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Avoiding the Market Swings of Summertime Softness

By  +Follow August 22, 2013 3:19PM
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As Wall Street intensifies its watchful eye over the Federal Reserves bond-purchasing strategy, the market will likely be more susceptible to reactionary movements. How should traders and investors handle this kind of market? We asked Toni Turner of TrendStar Trading Group in this week's interview.

EQ: With earnings season over, Fed Watch is back in full swing again. What were your thoughts on the most recent FOMC minutes and the eventual tapering?

Turner: It was a wild ride in the market after the FOMC minutes came out. The S&P 500 and other indices were shot  higher but then plunged lower toward the close. The minutes stated that the committee will moderate the pace of its security purchase later this year. It went on to say that if economic conditions improve, that the committee will gradually reduce the pace and conclude its purchase in mid-2014. Of course there was a lot more content, but that sums up most of what concerns the market.

Naturally, the journey from where we are right now to undergoing this process is going to change almost everything, because it’s going to change interest rates. As we’ve discussed before, interest rates represent the cost of money and the cost of doing business. That’s a dynamic that rules much of the world. I don’t think this transition is necessarily going to be easy, especially considering the added headwinds including the upcoming debt ceiling limit and other policy making issues that will arise when Congress returns from vacation. I think we may have a bit of a rocky road ahead here, but we’ve certainly had a lot of warning and I think we need to be tactical in our decisions right now.

EQ: One particular industry that is especially rate sensitive is real estate investment trusts. Is this an area you’re looking at for potential plays?

Turner: Ironically, bonds are so oversold right now that they could potentially bounce, and sooner than later. If that happens, we’re looking at REITs and the iShares Dow Jones US Real Estate ($IYR), and it shows that at least there is a tradable bottom here. So we’re looking to capitalize here on a bounce. Certainly, the yields that they are paying now aresubstantial, some above 5-percent, , and if they get an oversold bounce here, we’re looking at BioMed Realty Trust Inc. (BMR) , Duke Realty Corp. (DRE) , and Camden Property Trust (CPT) . Of course, there are many more REITs people can check out.

Now, anyone that gets into these has to put enter what I call a “no kidding around” protective stop, meaning a hard stop with their broker. If you don’t want to do that, then I would suggest not entering this trade. We’re looking to trade for a short-term bounce, and by that, I mean within just a couple of days, for a quick opportunity. There is risk involved, , so the stop is very important.

EQ: There have been some murmurings about the Hindenburg Omen. Is this an indicator you pay attention to?

Turner: It’s one of the things that I pay attention to. Of course, the Hindenburg Omen was named after the 1937 disaster of a German passenger airship that exploded. The Hindenburg Omen is the combination of technical analysis and trading signs. One of its components is based on Norman Fosback's High Low Logic Index. Basically, the indicator lights up when:

  • New 52-week highs and 52-week lows are equal or greater to 2.8 percent on the New York Stock Exchange,
  • The NYSE index is greater in value than it was 50 trading days ago,
  • The McClellan Oscillator is negative on the same day

When all these signals converge, it indicates that we could have a severe meltdown in the market. It hasn’t always been right—I don’t know of an indicator that has been—but it has predicted the 2007 financial meltdown and the 2000 tech bubble burst. So there are times when it has been right.

Now, while I certainly do pay attention to these kinds of indicators, I tend to just keep them at my elbow, so to speak. We can simply look at a chart in the last couple of weeks for the S&P 500 and see that simple indicators like the relative strength indicator (RSI) and the moving average convergence-divergence indicator (MACD) have also told us that the market is heading south. At the moment, much of the market is oversold, so a short-term bounce could take place. Still, our indicators show weakness heading into September.

EQ: Are there any sectors or industry groups that you’re watching right now?

Turner: There are pockets of strength, though I’m not necessarily looking to go long here. The iShares Dow Jones US Pharmaceuticals ($IHE) is sitting on its 50-day moving average and it is oversold based on its RSI. Because pharmas is more of a defensive industry group, I’m going to be curious to see here if it can bounce to the upside and stay above its 50-day moving average.

Also, the Guggenheim Solar ($TAN), which we’ve talked about before, seemed totally unphased by the broader market rollercoaster on Wednesday, and it  moved up on that down day . It’s also sitting on its 50-day moving average. Now whether it can hold here or not, I don’t know, but just out of interest, I’ll keep an eye on it. Overall though, I’m going to be an observer for  a few days and see what happens  before I commit to any new long positions.

 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.


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Results for IYR
Trevor G
24 Nov 14 15:49:00
@traderstewie I agree, also $IYR
Michael Kahn, CMT
24 Nov 14 14:27:55
Follow the Churning Financials http://t.co/JD2PdT4IK5 $XLF $IAK $MET $USB $AXP $IYR
TrendLizard
24 Nov 14 14:09:27
$IYR - new trade setup http://t.co/QpIBRqFSMg http://t.co/hRSs0tHD3I
James Stollenwerck
24 Nov 14 12:17:01
Trade: DIAGONAL on $IYR: -3 DEC114 77 / +3 DEC14 75 CALLS 1.31 http://t.co/vz91E7QMJg
James Stollenwerck
24 Nov 14 11:50:17
Trade: DIAGONAL on $IYR: -3 DEC114 77 / +3 DEC14 75 CALLS 1.34 http://t.co/hTR8vzC9jD
Investors Hangout
24 Nov 14 10:49:26
lookn4wins: $IYR 200 Simple Moving Average $IYR Most recent http://t.co/xmruonSvjt
Investors Hangout
24 Nov 14 10:49:06
lookn4wins: $IYR 200 Simple Moving Average $IYR Most recent http://t.co/nhxM4iCqPT
lookn4wins
24 Nov 14 10:20:14
$IYR 200 Simple Moving Average $IYR Most recent stock chart and technical analysis. $HNU.TO $VTI $NTI $NTI $XL http://t.co/HPml3V3H3M
Lauren Holmes
24 Nov 14 09:54:04
Focus on strong ETFs going forward $XLP $IYR $XLU. Best risk/reward here. Check our best ideas http://t.co/VrsGMCgPOC
lookn4wins
24 Nov 14 09:44:43
$TSLA Chart $TSLA Most recent stock chart and technical analysis. $GILD $ARIA $IYR $GHDX $EDC $LVGI http://sto http://t.co/98Y5joraFn
lookn4wins
24 Nov 14 09:28:58
$LUV Current Price $LUV Most recent stock chart and technical analysis. $NBG $HNU.TO $IYR $LEXG $FCX $YELP htt http://t.co/uPqYv54MXw
danrocks
24 Nov 14 09:17:59
$XLV Is this one to watch? $KGC $CENX $IYR $RSX $AUY http://t.co/rspYs2PW3O
iHangout
24 Nov 14 09:01:22
danrocks: ZIP CASH TRAIN: $XIV Hitting Buzz $MSL.TO $IYR $HD $NUGT $XLE http://t.co/vb00kKaaBk
danrocks
24 Nov 14 08:59:36
$XIV Hitting Buzz $MSL.TO $IYR $HD $NUGT $XLE http://t.co/cbzyLSV182
leahanne
24 Nov 14 08:50:35
$X United States Steel Corp (X) 35.25 +0.56 (+1.61%) $ELRA $SNSS $IYR http://t.co/gSlXVpiZHR
Investors Hangout
24 Nov 14 08:41:56
chartguy89: IBM Stock Chart $IBM $BIIB $NHMD $IYR http://t.co/i824aLsvC3
Investors Hangout
24 Nov 14 08:41:56
chartguy89: IBM Stock Chart $IBM $BIIB $NHMD $IYR http://t.co/5zLU6SheLr
chartguy89
24 Nov 14 08:30:52
IBM Stock Chart $IBM $BIIB $NHMD $IYR http://t.co/3UX1jBvmZ1 http://t.co/J0JIqPsjFg
clayton
24 Nov 14 06:51:57
$IYR 75.8 http://t.co/SO2bDB1ZSh
Dividend Master
24 Nov 14 06:44:42
$IYR over $76 for the first time since 2007 .
Trevor G
24 Nov 14 06:01:13
$IYR looks good for long call play.
Trevor G
23 Nov 14 14:54:43
Bull bets this week on $IYR $CELG and $IWM I'm bear on $NFLX via debit spread.
John Lounsbury
23 Nov 14 10:32:54
Commented on: "Lack Of Rental Units Can Trigger Inflation" http://t.co/HmDjYPljbQ $IYR
Jeff
21 Nov 14 18:29:18
RT @DividendMaster: $IYR closes @ a 7 1/2 yr high today (REIT ETF ) . It would not be there if investors saw rates going higher anytime so…
Ben Silverberg
21 Nov 14 17:17:18
Leading market sectors higher Friday included: $XLF $XLE $USO $XLB $XME $IYR $XLI $ITB $TLT $FXI $KOL $SLV and many more.
David de los Angeles
21 Nov 14 16:22:50
Commented on: "Lack Of Rental Units Can Trigger Inflation" http://t.co/5ZPo5go5SM $IYR
Dividend Master
21 Nov 14 13:48:52
$IYR closes @ a 7 1/2 yr high today (REIT ETF ) . It would not be there if investors saw rates going higher anytime soon
Lauren Holmes
21 Nov 14 11:26:02
Focus on strong ETFs going forward $XLP $IYR $XLU. Best risk/reward here. Check our best ideas http://t.co/VrsGMCgPOC
θptions•Dt
21 Nov 14 09:50:59
Last time I saw large amount of puts trading was with $IYR and paid off huge! ( $TWX Dec 75 Puts )
OneChicago
21 Nov 14 08:48:01
$IYR 20141219 Block Trade: 1012 trade. ~$7.7 MM notional value.
Albemarle Schott
21 Nov 14 04:33:07
2014 Outlook: Enter Volatility … $AGG $CEF $DBC $EEM $EMB $EPI $EWZ $FXI $GLD $HYG $IYR $LQD $MUB $PFF $SLV $SPY
Keith W. Schwartz
20 Nov 14 16:58:32
@ByrneRWS Better looking R/R than the $SPX based on the L-T channel. And you get a 92% higher yield as well. $IYR http://t.co/NfZ7wR4N5c
NelsNYC
20 Nov 14 16:35:06
RT @ByrneRWS: A break above the 3-wk downtrend line would be a nice catalyst. Failure to hold above 74.50 on a closing basis would probably…
Bob Byrne
20 Nov 14 16:26:21
A break above the 3-wk downtrend line would be a nice catalyst. Failure to hold above 74.50 on a closing basis would probably kill it. $IYR
Bob Byrne
20 Nov 14 16:25:08
No clue if any meaningful conclusions can be drawn between the reits & indices...but I do think the $IYR looks good to move higher again.
Bob Byrne
20 Nov 14 16:24:52
The $IYR has been trading dead sideways early-Nov, but has held above its early-September swing high throughout the entire consolidation.
Bob Byrne
20 Nov 14 16:24:46
The $IYR began selling off on September 8, well ahead of the major indices. It also bottomed in late-September. Well ahead of the indices.
mikeh
20 Nov 14 15:26:33
@Couzin_Vinny Hi. Is that $IYR soon a poss b/o?, like $ITB, $XHB. Also on Weekly 3 wks tight pattern? Wht y think? Thanks. Cheers..
Investors Hangout
20 Nov 14 10:33:10
$IYR Last Price Click Here: http://t.co/uybZI6iI1G Also See: $GNCP $FONU $NHMD $SNET ~
Stock Forums
20 Nov 14 10:29:40
$IYR Last Trade Click Here: http://t.co/raskzt0XbN Also See: $DOMK $TUNG $CHICF $SAMP ~
Chasing Stars
20 Nov 14 10:27:16
$IYR P/E Ratio Click Here: http://t.co/LGaYgW5NpA Also See: $FB $RSX $SMH $TZA ~
Chasing Stars
20 Nov 14 09:39:24
$IMSC Filings Click Here: http://t.co/Ed3E35kOGa Also See: $IYR $CYBR $AC.TO $TWTR ~
Lauren Holmes
20 Nov 14 09:35:59
Focus on strong ETFs going forward $XLP $IYR $XLU. Best risk/reward here. Check our best ideas http://t.co/VrsGMCgPOC
Chasing Stars
20 Nov 14 05:09:22
$GILD % Change Click Here: http://t.co/v0Dehn0OBL Also See: $IYR $QLD $GOOGL $UGAZ ~
Ben Silverberg
19 Nov 14 18:41:09
Leading market sectors lower Wednesday included: $QQQ $IWM $KBE $KRE $XLV $IYR $GDX $SLX $SIL $SLV $GLD $XME $KOL $TLT
Dr. Duru
19 Nov 14 18:08:16
Commented on: "A Closer Look At First-Time Home Buyers: Trends And Prospects" http://t.co/Z4auxt2XMu $ITB $IYR $XHB
Seeking Alpha - All
19 Nov 14 16:08:18
Mixed Housing Data http://t.co/Ridj4Nlz3t $XHB $ITB $PKB $IYR
ShortStockVolume.com
19 Nov 14 14:31:37
Top Shorted Stocks 11/19/14 1. $USDU 99.75% 2. $COWN 93.97% 3. $GME 78.54% 4. $MT 78.42% 5. $KMI 77.12% 6. $IYR 75.36% 7. $CX 74.77%...
ShortStockVolume.com
19 Nov 14 14:31:34
Top Shorted Stocks 11/19/14... 4. $MT 78.42% 5. $KMI 77.12% 6. $IYR 75.36%... http://t.co/9xRfs8Pzcp
Lauren Holmes
19 Nov 14 10:20:16
Focus on strong ETFs going forward $XLP $IYR $XLU. Best risk/reward here. Check our best ideas http://t.co/VrsGMCgPOC
				
				
By  +Follow August 22, 2013 3:19PM
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