Tuesday, October 31, 2006

Trade Ideas: NKE, TLT, FTD, EWW, CHA, RPM, IEF, ILF

Markets failed to close yesterday with the vigor necessary to regain lost support from last Thursday. Today, markets drift in aimless fashion, but the Trade Ideas scan was showing a little stronger buying than this time yesterday; today's picks covered a time span of 2 minutes - someone appears to be buying the dips.

It was a relatively eclectic mix of 8 picks; two treasury bond funds (TLT and IEF), a latin America Index iShares (ILF) and Mexico iShares (EWW), with a dose of China (CHA) and an America staple, Nike (NKE).

The Latin America Index (ILF) was the only pick to manage a bullish cross of its 20-day/50-day MAs over the last 2-months. FTD Group (FTD) and RPM Intl (RPM) recently suffered bearish crosses in these MAs. In terms of frequency, the treasury bond fund, TLT, took the biscuit at 26 appearances.

Long term charts of these picks look a littly iffy. There is a cup-and-handle pattern in the two treasury funds (TLT and IEF); use the October low for stops and buy break of the September high, project a 5% gain in each. RPM has a scrappy handle with support around $18.40, but its too erratic to make any convincing call. Others, like FTD, look too extended to be buying in the short term.



One will have to keep an eye on treasury/bond action. If stocks were to fail and treasuries rose it would set up a deflationary environment - which would could see a repeat of of what happened in the Nikkei during the 90s, namely one large trading range. For the Nasdaq this could be defined by October 2002 lows and recent, cyclical bull highs(?). If it does come to fruition, lets hope it pops out the top end of the range and not the bottom as it did in the Nikkei.

Where's the fear?



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