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instructor@mywealth.com (MyWealth.com) — Fri, 20 Nov 2009 08:49:48 PST

The Currency Market: Ruled by Rhetoric

Is there an easier market to trade right now than the currency market? There are basically 2 trades going on: risk taking and risk aversion. While this will come as no surprise to anyone who’s in this market, investors in both the stock and commodities markets should also pay attention.

Let’s face it, if it were up to the market, stocks would be back to pre-Lehman collapse levels, gold bugs seem to be happy with the price of gold, oil would be extremely cheap, bank interest rates would be higher, yet mortgage rates would be where they are right now, and we’d have a strong dollar. Sounds just peachy, doesn’t it?

Of course it does, it’s a complete fantasy. Yet those in government believe they can create situations where they can attempt to achieve these ideal conditions. How do they do this? Through their words.

The nice thing about the currency market is that it tends to “trend” more so than other markets. This is good for investors. But bad for policy-makers. Especially if they are firmly rooted in a downtrend. The direction of the trend is established by their decisions, so it follows that they way to change the trend is by changing their decisions.

The conflict occurs when they try to achieve the ideal conditions as they are seeking to make the impossible possible. And in no currency is this truer than the US dollar. After all, in having the world’s reserve currency, US policy makers have a little more juice than their counterparts. This means that almost all markets are affected by US policy.

Again, nothing new here but what it does illustrate is how the markets have essentially become a “tale of two trades”. The risk taking trade (sell USD &JPY, buy stocks and commodities) and the risk aversion trade (buy USD & JPY, sell stocks and commodities) is not only a bit counter-intuitive, but also a case of “throwing the baby out with the bath water.”

A perfect example of this was President Obama’s double-dip recession comments from earlier this week. While the timing of these comments has been debated in the blogosphere, one thing can be certain. Obama was clearly trying to send a message to the Chinese that it is very easy to change the short-term direction of the US dollar without having to change policy. He can do it through his words.

I mean, is the US really in any more jeopardy of falling into the double-dip on Wednesday then it was a week ago? A month ago? A month from now? What this does is slow the pace of the dollar decline, to appease our largest debt-holder. And what we’ve gotten is two days of the risk-aversion trade.

Surprise!

Those comments notwithstanding, what happens if we really do fall back into double-dip recession?

Based on the “tale of two trades” scenario, one would likely assume that investors would dump stocks and commodities and buy US dollars and Japanese yen. However this time I think it might be different.

While stocks will surely take a beating, and oil will sell off due to decreased demand, I think I’d still want to hold gold over US dollars, even if it is losing value. There is a reason why guys like David Einhorn and John Paulson are investing heavily in gold, as the flight to safety trade should be to the precious metal and NOT the US scrip.

I also wrote recently that regardless of what the risk trade tells me, I want to be long the Australian dollar (AUD). Not only for the interest rate differential via the carry trade, but also because of the Australian economy’s link to gold.

So while US policy makers like to get cute with the rhetoric, I’m closing my ears and keeping my eyes open!

To learn more about how to trade currencies, be sure to check out our currency trading courses!

Gold Reaching All-Time Highs!

instructor@mywealth.com (MyWealth.com) — Thu, 19 Nov 2009 10:58:01 PST

Precious Metals & Energy ETF Trading Report

So far this week has been generous with our commodity ETFs moving higher, other than natural gas which is clearly in a bear market. Each of the commodity ETF trading charts below is at a different stage and it will be interesting to see how things unfold in the coming weeks.

Trading ETFs is very rewarding when done properly and using multiple timeframes for timing your entry and exit points is crucial. My main focus is on the weekly and daily charts but I use a 30 minute intraday chart when the time comes to actually pick an exact buy or sell point. Below I have provided both the weekly and daily chart so you can see how the same ETF looks completely different on the two timeframes.

GLD ETF Trading – Weekly & Daily Trading Charts

The weekly chart a nice multi-month rally but is now starting to go parabolic (straight up). When this happens I start tightening my stops so that I can lock in maximum gains. Now, jump over to the daily chart and notice that gold has rallied longer than the previous move in early October. It looks overbought and ready for a pullback. Pullbacks on strong rallies like this tend to be hard and fast as stop orders get triggered sending prices tumbling down on heavy volume. My general thought is 5 days up in an investment is given back in 1 down day. This is why I scale out of positions when they are looking long in the tooth and ready for profit taking.

SLV ETF Trading – Weekly & Daily Trading Charts

Silver had been under performing gold for several weeks but made up some nice ground this week. Gold and silver tend to trade together so if gold pulls back I figure silver will also. That being said the weekly chart of silver looks ready to rocket higher for another week or so.

USO Fund Trading – Weekly & Daily Trading Charts

While gold and silver have been moving higher, oil has been flagging sideways taking a breather. Both the weekly and the daily charts are aligned for a nice move higher if the trend and charts follow through on their patterns. We could get some tradable action in the next couple days.

UNG Fund Trading – Weekly & Daily Trading Charts

Natural gas is really starting to slide. Wednesday UNG dipped below the Sept. low of $8.94 by a couple cents then moved up into the close. Overall it’s not bullish. This could be the start of a waterfall sell off which is a sharp heavy volume sell off that lasts 3-5 days.

Commodity ETF Trading Conclusion:

To sum everything up the gold and silver ETFs are on fire as they continue to surge higher. Being ready for a sharp reversal is important if you want to lock in gains on a portion of your position.

Crude oil is taking its time but looking ripe for a breakout higher. We continue to watch for some action.

Natural gas continues to get pushed down and it’s not looking good for higher prices anytime soon. We are waiting for a shorting opportunity or an oversold condition to play a 1-5 day bounce.

Quick Trading Tip: If you have a position which has done well and has moved up for an extended period of time be sure to draw some trend lines and tighten your stop, or set a stop, under a tight trend line. Sell some of your position (25-50%) to lock in gains and let the core position continue to mature. If you get a pullback to a support level (previous breakout level) you can buy back the other part of your position at a lower price.

To learn more about ETF trading and how you can profit from this analysis, be sure to check out our ETF trading course!

Disclosure: I currently own the GLD ETF.

Congratulations to our Survey Winners!

instructor@mywealth.com (MyWealth.com) — Wed, 18 Nov 2009 10:24:09 PST

Just by taking 2 minutes of your time and giving us your responses, the following subscribers have won a free currency course bundle (value $1400) AND a $50 live trading account for FREE!

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Stocks may come and go, markets may go up and down, but currencies are ALWAYS in play as long as there is economic activity! Because government decisions affect the value of currencies world-wide, it is important to understand how to protect your wealth from bad decisions over which you have no control.

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Tap in to China!

instructor@mywealth.com (MyWealth.com) — Tue, 17 Nov 2009 09:37:11 PST

14 Chinese Dividend Stocks

In 1995, the NASDAQ was trading around 1000. On 3/10/2000, it hit a peak of 5048. Such euphoria had not been seen since the railroad boom of the 1840s or the automobile boom of the 1920s. Now it is China’s turn.

Last quarter China grew at a brisk 8.9% rate thanks to the government’s aggressive stimulus. The following are 14 Chinese stocks that trade on U.S. exchanges and have dividends over 2%:

14 Chinese Dividend Stocks

Name (Symbol)	Sector	Mkt Cap	Yield	P/E	Forward P/E
CHINA MOBILE (CHL)	Telecom	192.55B	3.5%	12	n/a
CHINA PETRO&CHEM (SNP)	Energy	76.60B	2.3%	10	8
CNOOC LTD ADS (CEO)	Energy	72.39B	2.8%	17	10
GUANGSHEN RAIL (GSH)	Railroad	3.07B	2.2%	18	n/a
PETROCHINA CO ADS (PTR)	Energy	237.01B	2.5%	16	11
YAZHOU COAL MNG (YZC)	Energy	9.01B	2.9%	13	n/a
China Medical Tech (CMED)	HealthCare	480.32M	3.6%	n/a	9
CHINA NEPSTAR ADS (NPD)	HealthCare	772.72M	4.7%	39	34
CHINA TELECOM CP (CHA)	Telecom	37.05B	2.1%	n/a	20
GIANT INTERACTIV (GA)	Online Game	1.62B	2.5%	13	12
GUSHAN ENV EGY ADS (GU)	Basic Mat	117.73M	9.4%	n/a	140
HUANENG POWER (HNP)	Utilities	7.93B	2.1%	n/a	11
NOAH EDUCATION (NED)	Education	233.17M	9.7%	15	n/a
WSP HOLDINGS LTD (WH)	Basic Mat	411.58M	7.3%	5	n/a

I discussed the 1^st 6 stocks (CHL, SNP, CEO, GSH, PTR and YZC) in my Oct 13’s article. The 8 new stocks are mainly in healthcare, telecom, and the utilities sectors.

Health Care

New medical product development is both costly and labor-intensive and has a very low rate of successful commercialization. Companies that have to spend heavily on R&D have an inherent flaw in their competitive advantage that will always put their long-term economics at risk.

As a small cap, CMED’s operating results have fluctuated in the past and may continue to fluctuate significantly from time to time. I have followed this stock since summer 2007, when it appeared on the top 100 list of Investor’s Business Daily. The following is a comparison between CMED, Johnson & Johnson (JNJ), and Alcon (ACL), the biggest medical instruments supplier by market cap:

Metrics	CMED	JNJ	ACL
Trailing P/E	n/a	13.4	22.1
Forward P/E	8.9	12.5	19.6
Operating Margin	17%	27%	37%
Debt/Operating Cash Flow	5.8	0.8	0.3
Yield	3.6%	3.2%	2.4%

As a result of acquisitions of the ECLIA, FISH, and SPR technologies, as well as BBE business, 59% of CMED’s total assets are intangible assets and goodwill. Earnings could be adversely affected if the company chooses to recognize impairment losses. Nonetheless, with plenty of cash on hand, CMED might be benefit from the lucrative and profitable health care market in China.

NPD has 2700 drugstores providing pharmacy services. Its P/E is too high.

Telecom

Competition is intensifying for China's major telecom operators as the government granted 3 third-generation mobile licenses. CHL experienced a slowdown in profit growth recently, while rival CHA’s net profit fell due to higher marketing costs to attract customers to its newly acquired cellular business.

Electric Utilities

China has increased its appetite for coal power. Barron’s projects that coal usage will increase 55% in the next 15 years. Variable coal spot prices, possible tariff adjustments, along with rising power production nationwide make HNP’s future uncertain.

The following is HNP’s dividend history and comparison with top 2 U.S. electric utilities: Southern Company (SO) and Dominion Resources (D):

Metrics	HNP	SO	D
Trailing P/E	n/a	15.7	12.9
Forward P/E	11.0	12.9	11.1
Operating Margin	-2%	22%	25%
Debt/Operating Cash Flow	7.6	6.3	4.3
Yield	3.6%	5.5%	4.8%

Hong Kong & Taiwan Dividend Stocks

Name (Symbol)	Sector	Mkt Cap	Yield	P/E	Forward P/E
CHUNGHWA TEL (CHT)	Telecom	19.15B	11.0%	12	14
CHINA UNICOM (CHU)	Wireless	32.87B	2.1%	23	26
City Telecom (CTEL)	Telecom	271.80M	5.6%	14	n/a
Himax Technologies (HIMX)	Semi	224.76M	11.7%	9	9
TAIWAN SEMICOND (TSM)	Semi	54.86B	3.5%	26	15

CHT is Taiwan's principal telecom service provider. Recently it announced a $1 million investment in mainland China. CHU’s new iPhone launch wasn't catching on with consumers as expected. TSM just reported big sequential gains in revenue and earnings. These latest results might be the beginning of a broader rally.

The following is their annual dividend histories:

ETFs

Fund Name	P/E	Net Assets	Yield
MSCI Emerging Markets Index (EEM)	21.6	36.7B	1.5%
FTSE/Xinhua China 25 Fund (FXI)	24.7	9.7B	1.2%
MSCI Taiwan Index (EWT)	28.3	3.4B	5.1%
MSCI Hong Kong Index (EWH)	26.6	1.9B	3.4%

iShares.com’s data shows all 4 of these ETFs trailing P/E’s are over 20. As you can see from the chart below, over the last 12 months they have all moved in the same direction:

Both EWT and EWH offer higher dividends than FXI and EEM:

Conclusion

China's export markets are tapped out. Its domestic consumption hasn't started to rise significantly. Yet the Shanghai stock market is trading at 30 times trailing P/E and 20 times forward earnings. According to Lawrence McDonald, author of A Colossal Failure of Common Sense, you can’t model human behavior with computer. When a high rolling market goes wrong, history tells us it happens with lightning speed, as everyone stampedes for the door at the same time.

However, for long term income investors, the key is to find fundamentally sound blue- chips with low P/E’s and consistently paying solid dividends. In addition to ADRs, foreign investors can invest in the Shanghai Stock Exchange’s B-shares or H-shares from the Hong Kong Exchange. They usually are traded at a discount to their A-share listings.

Disclosure: I have long position on CHL and EEM. Data are from SEC Filings, iShares, Google and Yahoo Finance as of November 13, 2009.

To learn more about how you can invest in foreign stocks such as these, be sure to check out our investing and stock trading courses!

Use the Weekly Charts!

instructor@mywealth.com (MyWealth.com) — Mon, 16 Nov 2009 08:18:18 PST

Commodities continue to perform well as the US dollar tests the October lows. If we step back and take a look at the weekly charts of the gold, silver, oil and natural gas ETFs we can get a better feel for what to expect in the coming week.

Trading commodity ETFs can be a very fun and profitable experience when done correctly. The first things I always analyze are the longer time-frame charts. This allows me to see past support and resistance levels and determine whether the investment is trending up, down or sideways.

Let’s take a look at gold, silver, oil and natural gas.

GLD ETF – Weekly Chart

The weekly trend is crucial for understanding the power behind price movements. We can see that the GLD ETF is in a strong up-trend and that price closed at the high on Friday which is a strong sign. I would expect to see gold continue higher on Monday because of this strong momentum.

We can see that over the past 2 years GLD has formed a large cup & handle pattern which is very bullish. A breakout above the handle will trigger investors to buy gold

as a long-term investment and that is what we are seeing now.

GLD ETF – Daily Chart for Trading the Trend

Using GLD as an example, the trend has been up for several months on the weekly chart. So we know buying low and selling high is the proper strategy for this investment. The weekly chart above shows this.

Buy Signal for GLD - Using the daily chart we focus on buying pullbacks when the price is near a support level and reverses back up.

Profit Taking – I am not a greedy trader so I take profits after a nice run in prices. For GLD a nice short term run is between 2-5%. So once I reach that level I start tightening my stops and trend lines to lock in some gains. I do this by selling part of my positions - generally between 25-50%. I let the balance of the position run with the market providing more wiggle room for GLD to mature.

SLV ETF – Weekly Chart

SLV has yet to breakout above the 2008 high. But the chart is still very strong. If we see the price move above the $17.50 level I expect buyers are going to jump in and push prices up to the $20 level.

USO Fund – Weekly Chart

The USO fund continues to look bullish as it consolidates the breakout with volume getting lighter. We could see a bounce this week and if we do I will be watching for a low risk entry setup.

UNG Fund – Weekly Chart

UNG continues to trend down and under-perform the market. The last time UNG dropped to this level we had a nice bounce generating a 30% move in 3 weeks. But I don’t think that will happen this time. The price has been sliding lower slowly on light volume. This type of price action is not as predictable when compared to others. I will wait for a proper setup before buying an oversold bounce or shorting after a bounce.

Commodity ETF Trading Conclusion:

The weekly charts don’t lie. Trade with the underlying weekly trend and you will put the odds in your favor. I use the daily chart and 30 minute intraday charts for timing my trades as those time-frames have proven to be very accurate with commodity ETF investments.

WE continue to be long our golden rocket stocks and GLD fund. If the market cooperates this week we could get some trading signals for both Canadian and US ETF funds.

If you would like to receive my Free Gold Trading Newsletter visit my site at: www.GoldAndOilGuy.com

To learn how to own commodities through ETFs, be sure to check out our ETF trading course!

Last Chance to Take the myWealth Survey!

instructor@mywealth.com (MyWealth.com) — Fri, 13 Nov 2009 11:11:36 PST

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ETFs For Life!

instructor@mywealth.com (MyWealth.com) — Thu, 12 Nov 2009 08:39:27 PST

Trading Gold, Silver, Oil, and Gas Using ETFs

So far this week has been slow in regards to commodity ETFs. Gold continues to shine while silver refuses to make a move higher. Crude oil has a nice bull flag and we are waiting for a breakout and setup while natural gas continues to see selling pressure.

ETF Trading Tip: Waiting for these exchange traded funds to generate low-risk setups and watching our current positions mature is the boring part of trading. It's during these slow times when traders get bored and start taking more risk by entering positions that do not have clear entry and exit points. Not having clear entry and exit points will lead to traders holding on to losing trades and not taking profits on winning trades. Be sure that you enter positions in which you know where you should get out if the trade goes against you and where to take some money off the table if it rallies higher.

GLD ETF Trading – Daily ETF Chart

The gold ETF looks to be in rally mode which means when traders start to take profits we should see a sharp reversal down.

SLV ETF Trading – Daily ETF Chart

Silver has been under performing gold for several weeks now. I think this is because gold is the safe haven of choice for both traders and investors. That being said, silver generally leads gold so this is giving me a red flag. A larger correction in precious metal ETF prices could be just around the corner. But until we see a technical breakdown on the charts, we are staying long.

USO Fund Trading – Daily Fund Chart

The USO oil fund broke out a few weeks ago from the large pennant pattern. The price has been flagging for about 3 weeks now. It looks like we are getting close to a low risk setup so I am keeping a close eye on this fund.

UNF Fund Trading – Daily Fund Chart

Natural gas continues to under perform the rest of our commodities. This fund is starting to look like another good buy point but we need a few things to fall into place before that happens. Let's not jump the gun because this fund is still in a bear market. We are waiting for a setup.

ETF Trading Conclusion:

We continue to wait for trading opportunities to unfold. We focus on taking advantage of low risk setups and avoiding times the market when things are choppy and unclear.

To learn more about how to trade ETFs technically, be sure to check out our ETF trading course!

Not So Sterling!

instructor@mywealth.com (MyWealth.com) — Wed, 11 Nov 2009 09:00:16 PST

Sound As A Pound No More!

The British pound (GBP) is weak across the board today as BOE Governor King re-iterated that a weaker currency should lead to a recovery in the economy. This comes on the heels of a better than expected unemployment report, though not enough to buoy the sentiment for a rapid economic recovery.

As a result of subdued growth prospects, the BOE increased its quantitative easing program to $200 billion pounds last week to pump liquidity to the financial system. Some have argued that their conservative, controlled approach to asset purchasing was a major reason why GDP shrank an unexpected .4% back in October, as other nations were exiting recession.

Also to note was that the BOE said that inflation will stay below it 2% target for the next three years, thereby all but confirming that deflationary pressure is the concern for today. As a result, don’t expect any interest rate hikes anytime soon. In fact, a Bloomberg survey of economists showed that the median thinks they will maintain rates at .5% until the Q3 of 2010. This also leaves open the door for increased asset purchases going forward.

As I wrote in an article back in September, I couldn’t envision the pound falling against the US dollar in the near-term as, “Bernanke’s path to dollar destruction has been well-documented”. But I did caution against the pound in the long-term as the problems that are inherent in the British economy are coming into play today. Since that time, GBP/USD did decline further before going on a tear from mid-October until now.

Here’s a good article from BBH’s Marc Chandler from yesterday presciently calling for GBP weakness.

One of the other things I talked about in my previous article was the pound’s positive correlation to the S&P 500. Here’s a chart of the British Pound ETF (FXB) and the S&P 500 (SPY).

Well since that time, it looks like this correlation has stalled and we could be in for a possible decoupling of this correlation.

Or could this move down in the pound be foreshadowing a move down for the US equities markets? Now that earnings season is all but over, there doesn’t appear to be a catalyst that will move the stock market higher other than Bernanke’s commitment to dollar weakness.

If we do see a pullback in the US equities market, then expect the US dollar to strengthen as the risk aversion trade is sure to hold up.

Either way, I expect a bit of fireworks in the New Year!

To learn more about how currencies can affect your other investments, be sure to check out our currency trading course!

Diversify Away With EFA!

instructor@mywealth.com (MyWealth.com) — Tue, 10 Nov 2009 08:02:45 PST

Diversify Your Portfolio Outside the US

Asset allocation is the most influential factor on investment outcome. There have been growing signs that the worst of the global crisis might have passed. While the US dollar may continue to weaken and the US loses significance in the global landscape, an allocation to other developed markets is deemed necessary. After all, 76% of global GDP is outside the US.

The most popular ETF to provide global diversification is iShares MSCI EAFE ETF (EFA), which tracks Europe, Australasia and Far East Index of developed countries.

GDP vs. Market Cap

EFA weights countries based on their market capitalization rather than GDP. The following chart shows its country breakdown:

As you can see from the GDP chart below, Germany accounts for 6% of world GDP, much higher than UK’s 4.4%. However, its share in EFA is much smaller than the U.K.’s.

Top 5 Countries Within EFA

Country ETFs are another great way to organize a global portfolio. The following are top 5 countries and their ETFs within EFA:

Fund ( Symbol)	Assets	P/E
iShares MSCI Australia (EWA)	$2.1B	21.7
iShares MSCI France (EWQ)	$313M	21.9
iShares MSCI Germany (EWG)	$875M	23.1
iShares MSCI Japan (EWJ)	$4.8B	28.7
iShares MSCI UK (EWU)	$888M	24.7

Australia is a country that has weathered the global financial crisis better than most others. Since 1990, Australia has had only one quarter of negative GDP (-0.7% in Q4 '08). An unemployment rate of 5.8% is also the lowest in developed economies. Chinese growth means increased demand for Australia’s natural resources.

The euro-zone jobless rate inched up to 9.7% in September, the highest level since records began in 1999. Consumers hit by mounting job losses can’t support the economic recovery by spending heavily. No wonder the EU’s retail sales dropped by 0.7% in September.

The European Commission predicted that the EU will grow in 2010 at a modest rate of 0.7% as the economy moves from a sharp recession to a hesitant and fragile recovery, according to Associated Press. With low wage growth and rising productivity growth, Germany has slowly regained its competitiveness. In other countries, such as Spain and Italy, exports tend to be low value added and labor intensive. The divergence of growth rates within the euro-zone is becoming worse.

The EU’s debt/GDP ratio is set to rise from 78% this year to 88% in 2011, far above US’s. But they are still much better than Japan’s 170%.

Currency ETFs

US interest rates near zero and monetary easing have given rise to a carry trade of the U.S. dollar. The following are EFA economics’ currency ETFs:

Fund ( Symbol)	Assets
CurrencyShares Australian Dollar (FXA)	610M
CurrencyShares British Pound (FXB)	151M
CurrencyShares Euro Trust (FXE)	554M
CurrencyShares Japanese Yen (FXY)	516M
PS DB G10 Currency Harvest (DBV)	386M
PS DB US Dollar Index Bearish (UDN)	335M
PS DB US Dollar Index Bullish (UUP)	501M

Top 15 Holdings Inside EFA

The following are EFA’s top 15 stocks (by % of assets) traded in the US exchanges:

Name (Symbol)	Sector	% Net Assets	Forward P/E	Mkt Cap
HSBC HOLDINGS PLC (HBC)	Financials	1.99	19.1	197.37B
BP PLC (BP)	Energy	1.66	10.1	182.62B
BANCO SANTANDER (STD)	Financials	1.29	9.0	136.36B
TOTAL SA (TOT)	Energy	1.27	8.9	139.27B
VODAFONE GROUP (VOD)	Telecom	1.18	9.2	118.98B
TELEFONICA SA (TEF)	Telecom	1.18	10.0	130.80B
BHP BILLITON LTD (BHP)	Materials	1.12	16.9	189.11B
TOYOTA MOTOR (TM)	Consumer Disc	1.09	25.1	122.55B
NOVARTIS AG-REG (NVS)	Health Care	1.07	12.6	119.92B
GLAXOSMITHKLINE (GSK)	Health Care	1.03	10.3	105.12B
ROYAL DUTCH SHE (RDS-A)	Energy	1.01	N/A	188.27B
SANOFI-AVENTIS (SNY)	Health Care	0.78	7.5	100.27B
SIEMENS AG-REG (SI)	Industrials	0.77	13.6	79.82B
WESTPAC BANKING (WBK)	Financials	0.66	14.6	70.80B
BARCLAYS PLC (BCS)	Financials	0.66	N/A	62.10B

Based on Yahoo Finance next year’s estimated EPS, the top 15 holdings average forward P/E is 12.8.

EFAs biggest sector is Financial, which accounts for 26.5%. Australia’s big-4 banks have maintained strong capital bases in recent years. Problem loans are forecast to decline next year when earnings are set to rebound. Other banks still face lots of problems. Santander (STD), the euro-zone's largest bank, boosted provisions for an expected rise in bad debts from the housing boom hangover.

One of promising sector is HealthCare, which might be benefit from H1N1. In addition, they are entering the fast-expanding Chinese healthcare market in a big way. Novartis (NVS), the Swiss drug giant, is pumping $1.25 billion to build two R&D centers in China.

Conclusion

Global markets are functioning normally and they might have more upside potential. The G-20 may decide to reassure markets that stimulus will remain in place until a sustainable recovery has been assured. Interest rates in core countries are likely to remain low for a long time. Consumers are becoming less pessimistic about the economic outlook.

However, record high and rising unemployment as well as financial uncertainty continue to weigh on global consumer confidence. iShares.com shows that as of Oct 30, EFA’s P/E is 23, which is very expensive. Its forward P/E is quite attractive though.

I have accumulated EFA over time and now it has become one of my core holdings. While there is a steady rise in correlation between US and other countries' stock markets, EFA might still give you the chance to benefit from diversification. Alpha-seeking investors might be able to profit more by handpicking countries, sectors, or even stocks.

Disclosure: I have a long position on EFA. Data are from iShares, Google, and Yahoo Finance as of November 6, 2009.

To learn more about how to invest in ETFs such as this one, be sure to sign-up for our affordable, ETF trading course!

Technically Speaking: Commodities!

instructor@mywealth.com (MyWealth.com) — Mon, 09 Nov 2009 10:55:35 PST

Commodity Report for Gold, Silver, Oil and Nat Gas

Everyone is talking about commodities as THE place to be in the coming months. I tend to agree, but it is still important to know where each commodity is trading to maximize returns and reduce risk.

That being said we are also seeing money flow out of the small-cap stocks and into the large-cap, blue-chip stocks. These companies prove year after year that they are profitable and that’s where investors have been putting their money the past couple weeks. This can be seen by simply looking at the Dow Jones Industrial Average and the Russell 2000 index as the Russell has dropped in value much more than the Dow. But if we see the market turn back up and make a new yearly high in the coming weeks, small-cap stocks will most likely provide explosive opportunities for traders.

Below is our technical analysis on gold, silver, natural gas, and oil.

GLD ETF Trading – Weekly Trading Chart

By looking at the weekly chart of gold we can see two simple things:

1 – Each breakout is happening quicker as money continues to move into gold.

2 – This step like pattern (bull flags) is very powerful and can continue for a very long time.

GLD ETF Trading – Daily Trading Chart

This chart shows the same price action but on a daily chart. It also shows one way to find and trade low risk setups for the GLD ETF traded fund.

SLV ETF Trading – Weekly Trading Chart

The Silver ETF trading has not been as exciting. Silver has yet to breakout above the 2008 high. It is actually trading at a major resistance level and still has some work to do before looking really bullish in my eyes. This is acting like a major resistance level for two main reasons:

1 – It is testing the 2008 highs where a lot of traders bought silver over a 5-6 month period. There are a lot of sellers to flush out before moving higher.

2 – The drop in silver price in late 2008 was so scary for investors who bought at the $16-20 level that they cannot believe they are getting their money back. I think this is making a higher volume of investors sell their positions at break even because they just want out after seeing 50% loss at one point last year.

UNG Fund Trading – Daily Trading Chart

UNG has been sliding lower and lower since hitting its head on resistance back in October. The gap down on Friday is bearish indicating traders are starting to panic out of UNG and willing to get out at any price.

UNG Fund Trading – Natural Gas Seasonality Timing

UNG and the seasonality chart seem to be spot on for timing the price of natural gas. Keeping an eye on seasonality and general market seasonal patterns can really help improve ones performance. It may be better to trade stocks or commodities, or maybe just carry more cash depending on the timing and situation the market is in.

USO Fund Trading – Daily Trading Chart

USO has broken out from its large multi-month consolidation from August – early October and is now forming a bull flag. While this flag could last a couple months I have a feeling we will see a breakdown or a breakout sooner than later. This is just a gut feeling and I will continue to watch and wait for a low-risk setup.

Commodity Trading Newsletter Conclusion:

To sum up next week’s market action, I feel it will not be anything to write home about. Gold and silver will most likely trade sideways or up, natural gas should continue lower, and crude oil should trade sideways. With any luck stocks will continue to rally and test the highs once again.

GLD ETF continues to be our investment of choice as it provides the more accurate low risk setups time and time again. With any luck we could get some low risk setups this week but I am not counting on it.

To learn more about how to trade ETFs, be sure to check out our ETF trading course!