ETF of the Day - US Dollar ETF (UUP)

In theory the Federal Reserve pumping $85 billion into bonds each month would be negative for the US Dollar. However when the currency is compared to its peers around the world it is not surprising that the US Dollar Index is trading near a 9-month high.

The other major currencies around the world have been falling due to action that is outside the control of the US. The Japanese Yen (FXY) is at the lowest level in over 4 years versus the US Dollar as the Bank of Japan is devaluing its currency in hopes to fight deflation. And they are doing it in a bigger fashion that the Fed – believe it or not!!

The Euro (FXE), another major global currency has been struggling the last few months as there is talk of more action by the European Central Bank and the fears in that region remain elevated. The same can be said for the UK Pound (FXB) and the Swiss Franc (FXF).

The end result is the US Dollar becoming the best of the worst as far as currencies are considered around the globe.

The chart below shows the PowerShares US Dollar Index Bullish ETF (UUP) over the last year. You can see the action today (5/22/13) on the right-hand side and the turnaround it had during the trading session. This was due to the belief the Fed may stop their quantitative easing sooner rather than later and this would lead to even more strength in the greenback.

I view UUP as a hedge against the eventual end of the Fed easing. However, I do not think that will occur in the coming months.

Market Update: Japan, Housing, Buying Now

The US markets are trading with slight gains with about 60 minutes to go before the opening bell. Overseas last night the gains continued for Japan and China as Hong Kong closed with a modest loss. In Europe the indices are mostly trading with small losses after the Bank of England made some remarks.

Japan Rising: The Bank of Japan held its interest rate unchanged at 0.10% and maintained its current policy course. This means lower Yen and higher Japanese stocks in the future. The Nikkei closed with a gain of 1.6%. Year-to-date the iShares Japan ETF (EWJ) is up 26% and the WisdomTree Japan Hedged Equity ETF (DXJ) has surged 44%.

ETFs to Watch: EWJ, DXJ, FXY

Housing Market: Two stocks closely tied to the housing market reported earnings and they are moving in two different directions. Lowe’s Companies (LOW), the home improvement store missed earnings estimates and the stock is lower by 2.5% in premarket trading. Home builder Toll Brothers (TOL) is up over 2% after beating on both the top line and bottom line. Home prices continue to rise as does demand, solid signs for the housing market. Could LOW be an anomaly? Considering Home Depot (HD) had great numbers yesterday and is trading at an all-time high, I am going with a strong housing market!

ETFs to Watch: ITB, XHB, XRT, RTH

WHAT TO DO NOW?

If you are in the market – remain in the market and let the rising tide take up your portfolio. If you are looking to get into the market or have a few stocks/ETFs you want to add to your portfolio I suggest buying on weakness. That may be a day or two of selling in the market or the individual position. The pullbacks are not deep and do not be afraid to buy when you seem weakness.

Importance of Patience in Investing - MUST READ

Over the last 13 years I have bought and sold many stocks for clients and myself. Some I sold too soon and some I should have should have never bought. When it comes to investing there is no crystal ball and it is nearly impossible to buy at the low and sell at the high.
I have learned the hard way that one of the most important qualities of a successful investor is patience. As they say, “patience is a virtue”; and I cannot agree more.

I can go on and on about patience, but the best way to show you what I am referring to is to lay out real life examples of stocks we currently own for some of our clients.

Schweitzer Maudit International (SWM) was originally purchased on 2/5/13 at $40.40 per share. The stock was pulling back from an all-time high it hit two weeks earlier and I felt it was time to get into the stock. The PEG Ratio was 0.71 and both the fundamentals and technical were in our favor. That is until 2 days later the street was not kind to the stock after SWM reported fourth quarter earnings.

The stock fell dramatically the next day, but my view of the specialty paper company did not change and as hard as it was to hold onto the position, I decided it was the best move at that time. Thankfully I did hold because the 10% loss within three days has turned into the stock now sitting with a gain of 14% and at a new all-time high. Our stop-loss of 12% was never broken and the end result is another winner!



FMC Corp (FMC) was originally purchased on 6/25/09 for $23.75 per share (split adjusted). The stock fell by more than 10% after the purchase as it now appears the buy was a little premature. But, similar to SWM I felt FMC was a solid long-term buy that was undervalued and the chart was improving. So I stayed with my original analysis and it paid off handsomely.

On 6/20/12, nearly three years after the original purchase I sold half my clients shares at $52.55 with a gain of over 120%. The chart still looked good and the fundamentals were not flashing sell, therefore I felt it was prudent to let half the position go and be patient. At the same time taking a profit of that size is never a bad move. The patience has paid off as the stock continues to move higher and recently closed at a new all-time high and the original position is up 165%!

I will disclose that not all positions workout with patience and there is a fine line between patience and hope. If you are simply “hoping” a losing position comes back from negative territory you need to sell immediately and take the loss. Hope is not a strategy in investing or life.

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Morning Market Update: Japan, Gold, Italy

Stocks head into Monday morning on a four-week winning streak, but the futures are showing small losses heading into the opening bell.

The Japanese stock market continues its unfathomable rally overnight with the Nikkei up 1.5% after positive remarks from the government and a better than expected manufacturing number. The Nikkei is now up 47% in 2013.

ETFs to Watch: EWJ, DXJ, FXY

Both Gold and Silver continue their ominous slide overnight with silver down as much as 3% at one point. Both metals have bounced well off the lows, but the trend is clearly not in the favor of precious metals. I continue to have steer clear of the sector until a bottom is formed and the end of the selling is evident.

ETFs to Watch: GLD, SLV, GDX, IAU

In another sign that investors are believing the Eurozone situation is improving, the yields on Italian debt fell as the country’s industrial orders number beat expectations. The spread between the 10-year German Bunds and the comparable Italian government debt has narrowed to the lowest level since January. Even Slovenia saw its yields fall overnight after a downgrade by Fitch.

ETFs to Watch: ITLY, BUND, BWX

Patience vs. Go-For-It – The market is sitting at an all-time go begin the new week and therefore chasing performance is never the best strategy. That being said, investors that have been waiting for a 10% pullback have been sitting on their hands for a long time and missing out on the stock market rally. My advice is to highlight the stocks/ETFs you want to buy and when there is a day or two of weakness – begin to build a position. A mix of go-for-it and patience.

Morning Market Outlook

The markets are near the flat line in early trading as investors digest mixed earnings reports from two big-name companies and Japan’s GDP that was released overnight.

The nation’s largest retailer, Wal-Mart (WMT), missed earnings expectations this morning and the stock is trading lower by over 2%. A former high-flyer, Cisco Systems (CSCO), beat their numbers last night and is surging in pre-market trading with a gain of 10%.
{ETFs to Watch: QQQ, RTH, XRT}

Japan reported growth of 3.5% during the first three quarters of the year, a possible signal that the stimulus package has been working for the country. The better than expected number did not lead to a rise in Japanese stocks because inside the number it showed that consumers are spending, but corporations are still hesitant. Also take into consideration that the Nikkei is already up 45% in 2013. Maybe time for a breather??
{ETFs to Watch: EWJ, DXJ, FXY}

Gold and Silver continue their downtrend with another loss in excess of 1% this morning. The trend is clearly not in the favor of the precious metal sector and I would continue to avoid it at all costs.
{ETFs to Watch: GLD, IAU, SLV}

I would not be shocked if the market experiences some profit-taking today after hitting yet another all-time high yesterday. My strategy will be to continue using weakness as a buying opportunity for higher stock prices later this year.

Morning Outlook: Malaysai, Oil, Top Stocks

Malaysia Leads Southeast Asia

The Malaysian stock market rose to its highest level ever this morning after trading higher by as much as 8% following yesterday’s election results. The ruling coalition Barisan Nasional extended their 56-year rule over the country and the “free money” approach they take helped stocks soar. The Ringgit (Malaysian currency) also had a strong day with an increase of 1.4%. Its neighboring countries are also enjoying some love as Vietnam is up 3% and Indonesia is rising by 1.4%.

ETFs to Watch: iShares Malaysia ($EWM), iShares Indonesia ($EIDO), Market Vectors Indonesia Small-Cap ($IDXJ), Global X FTSE ASEAN ($ASEA)

Oil Rises on Syria Fears

One of factors that moves the price of oil is geopolitical tension and over the weekend the tension has risen between Syria and Israel. Syria has vowed to retaliate after Israel bombed the area outside the capital of Damascus. Due to the potential for the conflict to escalate and the possibility of Iran getting involved, brent oil futures rose to their highest level in a month.

ETFs to Watch: iShares Israel ($EIS), US Brent Oil ETF ($BNO)
 
Market Flat

The futures are indicating a flat open for the major indices, with the NASDAQ up slightly – led by tech names Apple ($AAPL) and Intel ($INTC). After going through hundreds of charts this weekend I came up with a list of about 40 or so stocks/ETFs that were added to the PFG WatchList. There are mega-cap names, small unknown stocks, and high dividend-paying players on the list.

Here are 2 that I found intriguing:

·  Avis Budget Group (CAR) – Rental car company that trades with an ultra-low PEG Ratio of 0.39

·  Alaska Air Group (ALK) – Mid-sized airline company that is breaking out of a consolidation pattern and trades with a PEG Ratio of 0.74