. This halfhearted demand for buyers means bond yields likely will continue rising. It also means that if you are a big holder of U.S. Treasury bonds, you might want to think about setting a stop loss on your positions to protect yourself against a further decline in bond prices.
It's Time to Call Your CPA
It’s nearly the end of February, and that means tax season is in full swing. Over the past two weeks, I’ve been working particularly hard on my own tax situation, and I’ve been meeting regularly with my CPA, Lee Haight. Now, you may remember the excellent article that Lee wrote back in December.
In that article, Lee showed you how to make the most of your year-end tax planning by getting out in front of some of the rule changes slated for 2010. Those rules are numerous, and much more voluminous than one can cover in a short article.
So, to help you plan even further for this year’s taxes, I conducted an interview with Lee, recorded it, and I now have made that interview available at DougFabian.com.
If you want to find out what you need to be doing right now to get yourself prepared for April 15, then I highly recommend that you listen to this interview now.
I guarantee you’ll find our discussion most insightful.
ETF Talk: Eastern Europe Offers Potential Escape Route
Years ago, people risked their lives to escape from the tyranny of the former Soviet bloc countries. Now, those same nations may prove to be an effective place for investors to flee from the debt problems cropping up in Greece and other fiscally faltering nations in Europe.
One way for investors to gain exposure to such non-eurozone nations is through the MSCI Emerging Markets Eastern Europe Index Fund (ESR), an exchange-traded fund (ETF) which seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the MSCI Emerging Markets Eastern Europe Index. Deutsche Bank recently issued a report that estimated non-eurozone countries, such as Poland and the Czech Republic, will enjoy faster economic growth than eurozone nations.
So far, ESR is showing that such positive views about Eastern Europe have merit. The fund rose 11.08% through the end of January, since its inception on September 30, 2009. ESR invests in equities from four countries, Russia, Poland, Hungary and the Czech Republic. Nearly three-quarters of its investments were based in Russia at year-end 2009, while Poland ranked second and accounted for more than 14% of the fund’s portfolio. Two energy companies, OAO Gazprom-Reg S ADS, 21.21%, and Lukoil-SPON ADR, 9.75%, ranked as the fund’s largest investments at the end of January.
In addition, both Russia and Poland have economic growth rates that are projected to top those of the eurozone. The European Bank for Reconstruction and Development (EBRD) is forecasting economic growth this year of 3.9% in Russia and 2.3% in Poland. Those are pretty good growth rates, especially considering much of the rest of the world is struggling.
Certainly, no region of the world is immune from the economic weakness that has spread to virtually every corner. But the eurozone and the debt woes of its weakest countries leave that region in a vulnerable state. Safe harbors are not easy to find in a financial storm, but Eastern Europe may be one place that investors can duck for cover.
I currently am not recommending ESR, but it is a fund that I am tracking. If you believe that Eastern Europe offers a refuge from the debt problems threatening the eurozone, ESR is one fund that you may want to consider.
Please feel free to contact me if you want advice about which ETFs to buy and to sell. One way to obtain my guidance on a regular basis is to sign up for my ETF Trader service by clicking here. As always, I am pleased to answer your questions about ETFs, so do not hesitate to email me if you have one. To send a question to me, simply click here. You may see your question answered in a future ETF Talk.
Announcing My FREE Teleseminar
Join me on Saturday, March 6, at 12:00 p.m. (noon) Pacific Standard Time, for a FREE update on the financial markets in 2010. In this teleseminar, titled “Return of the Bear Market,” I will be offering my opinion on how you should be managing your assets as we navigate these choppy market waters.
Let’s face it, the last two years have been a wild ride for both stock and bond investors. What I call Phase One began in 2008, with the biggest decline in stocks since the Great Depression. Phase Two saw a recovery of more than 50% for the S&P 500 Index. Most investors now have been pacified by Wall Street and Washington, and many think the worst is behind us.
I believe that we are close to entering Phase Three of this investment cycle, and that could mean another devastating wave of wealth destruction. The good news, however, is that there is time to prepare, as well as clear signals on the road ahead that will give us time to adjust before any real damage is done.
Four key points you’ll learn in this seminar are:
- Why stocks and bonds have the potential to enter a new bear market
- What are the warning signs to look for in the markets
- Where investors can seek safety during the next 12 months
- How you can profit from the crisis
This FREE, one-hour teleconference will be held exclusively for the first 800 registrants, and judging by the participation in our last teleconference, we will reach capacity quickly. We urge you to take advantage of this opportunity and reserve your spot today.
NOTE: Fabian Wealth Strategies is a SEC registered investment adviser, and is not affiliated with Eagle Publishing.
I Know What I Want...
I know what I want
I say what I want
And no one can take it away
--Iron Maiden, “Journeyman”
When you think of all of the brilliant statements of resolve that have come out of England, you tend to think they’ve come from great leaders like Winston Churchill or Margaret Thatcher. But today, I’ve uncovered this pearl of wisdom from an unlikely source, English rock musicians Iron Maiden. The lyrics to their song “Journeyman” are indeed words to live by, and I think more people should strive to know what they want and say what they want. Because in the end, knowing ourselves and making ourselves known to others is really all any of us have.
Wisdom about money, investing and life can be found anywhere. If you have a good quote you’d like me to share with your fellow Alert readers, send it to me, along with any comments, questions and suggestions you have about my radio show, newsletters, seminars or anything else. Click here to ask Doug.
P.S. My publisher, Eagle Financial Publications, is now on Facebook. Click here to see our page and be sure to become a fan when you get there.