Related ETFs: UNG & FCG

Time to Hop on the Natural Gas Train

With hedge funds performing miserably this year compared to the indexes, you’ve got to say that sometimes it helps to be a little stupid.  Those investors who didn’t read the Q’s, ignored the warnings of slowing Chinese growth and EU double-dip recession and just blithely kept long dividend staples in Vanguard index funds have done spectacularly well.

Such a year would make Jack Bogle proud, never have we seen such a complete vindication of his hold, hold, and hold strategy as 2013.  

I am a big fan of Mr. Bogle and try to keep a major portion of my portfolio under wraps and unmoving – but I’m also a trader and my career has been about improving performance based on tactical allocation and better understanding the commodity cycles  – with a look to improve on mere indexes. 

This report takes a closer look at the U.S. Energy sector, via the iShares U.S. Energy ETF (Ticker: IYE).

In recent days, IYE has quietly broken out of an ascending triangle pattern two and a half years in the making. From a portfolio perspective there have also be some developments worth noting. For example, the longer-term relative strength chart (vs. the S&P 500) appears to have found support at an historically significant level and the near-term relative strength chart substantiates that a bottom is in place. As a result, it appears that IYE is becoming a technical leadership sector ETF and investors/traders should look to take advantage of such a rotation.

In addition to a brief technical analysis of this sector ETF as a whole, this report goes one step further as is delves into the technical outlook for its top 10 holdings or 63% of the entire fund.

By David Gillie

In a One-Man Market, nothing matters except Fed Chairman Bernanke. As soon as he’s on camera, traders faint  like teenage girls at an Elvis concert.
Economic data - irrelevant. Fundamentals - irrelevant. Technical analysis - irrelevant. Government embroiled in scandals - irrelevant. Do we get our $85 Billion a month? Yes or No! That's all that matters.

As usual, traders make the "wrong" move first - and then correct. In this case, the "safe bet" is always to the upside. Naturally, Gold, Oil and the S&P make the most violent moves. Then through the rest of the testimony, the algos pluck words and respond in a matter of nanoseconds.

As it turns out, the whole "tapering" story was just a plant to test the market's reaction. There was never an intent of cutting back the gravy train. If there are ANY changes, it's likely to be an INCREASE of QE as the Bank of Japan continues an unprecedented currency destruction of the Yen.

Today's testimony and the previous testimony have been a hurricane of confusion. Out of one side of his mouth, Bernanke states that they may continue QE as the economy shows signs of softening. On the other side, he states the Fed will be discussing cutting back on purchases at the next few meetings. There. Trade THAT!

Markets and $5.2bn inflows push US ETP assets to $1.519 trillion

Data in this report is as of Fri, May 17th

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Market and Net Cash Flows Review
Equity markets were mostly higher during last week with the exception of EM markets which ended slightly lower. The US (S&P 500) edged higher by 2.07%; while, outside the US, the MSCI EAFE (in USD) rose by 0.44% and the MSCI EM (USD) dropped by 0.36%. Moving on to other asset classes, the 10Y US Treasury Yield rose by 5bps last week; In the meantime the DB Liquid Commodity Index was down by 0.34%. Similarly, the Agriculture sector (DB Diversified Agriculture Index), Gold and Silver prices retreated by 1.60%, 6.12% and 6.81%, respectively, while the WTI Crude Oil end flat for the week. Last but not least, Volatility (VIX) dropped by 1.11% during the same period.

The total US ETP flows from all products registered $5.24bn (+0.30% of AUM) of inflows during last week vs. $13.79bn (+0.90%) of inflows the previous week, setting the YTD weekly flows average at +$4.2bn (+$84.46bn YTD in total cash flows).

Click here to download a PDF of this week's report