Download Emerging Markets (EEM) Abolute and Relative to SP500

Inside
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US 10 Yr
US Dollar Index
Nikkei
US Financials v. Far
East Financials
US Financials v. US
REITs
SP 500 v. Brazil
SP 500 v. Emerging
Markets
Brent Crude
Gold and Gold
Miners
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MacroView:
Reading Between the Lines
Our mission is to produce original, unbiased, thought-provoking
observations that will unlock the message of the markets. Our view is
neither bullish nor bearish, our goal is to uncover potential ideas and
opportunities for our clients.
Index Levels
SP 500
10 Yr
Gold
DXY
1,630.74
2.164%
1,392.6
83.375
June 3, 2012
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Summary
Recent movements in the markets have been swift, leaving many investors illprepared for higher volatility. Global interest rates are rising, foreign currencies are
declining against the USD, and global equity markets are dropping. While the S&P
is performing well on the surface, the internals of the market are
showing erratic movements across sectors.
Will this current volatility usher in a new wave of increasingly turbulent markets?
In terms of the US market, there have been warning signs over the past several
weeks indicating current trends will not hold. We are now starting to see the
correction on an absolute level.
With the underperformance of the global markets relative to the S&P widening to
2009 extremes, we are now at a crossroads. If the rest of the world does not
begin to stabilize, there is a heightened risk of weakening in the S&P.
During a rising market, relative performance is what matters most to portfolio
managers. If the market rises by 10%, a fund manager ultimately strives to beat their
respective benchmark. During bear markets, the focus shifts toward
ABSOLUTE performance. Different strategies become necessary for different
markets.
Our goal is to provide an outline that helps
guide you through these shifting markets.
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F I N T R U S T
US 10Yr YLD and US Dollar Index (July 2008 – Present)
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US 10YR
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Recent back-up in 10yr
yields, either due to
economic or confidence
issues, is having a
dramatic impact on the
Financial markets
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US 10YR currently
testing secondary
resistance at the
2.20%-2.40% range
US Dollar Index
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USD Index
challenging
CRITICAL
RESISTANCE
LEVELS
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Possible USD Index
Head and Shoulders
bottoming pattern
targets 92 zone
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Higher Yields + Higher
USD = historically has
led to a liquidity event
for global markets
RIGHT
LEFT
HEAD
3
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Nikkei 225
Every Action Causes a Reaction:
Nikkei Correction and the Relative Outperformance of US Financials
Nikkei Absolute Performance
Nikkei has risen over 75% since November of
2012. While the correction was overdue, it might
be the start of something more meaningful.
• 13% correction caused
tremors across many
intermarket spreads
US Financials vs
MSCI Far East
Financials Index
• Lack of confidence in
Bank of Japan and its
Asian neighbors’
monetary policies could
be a watershed event
US Financials Relative
to Far East Financials
Index
US Financials have
outperformed Asian financials
by 20% since the Nikkei peak
US Financials Relative to US REITs
US Financials vs
US REITs
• Lumber, down nearly
30% from its March peak,
has been a headwind
toward REIT
outperformance
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Recent back up in Global Bond YLDs has
caused a rotation within the interest rate
sensitive groups to the detriment of REITS
and related to the RELATIVE benefit of
banks
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SP 500: 8 Month Performance
SP 500
Support 1 1625
Support 2 1600
Resistance 1 1650
Resistance 2 1675
Sector Performance
MTD
SPX +3.26%
Materials +3.73%
Energy +4.48%
Financials +7.30%
Industrials +6.40%
Technology +3.70%
Staples -2.08%
Utilities -8.14%
Healthcare +2.73%
Cons Discretionary +3.31%
REITs -5.85
Transports + 4.55%
Gold Miners -.51%
Since the recent lows in November
2012, the SP500 has had 3 corrections
of nearly 3% that brought the index to
within 6% of its 200dma. The current
correction of about 3% still leaves the
index almost 9% from its 200dma.
• In the month of May,
it didn’t matter IF you
were long or short,
but, WHAT you were
long or short
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SP500/Brazil
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Bouncing Ball or a Safe?:
SP 500 Relative to Brazil (EWZ)
SP 500 Absolute Performance
Testing upper end of
channel resistance after
rallying over 100% from
July 2010 lows
Recent internal rotations
have sent a clear warning
of pause and possible
peak in absolute price
performance
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While the SP500 is
making 10YR highs, the
Brazilian market is
currently testing 3YR
lows
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The SP500 has
outperformed the
Brazilian Market by
over 65% since the
US Dollar Bottomed
in April of 2010
(Vertical Blue Line)
• Should Brazil break
support, the SP500 will
have a harder time
generating ABSOLUTE
gains
SP 500 currently
8.5% above 200dma
USD bottomed April 2011
Brazil (EWZ) Absolute Performance
Brazil (EWZ) Relative to SP 500
Brazil down over
65% RELATIVE to
SP 500 since Oct
2010
Trend remains down yet looks
to be entering exhaustion zone.
Capitulation may be ahead.
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F I N T R U S T
Emerging Markets (EEM) Abolute and Relative to SP500 - Brent Crude
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EMERGING
MARKETS (EEM)
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EEM Absolute Performance
Consolidation continues
with directional
resolution coming soon
Support 1 40
Support 2 37
Resistance 44
Resistance 46
EEM vs SP500
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Emerging Markets have
underperformed the
SP500 and are
currently testing 2009
relative spread levels
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Overall spreads seem to
lean towards a washout
and upcoming reversal
EEM Relative to SP500
Brent Crude Performance
BRENT
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Crude testing support at
100
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Break of support will
most likely coincide with
a break in overall equity
markets
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GOLD (USD) and the GOLD MINERS (GDX)
GOLD
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KEY SUPPORT remains
1325-1350 zone
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Close ABOVE 1425
would be a ST bullish
reversal targeting 14501475
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Many outside asset
classes are impacting
the daily action in the
GOLD space
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Discipline over
conviction
GOLD MINERS
(GDX)
• Massive
underperformance YTD
• Relative and absolute
levels holding firm the
past several weeks
• Close ABOVE 31 would be
a bullish development
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