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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
OneChicago
30 Oct 14 10:02:01
$IYR 20141121 Block Trade: 1080 trade. ~$8 MM notional value.
ShortStockVolume.com
29 Oct 14 14:33:49
Top Shorted Stocks 10/29/14 1. $MOVE 94.57% 2. $IYR 85.67% 3. $PDS 81.09% 4. $XLNX 79.81% 5. $EWU 78.92% 6. $EWG 78.88% 7. $XLI 76.81%...
ShortStockVolume.com
29 Oct 14 14:33:46
Top Shorted Stocks 10/29/14 1. $MOVE 94.57% 2. $IYR 85.67% 3. $PDS 81.09%... http://t.co/3q3lYyEoHa
busterstacks
29 Oct 14 12:03:54
$iyr its a good tell along with $GS
Dividend Master
29 Oct 14 11:13:53
$GLD $IYR hate this ......
BlockTradeAlert
29 Oct 14 11:03:43
BLOCK TRADE: $IYR 1,500,000 shares @ $73.76 [14:03:42]
Investors Hangout
29 Oct 14 10:27:40
jim50: $IYR Volume Date=Oct-29-2014 Open=74.18 http://t.co/3hwFV4ERr4
Investors Hangout
29 Oct 14 10:27:39
jim50: $IYR Volume Date=Oct-29-2014 Open=74.18 http://t.co/gNVnQ4K3Gs
iHangout
29 Oct 14 10:03:39
http://t.co/vVojvVrNNL jim50: The Launch Pad: $IYR Volume Date=Oct-29-2014 Open=74.18 http://t.co/BNdByRZAwX
jim50
29 Oct 14 10:02:26
$IYR Volume Date=Oct-29-2014 Open=74.18 High=74.28 Low=73.8 Close=73.85 Volume=2721085 http://t.co/11KU6Q7ft4
Dividend Master
29 Oct 14 09:09:40
@dhruv_ky you may well be right ... look at $IYR rise as $ARCP bounces .... just insane
Dividend Master
29 Oct 14 08:52:39
no clue why the Sith Lord descided that REITs were a sell today .... $IYR @ lod
Seeking Alpha
29 Oct 14 08:16:58
REIT Yields In A Low-Rate Environment http://t.co/GZfNZpvT6C $IYR $VNQ $DRN $URE $SRS $SCHH $RWR $ICF $DRV $KBWY $REK $FRI $FTY $PSR
Investors Hangout
29 Oct 14 08:07:13
danrocks: $IYR On Radar $EEM $SVXY $MHYS $LUV $F http://t.co/fZdQSRzzKc
Investors Hangout
29 Oct 14 08:07:13
danrocks: $IYR On Radar $EEM $SVXY $MHYS $LUV $F http://t.co/w71SFndsOY
danrocks
29 Oct 14 07:55:47
$IYR On Radar $EEM $SVXY $MHYS $LUV $F http://t.co/prhPppLE28
SouthpawSlinger
29 Oct 14 05:54:49
@JWPopeo @UpbeatInvesting jim - best proof 4 argument,show people $SRS & $IYR, towards the end of '08 both down >40% http://t.co/jB8pCDnKYr
  DecisionDecimal
28 Oct 14 20:47:46
Les hable de $IYR hace mas de una semana mas o menos, WOW. Hacer dinero es MUY facil, solo sigue las reglas y todo estara bien ;)
BATTLE THE BTK
28 Oct 14 13:55:11
RT @WallStJesus: I can't believe my eyes looking at some these charts.. $IYR $TRAN are at new f'n highs already!!
JE$US
28 Oct 14 13:53:04
I can't believe my eyes looking at some these charts.. $IYR $TRAN are at new f'n highs already!!
Proffitt Financial
28 Oct 14 11:47:50
Locked in $DAN , $DG, and $IYR For big profits..pigs get slaughtered..
Harvest Exchange
28 Oct 14 06:21:10
RT @ylevenstein: A look at recent Fund Flows @ETF_Global http://t.co/Wii0EW7IWH via @HVST Tracking the flow of capital to ETFS: $SPY $BND $…
Yosef Levenstein
28 Oct 14 06:20:20
A look at recent Fund Flows @ETF_Global http://t.co/Wii0EW7IWH via @HVST Tracking the flow of capital to ETFS: $SPY $BND $IJH $IYR $XLP $AGG
DaTrader
28 Oct 14 03:34:45
RT @marketminute: From my daily: $IYR This does have the look of something that can go to new highs
Alpha Maven
28 Oct 14 02:57:50
RT @SeekingAlpha: Evidence The Real Estate Recovery Is Intact http://t.co/STwPae76Ng $AVB $BAC $IYR $MORT $MTG $PHM $SPY $XHB
trader j
28 Oct 14 02:51:46
RT @SeekingAlpha: Evidence The Real Estate Recovery Is Intact http://t.co/STwPae76Ng $AVB $BAC $IYR $MORT $MTG $PHM $SPY $XHB
Dr. Duru
28 Oct 14 01:12:28
Commented on: "Evidence The Real Estate Recovery Is Intact" http://t.co/kDISXbmnN2 $AVB $BAC $IYR $MORT
#BUSINESSTOKEN
28 Oct 14 01:03:11
RT @SeekingAlpha: Evidence The Real Estate Recovery Is Intact http://t.co/STwPae76Ng $AVB $BAC $IYR $MORT $MTG $PHM $SPY $XHB
Paul W. Mahon
28 Oct 14 00:56:53
RT @SeekingAlpha: Evidence The Real Estate Recovery Is Intact http://t.co/STwPae76Ng $AVB $BAC $IYR $MORT $MTG $PHM $SPY $XHB
Quantpost Financial
28 Oct 14 00:45:47
$BAC News: "Evidence The Real Estate Recovery Is Intact $AVB $BAC $IYR $MORT …" http://t.co/IQCCnPrwKK Board view: https://t.co/K7a2PxI8Hg
Seeking Alpha
28 Oct 14 00:45:44
Evidence The Real Estate Recovery Is Intact http://t.co/STwPae76Ng $AVB $BAC $IYR $MORT $MTG $PHM $SPY $XHB
HotKeyTrading
27 Oct 14 23:30:05
Unusual Options Activity: Puts: $TNA $TWTR $COP $AMZN $GILD $MMM $UPS $YELP $HD $PG $COST $UNG $IYR $TRN $VMW http://t.co/XQITF0lRKD #mkt
ALittleLonger
27 Oct 14 21:48:28
RT @marketminute: From my daily: $IYR This does have the look of something that can go to new highs
Ben Silverberg
27 Oct 14 18:41:04
Leading market sectors higher Monday included: $KRE $IYR $IYT $SMH $IBB
ShortStockVolume.com
27 Oct 14 14:32:14
Top Shorted Stocks 10/27/14... 20. $IYR 69.96% 21. $MDT 69.87% 22. $TGT 69.85% 23. $OIBR 69.70% 24. $SIRI 68.99% 25. $XLK 68.97%
ShortStockVolume.com
27 Oct 14 14:32:12
Top Shorted Stocks 10/27/14... 19. $XLV 70.01% 20. $IYR 69.96% 21. $MDT 69.87%... http://t.co/kgsT8AOt9i
Briefing Trader
27 Oct 14 12:13:57
REITS out-perform today: $ICF $IYR $RWR $VNQ #ETFs
HotKeyTrading
27 Oct 14 11:30:04
Unusual Options Activity: Puts: $TWTR $COP $AMZN $GILD $MMM $UPS $YELP $HD $PG $COST $UNG $IYR $TRN $VMW $YHOO http://t.co/XQITF0lRKD #dow
Proffitt Financial
27 Oct 14 10:11:21
$IYR - exited +47% - Trying no to be greedy. Has room up
Market Int Center
27 Oct 14 08:53:46
Potential iShares DJ US Real Estate $IYR Trade Has 3.30% Downside Protection ( http://t.co/Xxit0Ju3bb )
Chris
27 Oct 14 07:44:54
RT @marketminute: From my daily: $IYR This does have the look of something that can go to new highs
CantDoIt
27 Oct 14 07:44:43
RT @marketminute: From my daily: $IYR This does have the look of something that can go to new highs
Michele Schneider
27 Oct 14 07:44:36
From my daily: $IYR This does have the look of something that can go to new highs
Jeff Reznik
27 Oct 14 06:54:35
@bkbriankelly How's that short of $IYR doing? #oops $VNQ
HotKeyTrading
26 Oct 14 23:30:05
Unusual Options Activity: Puts: $AMZN $GILD $MMM $UPS $YELP $HD $PG $COST $UNG $IYR $TRN $VMW $YHOO $CTXS $XLE http://t.co/XQITF0lRKD #nyse
DailyStockPicks
26 Oct 14 23:00:34
#virtualreality headsets will be the consumer tech gadget for 2015. $IYR investors find out how to profit here: http://t.co/UGK1Sij9xy
Investors Hangout
26 Oct 14 13:52:45
$GE Bid Click Here: http://t.co/lzHy4I4e0b Also See: $XOP $GG $IYR $IBM ~
G. Thomas Lackey Jr
26 Oct 14 13:12:07
$DJUSRE $IYR Real Estate weekly working a CnH http://t.co/32wD0jHY66
G. Thomas Lackey Jr
26 Oct 14 13:10:56
$DJUSRE $IYR Real Estate reversed 1st and nearing new highs http://t.co/NEPiqSocAi
HotKeyTrading
26 Oct 14 11:30:04
Unusual Options Activity: Puts: $AMZN $GILD $MMM $UPS $YELP $HD $PG $COST $UNG $IYR $TRN $VMW $YHOO $CTXS $XLE http://t.co/XQITF0lRKD #spy
				
				
By  +Follow August 22, 2013 3:19PM
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