Oversold Indicator likes long side

Quick blog post. As mentioned on our Twitter, we currently have a gap fade (going short) trade on right now.

However, as of the close on Friday, our Overbought / Oversold indicators switched from short to long. There has been chatter that the market is due for a big fall -- but contrarian investors often like to see "the markets climbing a wall of worry." The fact that there are some big-time bears out there gives us some comfort with the bullish indicator.

Our long-term and short term stock market indicators are both currently long -- so we are looking to enter the long side soon.

In other futures markets:

• The Japanese Yen has been wildly strong as traders believe that Japan will not intervene to slow the rise.
• The Gold rush has slowed for now -- but depending on market action, our systems will look to re-enter the long side at some point.
• Bonds continue to rally.

Stock Indicators, A Look at Futures

A quick update on our stock market indicators:

• Our overbought indicators are still flashing the warning signs we mentioned last week.
• Our long-term and short-term indicators remain bullish/long.

Overall, we have remained slightly long as the market has continued its rally -- albeit with relatively modest position sizes. Some other market sectors have been helping our portfolio recently -- namely some futures markets.

Gold has been in a sustained trend higher, rising from the mid 900-range (just a few weeks ago), breaking through the 1000 milestone mark -- and is now reaching contract highs around 1020. Gold is poised to spike through to new highs, or may consolidate before continuing its run.

In other futures markets:

• Sugar is reaching multi-year highs.
• ECU & Yen strong vs. US dollar.
• Bonds continue to move higher.
• Crude oil is volatile as usual, but is trending higher.
• Grains and meats are generally lower.
• And as we mentioned, gold is very bullish. Other precious metals and copper are also moving higher.

Overbought / Oversold Stock Indicator Shifting to Moderately Short

At current stock market levels, our overbought / oversold stock market indicators are shifting to slightly short. However, with both the long-term models and short-term models long, we will maintain a long stock market bias -- with a "yellow caution flag."

Our overbought/oversold indicators have been in sync with the market quite well lately.

Early Morning Calls: Stocks Up, Gold Up, US $ down

Many market sectors are continuing their extended moves, with US stocks calling higher early Tuesday morning due to the G-20 stimulus pledge. On Labor Day Monday, most world stocks were up 1%-1.5%. Our stock indicators remain long http://z-trader.blogspot.com/2009/09/stocks-all-systems-go.html .

This is causing gold to extend its push higher -- and is newsworthy, with gold currently trading hands at more than $1000/oz ($1007 in early morning trade, in the Dec futures contract). Gold has the potential to be a major mover today, as stops above $1000 are taken out. On the other hand, some traders will take profits at the round $1000 level. The US dollar is lower.

At some point, the fundamentals say that we may have to "pay the piper" -- but for now, traders need to be neutral or following these trends. Some traders may even be "dipping their toes in" and taking small contrarian positions -- but we typically follow extended moves. The global economy has hopefully averted more drastic moves in the financial markets, but only time will tell.

Quick follow-ups:

• After running to multi-year highs, the Sugar market is taking a breather and is down significantly in just a few days. Traders should look for a base before accumulating long positions again. http://z-trader.blogspot.com/2009/08/sugar-market.html
• Soon after our pre-market followup on Rambus last Friday, rumors of Samsung buying RMBS -- or at least in serious talks -- caused the stock to pop back up towards its upper range. We have no information besides the rumors swirling around. However, we believe that (1) the court delay under "weird" circumstances, combined with (2) a "big volume day" (share volume was more than four times the recent average volume; options volume was more than three times normal!) -- means that something could be in the works.
• Rambus is currently trading around $19 in Germany, after closing at 17.75 last Friday and 15.93 on Thursday. http://z-trader.blogspot.com/2009/09/rmbs-update.html

RMBS -- update

Back in April, we mentioned a high-return, high-risk "flyer" named Rambus.

http://z-trader.blogspot.com/2009/04/rmbs-flyer.html

As we stated, we like having a few "flyers" in our portfolio that have the potential for huge gains.

Rambus is involved in patent and anti-trust litigation (with Memory Manufacturers [MM]) that could bring in billions of dollars in damages and ongoing royalties -- or could wring the company dry. Since we mentioned the stock in April, the stock has moved up steadily from around 10 (after bottoming at around 5 and 7 in Nov 08 and Feb 09 respectively) to the high teens.

The stock hit recent highs of around 19.5 as the anti-trust suit scheduled for the end of Sept 2009 neared. This date has now been postponed to Jan 2010 due to the illness of a MM attorney. The delay caused the stock to move from the 19 range down to the 15's. However, due to the strange circumstances surrounding the delay, there is chatter that other things are going on "behind the scenes." While this remains to be seen, the drop to the 15's indicates increased uncertainty, but not "horrible" news.

We continue to see RMBS as a high potential flyer -- with associated risk. As litigation moves forward, and with the stock recently penetrating upside resistance at 19.1, we see the stock moving back to the high teens --- and into the 20's barring other unforeseen obstacles. Next upside resistance levels include 26 and mid-40's (!!) -- nice gains from the current 15 price range.

Traders may want to see a base form before buying RMBS.

Stocks: All Systems Go

On August 25, 2009 our blog stated that our Overbought/Oversold indicators for stocks called for an intermediate top -- and went moderately short. With the stock market selling off -3% in about a week, these indicators are going long.

In addition, both our long-term and short-term stock models are currently long, so "all systems are go." Note that this doesn't necessarily mean that the stock market will scream higher today, but the probabilities do favor the upside over the next few days.

Some of our friends might notice some "space lingo" in our recent posts because we were lucky enough to see the Space Shuttle Discovery (STS-128) streak through the Central Florida sky last week. Here are some fun Space Shuttle facts (and video clips):

http://z-techie.blogspot.com/2009/08/fun-space-shuttle-facts.html

Alcoa and Nokia

We usually focus on a macro-portfolio of stocks, bonds, currencies and commodities around the globe, but we love finance -- and sometimes talk about individual stocks with friends and family. Here's our take on two stocks that have come up recently in various places:

I have followed Alcoa for a while and still like it a bit. As an "industrial play," it could be solid. Also -- once things calm down (economy!) -- Alcoa could potentially be bought out.

I have also followed Nokia for a while... Nokia is a huge brand name and often shows up in "stock filters" (for both value and growth). One "filter" I believe is from a Mensa investing board/group that I have seen.