XSO (ASX) The Brains Trust

Originally posted by paddington bear ↑

Two good days in a row – that is really something in gold but I would feel a lot more relaxed if it could get above this second resistance level. The risks are that we are going to haes to continue sideways for longer. URA, the uranium ETF, had a huge move which should help our “prospective” uranium miners in this country again today. The market Gods are really smiling on us. Make hay while the sun shines and all that but don’t forget the pain a number of traders on Hot Copper felt who got caught with MUS. LIT – the lithium ETF – came off slightly. It left a gap when it broke topside the previous day so hoping this is just an effort to fill that gap and not a failure of the lovely pattern.

But for me today, it is the two canaries on which my attention is really focussed. I don’t call HYG and JNK the canaries for nothing. They continued lower overnight but dragged the overall stock market with them. Now I am going to introduce you to a new ETF for New York – UVXY – the futures on the VIX – sort of the opposite of XIV which I had named my secret weapon. The reason all these ETF’s are important and something we need to be very aware of, is that people think they are a bit protected by buying these things instead of individual shares, but in actual fact, I think it will be all the money tied up in these blessed ETFs that are going to be the undoing of the market. Last time it was such things as mortgage backed securities. Next time I believe it will be ETF’s. Still that day isn’t here yet (we hope) but I think the volatility last night is enough to suggest we have to be on our toes.

All the major indices on Wall Street gapped down on the open and then spent the rest of the session trying to retrace the earlier losses and, might I say, quite impressively in a number of cases.. Now the question is, did we see the beginning of a major correction last night or just a little warning? Looking at the charts of HYG and JNK, the one good thing I can see is that the volumes were massive which may have exhausted the selling pressure. For that to be the case, these ETF’s would need to regain their composure pretty quickly.

Dax might have been doing a bit of zooming higher recently but it certainly did a bit of zooming lower overnight.

As I mentioned on Monday I could not believe that the markets had ignored the news on Venezuela at the end of last week. I could hear echoes of Argentina or even more recently – Greece. Took almost a week for investors to wake up.

But – and here is the good news – my Geniuses are only 56% invested. They have been selling into the recent rise. Either they have got a lot smarter than in previous bull markets or for once they are going to be right. Or with the buying being in a different sector each day, has it all got too hard and they took their bat and ball and went home. However, on the records I have on this lot, I would have to say that the bull market is probably not over. Could we still have that blow-off that has threatened to be starting a couple of times?

On the local market, renewed buying yesterday pushed the XJO nicely higher. We are now in the season for the banks to be paying out their massive divvies which makes analysis of the overall index very difficult. However, I have said for months that we can’t use the XJO as a guide simply because we have been having a massive bull market in mining stocks such as BHP and RIO while banks have been sideways for months. So yesterday it was NAB going ex divvie. Oh for the days when the banks and their divvies were not such a big weighting on the market. Makes analysis very difficult. Mind you the way things are looking that may well change in the future. And with all the political games in Australia at the moment, we may well have a banking enquiry a lot sooner than people think…..

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very insightful Paddington. well done.