Market Stalls - Uptrend Still In Tact

The Dow Jones Industrial looked like it was going to rocket through its April/May resistance and send us in blow-off mode of some sort. That was all put by the wayside as many traders, hedge funds, algo funds, and even the small investor decided to take profits in the profit zone - meaning, anytime you come to resistance/support zones, there will be profit taking and volatility.

Looking at the DJIA and it's attempted breakout - it has now had a 5-6 day stall/correction. If we notice the large candle that gave us a signal of breaking out, and then the retracement from that candle, all of the corrective prices within that candle range. This now means DJIA has a high probability of channeling in here, before making an attempt higher or testing the current uptrend support.




Its currently a traders market with a long bias!

Chasing The Lead Pack

The pack has formed, the Nikkei is setting the pace with the Nasdaq and its echo of pounding footsteps, close behind. Since the last post about the Nikkei's emergence in Comparing World Markets, the Nikkei has shown leadership during that time and is making a move to become the best large economy performer of 2010 so far. The long term charts for the Nasdaq and the Nikkei are best suited for a 3-5yr time frame to be long. There will be bumps, pullbacks and even some strong corrections, but a major(secular) shift is occurring. This also helps back up the theory - The Other Commodity - which has so far led many global markets out of the abyss.






The idea behind The Other Commodity and its relation to the Nikkei is that Japan is well regarded for it's technological advancements in semi-conductor manufacturing, optical segments, and most notably consumer electronics, although that has been waning in recent years(and decades) - known also for innovation financial services, which could also be starting it's new beginning. How? If China realizes that its internal financing economy can lead to risks down the road - why not just let your currency rise and start financing growth and reducing risk from Japan's financial institutions. Basically, spread the risk and a bit of the reward.

What we do know is that over the last 12 months, technology across the globe has shown relative strength in major markets across the globe and this could mean that Japan's Economy, especially if China let's the Yuan rise, will benefit most from the consumption of smaller, better gadgets in technology, worldwide - which may help Japan's consumer electronics industry to come out of hibernation.


Below is a chart showing the emergence of the Nikkei as the new leader in the short term. One great investment idea is to be long the EWJ. The idea is to be long until that trend line breaks. Also note that we are at the bottom of the channel so we are at a high-risk area, but also high reward. If the channel is true, then we can see a rise to the median and even upper channel trend.




Here is a list of mutual funds to hold long-term 3- 5yrs.


AIM JAPAN FUND

COMMONWEALTH JAPAN FUND

FIDELITY ADVISOR SER VIII FID A

FIDELITY JAPAN SMALL COMPANIES

HENDERSON JAPAN ASIA FOCUS FUND

HENNESSY SELECT SPARX JAPAN FUN

HENNESSY SELECT SPARX JAPAN FUN

HENNESSY SELECT SPARX JAPAN SMA


The basic premise of the research is that the Nikkei is poised to outperform most all other markets, even if they go down, the Nikkei is likely not to go down as much, and if they go up, The Nikkei is poised to go up more. 頑張って (Good luck!)

AUY vs. MU

Here is a view of why the short early cycle/long late cycle may be quite profitable in the short term and also give you a bit of downside protection.

AUY Channel

The objective is to expect a bounce to the median channel and even the upper band. Watch for breakdown at support channel. If it breaks, strategy will have to be re-evaluated.





MU Channel

*Notice it is in the median of its channel - it can still thrust to that upper channel and then create the downside correction/consolidation period.




The looming risk in this trade is if AUY breaks down at trendline(it can happen) and MU keeps going - that would hurt, but worth the risk.