Put your money where your mouth is and buy the mighty US dollar in 2015

International Business Times Article + Video Link

What goes up tends to keep on going up. This is a good mantra for those wondering where to focus their investments now that 2015 is upon us.  

One of the most striking trends in financial markets over the past half-year has been the stunning ascent of the US dollar against virtually all other major currencies, including sterling, the euro and Japanese yen. For a UK-based investor, a simple investment in US dollars in mid-July when £1 bought you over $1.70 would have yielded a return of over 13% to date (Figure 1), with £1 only buying just over $1.50 today.

Figure 1: US Dollar Has Gained 13% Against Sterling Since mid-July 

Source: Bloomberg

Why the US dollar should remain top-dog currency in 2015

Of course, you might look at Figure 1 and take fright: why should you buy into a currency that has already done so well?

After all, it is not every day that a major currency pair like GBP/USD (sterling against the US dollar) moves by this much in a few months.

I see several reasons for the US dollar to make further gains against sterling:

1. The forthcoming UK general election in May introduces all manner of political uncertainty into the UK economic equation, making sterling a more unattractive currency to invest in until at least after the elections are held and the composition of the new government known.

The recent rise of the Ukip vote has added a big variable into the traditional calculation of likely voting outcomes: how highly will Ukip poll come May and could it prevent either of the two traditional parties of power gaining an absolute majority?

2. If the Conservative Party is elected, then Prime Minister David Cameron is likely to proceed with an EU membership referendum. If the Labour Party is elected, financial markets could well react negatively to a less business-friendly administration. Both outcomes would introduce yet further economic uncertainty and undermine the attractiveness of the pound.

3. The UK economy continues to slide closer to deflation with an inflation rate of only 1% and falling, dragged down by the eurozone, which has already registered a negative December inflation print of -0.2%. This will prompt the Bank of England to delay yet further any interest rate hike, again making sterling less attractive versus the US dollar, where an interest rate hike is likely to happen sooner.

How much more could the Greenback gain against the pound? Well a cursory glance at the long-term chart of the US dollar against sterling would suggest there is still some way to go to hit the US dollar's highs reached back in 2009 and 2010 (Figure 2).

Figure 2: US Dollar Can Still Go Some Way to Reach 2009, 2010 Highs 

Source: Bloomberg

Two easy ways to invest in US dollar exposure

Buying US dollars: The most obvious way to take advantage of this trend is to buy US dollars with pounds, particularly if you are thinking of going on holiday to the US sometime this year, as those they could become more expensive the longer you leave it.

I recommend ordering currency online via well-established, regulated institutions such as Best foreignexchange.com, which is offering a rate of over $1.50 per pound, or the currency websites of high-street supermarket chains such as Asda and Tesco, both of which are offering over $1.48 per pound with free click-and-collect services.

Buying US shares via an ETF: The second option is to invest in exposure to US stocks via an exchange-traded fund. Both the Nasdaq and S&P 500 indices remain in long-term uptrends despite the market sell-off of the past few days (Figure 3).

Figure 3: Nasdaq, S&P 500 Indices in Uptrend 

Source: Bloomberg

My preferred US stock ETFs, which you can buy in pounds on the London Stock Exchange (via your preferred stock broker), are:

1. The Powershares EQQQ Nasdaq-100 UCITS ETF (code: EQQQ), which carries heavy weightings to high-growth technology and biotechnology stocks
2. The iShares S&P 500 Minimum Volatility UCITS ETF (code MVUS), which carries exposure to US large-cap stocks, focusing on those stocks with lower risk.

Both of these ETFs will give you exposure to US stocks in US dollars with your pounds, and so should benefit not only from any continued gains in US stocks but also from further gains of the US dollar against sterling.

Happy dollar investing in 2015!

I have been featured in the Mail on Sunday (Financial Mail)!

Mail on Sunday: Web Link to the article -

Is the US stock market still a good buying opportunity and what is the cheapest way to buy and trade shares on Wall St?

As UK investors eye up Alibaba, the £140billion Chinese internet retail phenomenon that floated on the New York Stock Exchange last week, we ask whether the US stock market still represents a good investment opportunity – and show you how to cut the cost of trading shares on the other side of the Atlantic.

Edmund Shing, 42, works in the City of London, lives part-time in Paris, works for a Moscow-based fund management company – and knows a thing or two about investing globally.

For his own portfolio he likes US shares that give broad exposure to high growth industries such as technology, biotech, shale oil and shale gas.

He says: ‘It’s harder to get equivalent exposure from UK or even European shares. In the US there is a cast of thousands.’ 

Edmund, who is married to Kim and has four children, will be shunning Alibaba as he favours ‘real’ technology firms such as Microsoft. He is also eyeing up Apple because of its phenomenal ‘global brand’. He adds: ‘I also like Kulicke and Soffa, a company that makes inspection equipment for semiconductors. Few people in the UK have probably heard of it but I think it’s cheap and its earnings are growing.’

Edmund, left, has a wide knowledge of markets through his work but he also uses research tools such as Stockopedia. ‘I like the way it boils down the information and gives each stock a ranking based on value, quality and momentum.

‘It’s a great starting point for filtering out thousands of companies.’

(yes I know, not the most flattering photo, but you can't make a silk purse out of a sow's ear!)

Bloomberg TV:Debunking "Sell in May and Go Away"

I appeared last week on Bloomberg TV in the morning, talking to host Mark Barton about why the "Sell in May and Go Away" saying is no longer strictly correct - rather, June to September is more the danger period for stocks...

CLick on the Bloomberg link below to see the Interview:

Debunking-sell-in-may-and-go-away

Video: What Does the Recent Market Volatility Mean?

Does the recent bout of financial market volatility mean that the bull market in stocks is over? Find out with this video!

Youtube: What Does The Recent Market Volatility Mean?

Happy viewing, 

Edmund

Twitter:                      @TheIdleInvestor

"Expert Opinion":     http://www.mindfulmoney.co.uk/wp/edmund-shing/

The case for the US technology hardware sector

Tech has only marched halfway up

While technology stocks have enjoyed a strong rally since the stock market nadir at end-2008, it is perhaps surprising to note that they have only recovered 50% of the ground lost during the 2000-2003 tech bust.

But over the last decade or so, there have been many changes in tech-land. Many mobile phone makers such as Nokia, Motorola, SonyEricsson and Blackberry have come and largely gone, to be replaced by Apple, Samsung, LG and a whole raft of Chinese Android smartphone producers. We have seen the advent of the tablet and even the “phablet” (a crossover between a smartphone and a small tablet), and of course we have witnessed the phenomenal rise of social media, with Facebook, Twitter, and Linkedin leading the vanguard. I want to focus in this article on the technology hardware sector, makers of physical technology objects rather than providers of services or software.

Improving Capital Spending Trends Are a Help

The technology sector is particularly geared to macro investment trends, as companies tend to favour technology-related investments in good economic times as they tend to bear quick-to-emerge and sizeable fruit in the form of productivity, boosting profitability. Guess what? US durable goods orders have recovered steadily over last year, pointing to improving corporate investment trends that should benefit tech stocks.

To read the rest of this article, please click on the MindfulMoney link below:

Tech-has-only-marched-halfway-up

Bon weekend,

Edmund

Video: Why I like the (US) Technology Hardware space

Good day to all,

I wanted to draw your attention today to a video I recorded with the financial news and analysis website Mindful Money, focusing on why I like the Technology Hardware space (particularly in the US) right now.

Please click on the link below to go to the Mindful Money home page, and then click on the video on the right-hand side of the page to play it (7 minutes long):

Mindful Money Video on Technology Hardware

I hope you find it interesting!

All the best,

Edmund

Early Morning Interview on Bloomberg TV - discussing US Media, technology stocks

Hi there,

You may be interested to hear what I had to say on Bloomberg TV early this morning (Tue Jan 14, 2014) on the subject of US Media and Technology stocks, in focus on the back of the unsolicited takeover offer for US cable operator Time Warner Cable from rival Charter, for $61bn in cash and shares.

I remain bullish on both these sectors for 2014, both in the US and in Europe...

Bloomberg TV: Why-you-may-want-to-invest-in-media-tech-stocks

Edmund

Clean energy has the solar wind in its sails

In hunting around for investment themes for 2014, you could do worse than look to what has already performed well through 2013. Remember, momentum tends to be persistent in financial markets, i.e. unlike the effect of gravity in the physical world, in stock markets what goes up tends to keep on going up.

One of the hottest investment themes of 2013 was Clean (or Renewable) Energy. In the US, the Guggenheim Solar ETF (code TAN) gained 125% over calendar year 2013, while the First Trust Global Wind ETF rose 64%. Could this stellar performance possibly be repeated this year?

 2014 Trend number 2: Clean Energy Gathers Ever More Momentum

The first question that needs to be answered is of course: what is driving these solar and wind energy stocks up? The simple answer is a combination of two factors:

Please click on the Mindful Money web link below to read the rest of the article, including potential ways to invest in this theme:

Clean-energy-has-the-solar-wind-in-its-sails

Take advantage of this following wind for your investments!

Edmund

Weekly Global Strategy Screencast: Playing "The Internet of Everything" investment theme

Screencast: Playing "The Internet of Everything" investment theme

In this week's animated presentation with audio commentary, I take a look at how to play the "Internet of Everything" investment theme, without falling into the trap of paying very high valuation multiples for social media and e-commerce stocks, i.e. the likes of Facebook, Amazon.com and Linkedin.com. 

Screencast presentation (Youtube): Investing in "The Internet of Everything"

Or simply click to watch the video (small window size) below:

For an introduction to the Internet of Everything, watch the Youtube videos below:

Introduction to the Internet of Things

What is The Internet of Things?

Dr. John Barrett: The Internet of Things (speech)

Happy investing!

Edmund

Bloomberg TV slot: The Global Economic Outlook, and why I like Value Tech Stocks

Video: Bloomberg TV appearance on "The Pulse"

The Global Economic Outlook, and why I like US Value Tech Stocks:

(5-minute video)

The Pulse, Bloomberg TV: Macro Outlook favours Stocks, and Why I Like Value Tech Stocks

Enjoy this little contribution, 

Edmund

CNBC Europe: Talking about the US economy, small-caps

Click on the link below to hear me talk on CNBC Europe's Squawkbox programme on Friday, 15 November about the US economy, a prospective recovery in investment and why small-caps could continue to out-perform. 

Edmund Shing on CNBC Europe: US economy, investment, small-caps

Happy viewing! 
Edmund

Dividend funds: caveat emptor!

Market Indicators Remain Positive

With the US S&P 500 stock index hitting new highs, we might ask ourselves if shares are finally starting to become expensive, and vulnerable to a near-term correction. Checking a number of my favourite market indicators, conditions look to remain favourable for stocks and shares. 

1. US advance-decline indicator hits new highs

The cumulative advance-decline indicator, that measures how many stocks have gone up versus those that have gone down each day and adds the up-down balance up over time, continues to make new highs. This points to good market breadth, i.e. that the market is being driven by a large number of stocks rising. If this were not to reflect a similar pattern to that for the benchmark stock indices, then I would be concerned. But no worries here...

US Advance-Decline Index Remains very Bullish

 2. US Value Line Geometric Index Also Very Strong

A second measure of market breadth is the Value Line index, which looks at the performance of the average stock in the US. Again, if this were not to be making new highs at the same time as the benchmark stock indices, I would be concerned. But once again, things look good...

US Value Line Index Also In A Bull Trend

3. European Industrial, Bank Stocks Still Performing Well

In an economic recovery scenario, both industrial and financial stocks should perform well, reflecting the benefit of a stronger underlying economy for profits in both these cyclical sectors. Looking below, we can see that European Industrial (SXNP) and Bank (SX7P) sectors are still in strong uptrends, and close to new highs. 

European Industrials, Banks Close to New Highs

But High Quality Dividend Stocks Now Expensive In the US

Interestingly, stable dividend stocks have in particular started to become expensive as investors have looked for yields outside of the traditional bonds and cash sources, given the very low rates of interest currently on offer from both asset classes. 

US Dividend Aristocrat Dividend Yield at record low

The chart above represents the US dividend aristocrat ETF, which only holds US large-cap companies that have raised their annual dividend consistently each year over the last 25+ years. Members include healthcare companies like Johnson & Johnson, and consumer staple companies like Coca-Cola.  All very high quality companies, but now increasingly expensive, only offering a 1.8% dividend yield now as opposed to nearly 2.5% at mid-year. Clearly investors are looking for a better yield than they can get on bonds or cash, but without taking big risks and thus preferring to invest in companies that offer relative stability. 

Focus more on Small-Cap stocks

October has been a pretty good month for Small-Cap stocks, with both UK and US small-cap indices continuing to outperform the large-cap benchmarks and rising in a strong, steady pattern. Both small-cap indices have gained nearly 5% over the last month, continuing to forge new all-time highs. 

UK, US Small-Cap Indices In Steady Uptrend

Favour Industrials, Small-caps; Beware Overvalued Dividends

I remain a big fan of ETFs exposed to small-cap stocks such as the iShares MSCI UK Small-Cap ETF (CUKS) and the iShares S&P Small-Cap 600 ETF (ISP6). You could get exposure to Small-Cap stocks in Europe overall via the db x-trackers MSCI Europe Small-Cap ETF (XXSC). With capital expenditure trends improving, European Industrials also remain a good area for investment at this moment: db x-trackers STOXX 600 Industrial Goods ETF (XSNR). 

But I would be wary of continuing to chase large-cap dividend stocks and indices higher at this point, as many of these stable growth stocks are now sitting at relatively expensive valuations, particularly in the US.  

If you want to buy exposure to European dividends, it would perhaps be better to look at a high-yielding sector ETF that is performing well, such as the STOXX Europe Telecoms ETF (offered by db x-trackers, Lyxor amongst others) rather than chasing what seems to me to be expensive dividend growth, at this point.  

Banks Breaking Higher In Spite of US Political Roadblocks

Given the drag to US economic activity from the ongoing US government shutdown, and the looming need to raise the US debt ceiling (before the US government runs out of money!), I am surprised to see that US investment banks and broker-dealers continue to do very well, with hardly a pullback in sight. 

US Broker-Dealers Bounce off 3m Moving Average

Boosted by Retail Investors Buying Stock Funds

This particular index comprises investment banks such as Goldman Sachs and Morgan Stanley, stock and commodity exchanges such as the CME, ICE and NYSE Euronext, and electronic trading platforms with as TD Ameritrade and E*Trade. They are all clearly benefiting from the current bull market in stocks, and the swtch by retail investors away from bond funds back towards equity funds, e.g. in the form of buying equity ETFs. 

Money Still Flowing Into Equity ETFs

European Financials Lead the Stock Market

In Europe, the same trends can be seen, with both the European Banks and Insurance sectors at or breaking new highs:

European Banks break a new year high

European Insurers also hitting a new high

You might argue that financial markets are perhaps being a little too sanguine over the risk of a US government debt default; the accepted consensus seems to be that a US default would wreak complete havoc on the US and global economies (not to mention global financial markets), and thus will be avoided by a combination of the US Treasury and Federal Reserve at all costs. 

Nevertheless, the fact remains that volatility remains historically low in spite of the political deadlock, and investors are still stuck looking for somewhere to invest their savings where they can garner a half-decent return, which is still leading them back to stocks and shares. 

Implied Volatility Still Close to Multi-Year Lows

Personal caution

I personally would rather be a seller into this rally than a buyer, as I believe that any eventual debt ceiling deal in the US could result in the stock market cooling off, as it is often better to "buy on the rumour, but sell on the news". 

That said, the US and European Banks and Insurance sectors still contain many companies that look attractively valued when looking at P/E, dividend yield or price/book valuation metrics, at a time when the US stock market overall could be argued to be already fully valued (as was argued recently by the famed investor Julian Robertson in a recent CNBC TV interview: Julian Robertson interview).

So what to do? I am still heavily invested in the UK, European, US and Japanese stock markets for now, but I must admit, I am looking to sell down positions sooner rather than later. After all, we are still not even halfway through the month of October, which has proven a pretty volatile month for stock markets in the past (see previous post for details)...

So invest in banks and insurers if you are confident of a successful resolution to the US debt ceiling issue, and if you believe that upcoming quarterly earnings releases from giant US banks such as JP Morgan and Wells Fargo will not disappoint expectations. 

Good luck,

Edmund

How Much Longer can Small-Caps Outperform?

I have been pleasantly surprised this year to see small-cap stocks outperforming their large-cap cousins in the UK, US, and Eurozone pretty much all year long. As a simple example, while the UK FTSE-100 benchmark index sits close to its 3-month lows, in contrast the FTSE Small-Cap index is only 2% off its all-time high!

Small-Caps around All-Time Highs!

If we look at three small-cap indices, the FTSE UK Small-Cap, the MSCI Europe Small-Cap and the S&P 600 Small-Cap, we can see in each case that small-caps are still very close to their all-time highs. 

UK Small-Caps 2% of all-time highs

MSCI Europe Small-Caps also within spitting distance of highs

Last but not least, US Small-Caps Breaking Higher

Note the last chart, where US small-caps are breaking out to a new all-time high despite the obvious question marks in the US about political gridlock in Washington. 

Economic Momentum Helping Domestic Stocks

One key indicator that is positive for domestic economic momentum in the US is the recently-released national ISM manufacturing survey: the reading for September clearly outperformed expectations with a solid rise to levels not seen since early 2011. 

US manufacturing showing strong positive momentum

This is equally true of the UK economy, where manufacturing is also seeing an accelerating rate of expansion:

UK manufacturing also returning to early 2011 levels of growth

So, this is all very well, but it could well be argued that this good macro news is already reflected in the current price of small-caps: more importantly, where next?

Seasonal Performance Suggests Continued Caution

Interestingly, looking at the case of Small-Caps, it would seem that the worst month of the year for performance historically has been September (which was actually decent for small-caps this year): 

September has been the worst month for small-caps

But I wouldn't assume from the chart above that the worst is past, now that we are into the month of October. After all, you need also to consider the following chart:

Small-Caps: Worst months have been August-October

So despite the strong upwards momentum of small-cap indices and the favourable macro following winds, I would not conclude that all will be plain sailing necessarily this month for small-caps. 

So what to do? Stay long small-caps, but watch carefully!

Let us not forget that, in the long-term, mid- and small-cap  stocks in the UK and US have tended to outperform the FTSE-100 and S&P 500 benchmark large-cap indices by quite a distance, albeit at the cost occasionally of higher investment risk at times of recession/crisis. 

One market indicator I like to keep a close eye on in the US at times like this is the cumulative breadth (advance-decline) indicator for US stocks (from Barrons) - so far, this looks fine, with the cumulative breadth line still advancing wekk-on-week. If this were to start to fall, then I would get worried about a potential correction...

US market breadth still up, giving comfort to small-caps

So remember that October can still be a terrible month for small-caps; stay invested in small-caps (as I am), but then watch the small-cap indices very carefully for any signs of impending market correction... 

My favourite UK small-caps for the moment: British Polythene (BPI), T. Clarke (CTO), Communisis (CMS), Inland Homes (INL), James Latham (LTHM) and Workspace Group (WKP). In France, I like Manitou (MTU) and Trigano (TRI). But as always when investing in single stocks, do your own research!

Hang in there,
Edmund

Should we invest in Stocks in October, Despite Seasonal Risks?

Stay in Stocks in October?

There are a number of reasons for avoiding risky assets like stocks in the month of October, ranging from seasonal to geopolitical to fundamental:

1. Seasonal: Historically, September and October have traditionally been the most volatile months of the year for stock markets worldwide, the months when most sharp stock market falls have been recorded (think Sept-Oct. 2001, Sept-Oct. 2008). Yes, stock markets have generally made small advances over the month of September, and have done well over the year to date. But isn't that precisely the reason for locking in profits now, at the beginning of October?
2. Political: The partial US government shutdown over the lack of agreement between the Democrats and Republicans over a the US budget could cause further volatility in the US economy and thus in financial markets. Thus far, markets seem to have taken these events in their stride (VIX volatility index close to a year low at under 15), but can we expect this relative calm to persist if no agreement is reached soon?
3. Fundamental: Let's not forget that the US Federal Reserve, having positively surprised the markets by not beginning the infamous "taper" (i.e. not reinvesting the proceeds of maturing bonds back into the US bond market) in September, could nevertheless begin this tapering process very soon. This was even hinted at by St. Louis Fed President James Bullard, who intimated that the taper might even begin in October (i.e. this month!). So the relief rally we have seen in bonds may not last much longer...

But some reasons to stay the course with stocks (for now)

A key reason to remain invested in stocks at the beginning of October is the basic fact that established uptrends in the major US, European and Japanese stock markets remain intact. Each stock market sits above its own 3-month and 6-month moving averages, and has not broken the general pattern of higher highs and higher lows. 

EuroSTOXX index in clear uptrend

Secondly, while it is true that September and October have contained some painful periods of stock market falls, we should not ignore the fact that, on average, the UK stock market has generated an average 2.1% total return (price change + dividends) over the two-month period over the 23 years from 1990 to 2012. 

UK stock market has gained 15 times out of 23 Sept+Oct periods

Indeed, over the past four years we have seen positive 2-month returns on each occasion... So from this simple statistic, I would say that the jury is out on whether these months should be completely avoided or not. 

Be pragmatic, use a stop-loss!

My pragmatic approach to investing in stocks at this time of year is relatively simple: I favour using liquid index-based ETFs rather than individual stocks, as then I can easily manage the level of risk in my portfolio by selling or reducing only a few investments. I also put in place a relatively tight stop-loss, so that I reduce my stock market investments before losses become painful. 

But, for this month of October, my ETF-based investment strategy is 100% invested in stocks, via UK Small-Caps (ETF code: CUKS), Euro Low Volatility stocks (IMV), US Small-Caps (ISP6), Emerging Markets Low Volatility stocks (EMMV) and FX_hedged Japanese stocks (IJPH). But in each case, I will be closely monitoring weekly moves, and selling them if they exceed the stop-loss levels I have set in place as of today. 

Year-to-date performance of my re-christened STAS

On a final note, I just wanted to point out that my asset allocation trending system STAS (Signal-driven Tactical Allocation System) has now gained 15.1% net of costs over the year to the end of September, including a monthly gain of 1.3% for September alone despite being 40% invested in cash. So far, still so good...

Post BoE/ECB Markets Landscape: Small-caps, US Dollar show relative strength, Commodities still laggards

BoE, ECB lower for longer?

Following the forward guidance given both by the new Bank of England Governor Mark Carney, and President Draghi of the European Central Bank at their respective central bank rate-setting meetings, what can we divine from the reaction of various financial markets?

First off, no bones about it - both the Bank of England and the ECB remain fully engaged in supporting the fragile economic growth rates seen in Europe (Bloomberg - ECB signals prolonged low rates). We have been recently reminded of how fragile any economic stability is across the Continent by the volatile reactions to the resignations of 2 ministers in the Portuguese government, plus the emergence of cracks in support for the incumbent Italian government. Notice how the Portuguese bond yield surged beyond 7% in short order in response to this renewed political volatility, triggering reactions across the whole of Europe. 

Portuguese 10-year bond yield spikes up to 7+%

Let's have a quick tour of the various financial markets, to see where there are enduring trends to be identified. 

FX: US Dollar rules

As far as currencies go, the strength of the US employment data on Friday with 195,000 new jobs created in the month of June, plus upwards revisions to the jobs data for both April and May (BLS - US employment situation, June 2013), supported the US dollar, with the US dollar index (DXY) responding by making a new 1-year high.

US Dollar index breaks a new 12-month high

Sterling has been a major loser in contrast, with GBP/USD dipping below $1.50 following the Bank of England statement. 

Bonds: Still making new lows

The bond markets have not managed to reverse their bearish trend, with bond indices still sliding lower following the various central bank statements and the US economic data releases on Friday. Not yet time to dip back into buying government bonds, just yet then. 

US Treasury bond ETFs hit a new 12-month low on Friday

Commodities: Industrial metals, foodstuffs still weak as well

Another area not yet ready for buying is the commodities space: despite sizeable slumps in industrial metals, precious metals, and foodstuffs over the last 12 months, there has not yet been any discernable change in underlying trend... The mining sector continues to mirror this commodities malaise, still the worst-performing sector in the European stock market in the year to date.

Sugar dives ever lower

Don't try to catch this European Mining falling knife

Stock Markets: Small-caps holding up best,
No reason to return to Emerging markets yet

Looking at the UK and US stock markets, the outperformance of small-cap stocks continues to surprise me. However, they remain of course a good play on improving economic momentum in both countries, particularly relative to other areas such as Banks (which tend to be large-caps) or even Emerging Markets. Within Asian equities, Japan clearly remains the place to be, with the Baillie Gifford Japan investment trust (BGFD) returning to within a whisker of its 2013 peak on Friday.

US S&P Smallcap 600 Index Breaks New Highs

While UK Small-caps also look ready to return to recent highs

However, within European large-caps I would be wary of the Banks sector which has broken its 200-day moving average, while Emerging Market equities remain firmly out of favour. 

No inflection point yet for Emerging Market equities

And European Banks also look vulnerable

Conclusion: Small-Cap stocks look good, but beware Banks, Commodities

Stay long UK, US small-caps, and housing-related areas including Lumber (but not US homebuilders, which have already benefited from enormous revaluation). Stay long Japanese shares too, although the Yen will likely weaken further against the US dollar.

In contrast, there is a long list of financial assets to avoid or even short outright potentially: Emerging Market equities, European banks, industrial metals like copper and the related Mining stocks, and European Oil & Gas stocks. This is not to mention most commodity foodstuffs like sugar and coffee, which continue to touch new 12-month lows. 

Good luck for Monday and hope you are profiting from the belated arrival of Summer in the UK and France,

Edmund