4 Long / 2 Short Ideas For September Thursday, Sep 8 2011 

As the summer winds to a close, investors sift amongst the wreckage, and traders return to their desks, four opportunities stand out on the long side and two short ideas materialize. September can be a rough month for the markets and with the uncertainty of Congress returning to Washington, Europe moving closer to the precipice, and corporate America grinding to a halt, it looks as though market volatility is making itself comfortable.

4 Long / 2 Short Ideas For September

Technical Notes – August 1, 2010 Monday, Aug 2 2010 

Hong Kong (Hang Seng Index)

The HSI stands at an important crossroads that will set the stage for a major move within the next two weeks. While the HSI has broken above its June highs, the 200-day moving average is providing ocular resistance while an ascending wedge formation has formed. The HSI looks to be entering overbought territory, a pullback may be coming shortly, and investors should tighten stops and be wary.

Longer-term charts sit at resistance levels and a move above these resistance levels would set the stage for a nice rally higher which may test old highs. If there is a correction, the strength of the pullback will determine the depth. Right now the technical indicators are all over the board and investors should proceed with caution.

Buried within the monthly chart is a pattern of lower highs and lower lows that needs to be reconciled before the market can move higher.

Japan (Tokyo Nikkei Average)

Political changes and continued deflation are causing the Japanese stock market to be a laggard in 2009. If the political waters begin to clear it is likely that the market can make a move higher closing the gap between its Asian peers.

The short-term charts may look like an ugly mess technically but if the 9200 level can hold, the economic slowdown is not too deep, and political indicators improve we may see the index move above the 50 day moving average.

The longer-term charts are sending clearer signals. If the current level holds as support, the stage is being set for a very good rally. One that may surprise and shock most portfolio managers as to the length and size of the potential move.

Should the current support level fail look for a move back to the 2003 lows and if those lows fail the 2008-09 lows.

Thailand (Thailand SET Index)

It has been my experience that whenever the Thai market is outperforming its regional peers, the stage is being set for a larger pullback. Managers have missed most of the run this year choosing to avoid the market waiting on the sidelines for the political waters to clear.

Both the short and long-term charts are in the overbought area signaling a pullback within the coming weeks. The SET Index may make a blowoff move to 900 but if that were the case investors should move to cash and get ready for a significant correction.

While I am bullish long-term on the SET and Thailand, the charts now signal that a correction may be in the cards and this 2010 outperforming market may give back a sizable amount of its gains.

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It is what it Is Wednesday, May 13 2009 

When one looks at the stress tests recently completed by the US government one has to properly filter the noise. The government has released the results and metrics used in the ‘stress tests’ which have been picked apart by many people. You can crunch the numbers and manipulate the statistics all you want but in the end it comes down to loss recognition on bad assets.

Right now there is a tug of war going on between the private sector and the government. On one hand, we have the government looking for greater oversight of the financial sector. On the other hand, we have a banking industry looking to get out from underneath the government’s umbrella believing that they can fix the problems on their own. In this case, both sides are wrong.

The financial sector can be self-policing with a greater emphasis on risk management as is the case in Canada. But the participants in the sector must accept a greater responsibility for their actions and that includes the potential for failure. Capitalism is not about bailouts it is about letting market forces dictate winners and losers.

The government cannot expect to go the route of pay regulation as it will contribute to a brain drain in the financial sector. Just ask anyone working for a Big 4 auditing firm if they are having problems recruiting talent after the Arthur Andersen debacle. This should be a warning to those who seek to regulate items like executive pay.

Sarbanes-Oxley did more harm to the US financial markets by forcing small to medium sized businesses to go private and chased away IPO dollars to markets such as Toronto, London, and Hong Kong.

For those who wish to pursue further regulation in the financial markets, it should be done in a way similar to the regulations which came into effect after the 1987 market crash. In other words, capital formation should not be inhibited in any manner.