Today, on BNN, I’ll be giving my usual 3 “Top Picks”. One of those picks will be an ETF trading off of the Nikkei. We view the Japanese market as having some upside potential for a few reasons.
The technical breakout on the weekly chart looks appealing on this index. As I write this, the 50 day MA is attempting to move up through the 200 day MA – another good sign. The Nikkei has not taken out its last peak of around 17,000. So the breakout we’ve seen has not been a perfect one. Despite the fact that it’s not an ideal chart breakout yet, there are a couple of other factors that inspired us to take a position in that market.
Fiscal stimulus, as we know in this part of the world, can inspire rising markets if any signs of positive follow-up comes through. In the case of Japan, I note that some figures came out for an increased level of consumer confidence recently. That’s one point that may add some upside to the easy-money environment. Further, a sideways to or weaker Yen – as we are starting to see now – can be bullish for the Nikkei stock market. Note the chart below where I’ve done a correlation study of the Nikkei to the Yen—the bottom pane shows us that the relationship is almost always negatively correlated between the two. The lower that line, the more negatively correlated the two are. Of note, the correlation line has been pretty much always below the “zero” line for this study—suggesting the relationship is negatively correlated by varying degrees most of the time. You can see that relationship on the two price lines in the top pane as well. When the Yen (black line) zigs, the Nikkei (red line) zags.
Bottom line: the Nikkei may be a market to consider for investment at this time.
Keith on BNN
I’m on BNN’s MarketCall today: Wednesday October 5th at 6:00pm.
Phone in with your questions on technical analysis for Keith during this live show. CALL TOLL-FREE 1-855-326-6266. Or email your questions ahead of time (specify they are for Keith) to [email protected]
ValueTrend Performance numbers posted
Please visit this page to view our October Equity Platform numbers: https://www.valuetrend.ca/performance-investing-portfolio-management/
Of special interest should be the line chart at the bottom of the page- showing our relative performance to various indices, and most importantly, the low variance of our returns vs. those indices.
Our income model has also had a good year. Our decision to rotate out of preferred shares and some of our bond holdings and move into high dividend paying stocks has proven successful. The ValueTrend difference is our willingness to reduce our exposure to such stocks and move back into bonds or cash, should we see meaningful trend deterioration.
I’m interested in an update on your bear-o-meter. In your blog on this topic a few weeks ago you stated “Currently, we have a “SELL” reading on my “Bear-o-meter”. I re-tally periodically, and will report the results on this blog if we move out of this sell zone. But for now, we are in “sell mode”. ”
I picked up some inverse ETF’s and they really have yet to move.
Just wondering what you think October may bring for the S&P500 and whether I should close out my position or still hold.
Daddyo–I’ll update the Bear-O meter next week, but please recall that it is an intermediate termed indicator (forward looking by 1-6 months). its also more a measurement of risk vs. reward. not necessarily the trigger I would use to put on a big short or inverse trade. It simply tells you that the risk is higher than normal at a given time–or neutral or lower–relative to all other things.
Good catch Keith on the nikk…also noted that it has experienced flat returns ending in Oct. on two separate occasions before this and had really good gains…cheers
Would you please advise me how I can trade volatility? Would VXX-US be the right way to do it? and what is the difference between VXX-US and HVU-T?
Hi Amir–I have traded HUV which is a single (non leveraged) version of VXX. HUV is currency hedged. HVU is not the same as HUV–it is leveraged- I am not in favor of that strategy on this instrument.
Please read this to get a handle on the risks of VIX trading:https://www.valuetrend.ca/lessons-from-a-vix-trade/