How to make sense of the scrum?
First, emerging markets. They are all showing new bear signals, in line with the decline today of the uber-emerging-market etf EEM.
They are EPI for India, EWA for Australia, EWH for Hong Kong, EWW for Mexico, EWZ for Brazil, FXI for China, and ILF for Latin America, plus a couple of global funds: MF and VWO.
All of these etfs have low or marginal average directional indexes, meaning I won't play them directionally under my rules. The single etf in this group with a high-marginal adx is the Mexico fund EWW, and a bear signal is counter-trend, also against my rules.
I won't be adding any of these to the Watchlist because they fail to meet my standards. EEM is already on the Watchlist, and among my holdings as a bear play, so it will be the stand-in for them all.
Second, the minerals. Gold (GLD), gold miners (GDX), oil (USO), silver (SLV) and a combo metals and mining (XMO), all showing bear signals on the psar. They all have low adx readings, except SLV, which is marginal. So, they don't make the Watchlist. GLD and USO are followed as indicators in the Morningline.
Third, financials, banks, materials, real estate. Bad day. Started bad. Stayed that way.* The funds are IWF, IYR, KBE, KIE, XLB, and a high-income fund DHK. All have high adx readings, but the bear signals are counter-trend, which breaks my directional rules.
The question here is how to account for the possibility of a broad, secular change in trend. May the counter-trend is in fact the start of a new trend, and I am missing the train as it pulls out of the station rather than latching on to a glorious opportunity for glittering profits.
When it comes to declaring new trends, I'm from Missouri. Show me.
I'll want to see a series of lower highs and lower lows to illustrate a new downtrend, and the price must drop enough to break through a support level before I'll be interested in opening a bearish position.
Is that 24? No matter, those are the broad categories. Something's up.
New to private trading? Here's a look at How to Become a Private Trader.
* Note: With a tip of the hat to Melaka Fray and Joss Whedon.
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