Australia

Over the weekend, I watched the Baz Luhrmann film entitled “Australia”.  It was a pretty good movie because it kept me interested for 3 hours.  That is a long time by my standards! At any rate, Australia has a lot more going for it than just a good movie with the same name, Australia is a stand out in major western economies because it had a positive Q12 GDP growth. 

Dennis Gartman has been a big fan of all things Australia for some time (and Canada too).  As such, he is long the AUD while being short the yen.  This has been a good trade and is currently a very heavily weighted trade by Gartman’s standards (this means that if you have any ideas about following that trade, think again.  It was something that should have been done month ago).

However, GDP is one thing and investing is something else.  If want to put your money where some country’s economic mouth is, then Relative Strength is the way to go.  After all, you want follow the money which means following relative outperformance.  Measuring this is as simple as putting the above country ETFs into a matrix and calculating their RS Rankings.  I did just that and the matrix is given below:

This is a fast matrix (2%) which means that it is measuring more recent relative performance.  Like I said, GDP growth and investment return do not necessarily correlate – at least in the short term.  Although every one has enjoyed a nice up-move in recent months, the top dogs in this global sample are Canada and Australia.  The bottom are the US and Japan.  This shows up nicely when looking at the 1 month and 3 moth returns as there is no question about where you would want your hard earned dollars put to work.  This is why I like using the RS Matrix.  I don’t know the fundamentals but I do know who’s on top and in the final analysis, that’s all that counts.

So with Canada on top, maybe David Cronenberg will make a movie called “Canada” staring Carrie Anne Moss and Michael J Fox – wouldn't that be creepy?

Currency is for Losers

In the table below, I show some data that I’ve come across relating to currency debasement. It shows the percentage change (decline) of various world currencies with respect to GOLD. This type of data is all over the place and I just grabbed it from one site and reformatted it.

The best currency to hold has been the Swiss Franc followed by the Euro.  The Canadian dollar has not been too bad either relative to other currencies.  But relative to Gold, they all suck. This is called inflation.

Commodity currencies like the Canadian, Australian and New Zealand dollars have had a rough ride in the last year with the deflationary pressures brought on by the financial crisis - but notice how in the last month or so, they have started to gain some traction against gold.

Gold fell from about $325 USD to $250 USD between 2000 and 2001 and then it simply took off.  The money printing worldwide is really showing up in the commodities.  It’s not just gold either.  It’s the exact same trend for oil, silver and copper.

Here is something to think about: A trend, once in place, stays in place for longer than anyone can typically imagine.  This trend will change when the following things happen: the supply of commodities increases a lot (we have an over-supply), governments stop printing money because they all have budget surpluses and governments around the world contract the money supply (or base their currency on hard assets).  When do you think that will happen?

CURRENCY DEBASEMENT RELATIVE TO GOLD

Spinning My Wheels and Going Nowhere

All I am going to do is present and bunch of charts this morning that all have a pretty consistent message.  CURRENCY Matters!  The charts below are of GLD (Gold), USO (Oil), SLV (Silver), DBA (Agriculture) and the Continuous Commodity Index – all priced in Canadian Dollars.

Those wheels are spinning – but where are they going?

Now the future?  That might be something else!  But the past is pretty clearly depicted in the charts below.  Enjoy. :-)

Possible Gold Entry for Canadians?

Do we have a possible entry point in Gold for Canadian investors?

The folks at SIA charts sent out a nice chart on Gold this morning and I’ve posted it below.  This chart shows Gold bullion as priced in US Dollars. As the chart shows, Gold has been trading back and forth for some time.  The advantage of this price action is that it moves the Bullish Support line up over time which lowers the risk of entry when the price action gets close to that line.

I am neutral on Gold right now and I’ve been waiting a long time for Gold to pull back the the Bullish Support line before taking a position.  However, I am referring to the Bullish Support line on the Gold Chart when priced in Canadian Dollars.  That chart is next.

Below is the Point and Figure chart of the price of Gold as priced in Canadian Dollars that I have shown many times. As I have written before, Gold tends to pull down to the Bullish Support Line every so often thereby giving investors an excellent entry.  It doesn’t mean that you will see that entry in a time frame that you like.  In fact, it could take years while both the price of Gold and the Bullish Support Line both rise.  The Canadian dollar has been strengthening considerably against the USD but Gold has been working it’s way up too - just not as fast and so the net result is that Gold Bullion, in terms of Canadian Dollars has been weakening.  So looking at the Point and Figure chart below, nothing much has changed from my previous posts and the “gift” level for entry remains in the $950-$970 CAD area.

But I try to keep an mind open and I look for possibilities.  Something might be happening under the surface and the first hint of that is in the next chart.

Below is a line chart of the price of Gold in terms of Canadian Dollars. What is interesting is that a large down trending channel has formed that on a longer-term chart, looks like a Bullish Flag pattern.  Bullish Flags allow us to make price projections to the upside and in this case, if this pattern were active and reached it’s price target, Gold would move up to $1250-$1300 CAD.  Looking at the Point and Figure chart above, you can see that not only is that quite possible, but it would be the first price level to generate a new “buy” signal on that chart.

In the line chart below, we see that the price action has indeed broken upwards out of the flag channel and has since pulled back to test the upper channel line – something that is very typical on a breakout like this.

So what is this telling us?  Despite the fact that the Canadian Dollar is on a tear, we might have a good intermediate term entry here.  The longer term entry remains at the Bullish Support Line but that line can move up over time has gold price action moves back an forth.

Something to think about.

Canadian Gold Update - 06May09

It has been exactly on month since my last post on Gold.  There hasn’t been much to say.  Gold has been on a bit of a roller coaster if you are using US Dollars but if you are using Canadian Dollars, the only thing that has happened since my last post is that we have added another ‘O’. So Gold continues to weaken when priced in Canadian Dollars and is still on a sell signal.  Yawn…  I think I’ll go watch some paint dry.

Here is the chart:

Bullish on the Loonie – the 200 Day MA is Crossed!

I am getting more Bullish on the Canadian Dollar because my charts tell me so.  Well known economists like Dennis Gartman and Don Coxe are calling for parity with the Greenback and other respectable writers have also gotten Bullish on the Loonie. 

It’s all in the charts now.  The first chart shows that the Canadian Dollar broke through it’s 200 Day Moving Average yesterday and also note that the 50 Day MA is rising.  We want to see a flattening of the 200 Day MA first before getting more optimistic and a rising 200 Day MA to be full-on Bulls. Parity is still quite far away.

This next chart, a Point and Figure chart shows lines of support and resistance (although I am only showing resistance lines at the moment).  It also gives clear buy and sell signals and presently, the Canadian Dollar is on a clear buy signal.  Look for a close above 0.8689 to signal continued strength.  I have other targets shown in the chart, but for now, it’s one step at a time.

Regional ETFs and their 200 Day MA

We are seeing some important indexes and regional ETFs make it above their 200 day MA.  A good example is the Brazil ETF (EWZ) shown in the chart below.  The table at the end of this post gives an overview of the 200 day MA status for over 50 prominent indexes and ETFs traded in Canada and the US. 

18 of these benchmarks are now above their 200 day MA’s and most are Asia and Emerging market related (see table below).  None have rising 200 day MAs and none have a “Golden Cross” where the 50 day MA has crossed over the 200 day MA.  Still, seeing some of these benchmarks get above their 200 day MA is an encouraging sign that the worst might be behind us.

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TABLE of Canadian and US Benchmark ETFs and their 200 Day Moving Average Status
(US dollar denominated ETFs have the letters 'US' after their symbol)

Symbol	ETF Name	Position wrt 200 Day MA
EWZ US	MSCI Brazil ETF	Above Falling
ILF US	S&P Latin America 40 ETF	Above Falling
EEM US	MSCI Emerging Markets ETF	Above Falling
EWM US	MSCI Malaysia ETF	Above Falling
FXI US	FTSE/Xinhua China 25 ETF	Above Falling
EWH US	MSCI Hong Kong ETF	Above Falling
EZA US	MSCI South Africa ETF	Above Falling
EWY US	MSCI South Korea ETF	Above Falling
EWS US	MSCI Singapore ETF	Above Falling
GAF US	S&P Emerging Middle East & Africa ETF	Above Falling
EEB US	BRIC ETF	Above Falling
INP US	iPath MSCI India Index ETN	Above Falling
EIS US	MSCI Israel Capped Index Fund	Above Falling
EWT US	MSCI Taiwan ETF	Above Falling
CBQ	BRIC ETF	Above Falling
CPD	Claymore S&P CDN Preferred Share ETF	Above Falling
AIA US	iShares S&P Asia 50 ETF	Above Falling
QQQQ US	Nasdaq 100 ETF	Above Falling
XIU	S&P/TSX 60 ETF	Below Falling
IWF US	Russell 1000 Growth ETF	Below Falling
EWC US	MSCI Canada ETF	Below Falling
XIC	S&P/TSX Capped Composite ETF	Below Falling
VTI US	Vanguard Total Stock Market ETF	Below Falling
IWB US	iShares Russel 1000 Index Fund ETF	Below Falling
SPY US	SPDR (S&P 500) ETF	Below Falling
IWM US	Russell 2000 ETF	Below Falling
EWJ US	MSCI Japan ETF	Below Falling
EFA US	MSCI EAFE ETF	Below Falling
EWA US	MSCI Australia ETF	Below Falling
EWW US	MSCI Mexico ETF	Below Falling
GWX US	S&P International Small Cap ETF	Below Falling
CWI US	SPDR MSCI All Country World ex-US ETF	Below Falling
RSX US	Russia ETF	Below Falling
IJR US	S&P SC 600 ETF	Below Falling
EWG US	MSCI Germany ETF	Below Falling
DIA US	DIAMONDS (DJIA) ETF	Below Falling
DBV US	PS DB G10 FX Harvest ETF	Below Falling
JPZ US	Nuveen Equity Premium Income	Below Falling
ITF US	iShares S&P/TOPIX 150 ETF	Below Falling
GUR US	S&P Emerging Europe ETF	Below Falling
XSP	CDN S&P 500 C$ ETF	Below Falling
EWU US	MSCI United Kingdom ETF	Below Falling
IEV US	S&P Europe 350 ETF	Below Falling
IWD US	Russell 1000 Value ETF	Below Falling
EWK US	MSCI Belgium ETF	Below Falling
XCS	ISharesS&P/TSX Smallap Index Fund	Below Falling
XIN	MSCI EAFE C$ ETF	Below Falling
SSO US	Ultra S&P 500 ETF	Below Falling
IOO US	S&P Global 100 ETF	Below Falling
DVY US	DJ Dividend ETF	Below Falling
PSP US	PowerShares Listed Private Equity	Below Falling
XTR	CDN S&P/TSX Income Trust ETF	Below Falling
QLD US	Ultra Nasdaq ETF	Below Falling