Stocks Still in Funk

Asian stocks largely declined Wednesday after weak U.S. data refueled worries about the strength of the global economic recovery. Technology shares dropped, unimpressed by Samsung Electronics' forecast of a record operating profit.
"It's the same story from before; the market can't free itself from recent worries about slowing growth in the U.S. and China," said Samsung Securities analyst Oh Hyun-seok in Seoul. "The U.S. market's weakness toward the end of (Tuesday's session) is also negatively affecting sentiment."

and from WSJ:
LONDON—European stocks fell Wednesday, taking their cue from a weak Asian session as fears about global growth continued to dent sentiment.
"Disappointing data and also the uncertainties around what will be [or not be] disclosed around the stress tests seems to have kept risk takers on the back foot," Deutsche Bank said in a strategy note.
The pan-European Stoxx Europe 600 Index was down 1% at 240.35. London's FTSE 100 Index fell 1% to 4914.67, Frankfurt's DAX slipped 0.7% to 5897.67, and Paris's CAC-40 Index traded 1.1% lower at 3387.29.
Traders said another round of disappointing U.S. data in the form of Tuesday's Institute for Supply Management nonmanufacturing figures has reignited fears that the U.S. economy is losing steam, adding to worries about the global recovery. "Concerns over the growth outlook for the U.S. have resurfaced and are unsurprising in light of the slew of weaker-than-expected data points of late," said Goodbody Stockbrokers. "By all accounts, activity is entering the third quarter on a weaker footing."
In Asia, shares ended mostly lower in choppy trade Wednesday following the disappointing ISM data. Japan's Nikkei Stock Average, Australia's S&P/ASX 200 and South Korea's Kospi Composite all ended down 0.6%, while Hong Kong's Hang Seng Index lost 1.1%.
In Europe, banking stocks were among the worst performers, with Crédit Agricole down 1.9% and BNP Paribas slipping 1.3%. The sector was in focus as EU regulators prepared to outline how bank stress tests are being conducted in an attempt to revive confidence in the sector and allay fears of political meddling. The results of the stress tests are due on July 23.

Meanwhile, Stocks Give Back ALL Gains, Close DOWN!

It must be troubling to the Fed to see stock markets rally more than 150 points on the Dow following their rate announcement, and then sell off to close down for the day. The dotted white line is the closing price for the S&P futures yesterday. Perhaps if the stock market doesn't rally with rate cuts, the Fed will take some solace in knowing that commodity prices -- and inflation -- will!

Foreign vs. domestic stock ETFs

TIP: To view these charts in better detail, you may want to open them in another window. The above charts were saved in a single jpg file.

Note that in the above three charts, representing some of the most liquid and commonly-traded International stock ETF's, the chart patterns are nearly identical. If I didn't label them on my charts, I could hardly tell the difference. These charts are of very diverse areas of the world: Emerging markets, Europe, Australasia, China. If I posted the U.S. stock ETF charts (SPY, DIA, QQQ, UWM, etc.), they would appear nearly identical.

The point of this post is simply that trading a multiplicity of stock ETFs from around the world is really quite useless, because all appear similar and move nearly in lockstep with each other. Stocks around the world tend to trade in very mirror-like patterns, with relatively small differences. I have noticed this pattern perpetuate itself time and again, and I finally realized that trading stocks, whether in Japan, Germany, Hong Kong, or New York, is still still trading stocks.

I suggest trading the largest and most liquid stock index ETFs, so you can enter and exit positions with good fills, tight spreads, and minimal slippage. Whether those ETFs are U.S., European, or Asian ones is largely irrelevant. However, U.S. financial markets are among -- if not THE -- most liquid in the world, so I prefer to use them. If I were living in another part of the world, I might trade using their indexes. However, this would only be because of the time zone and the need to trade at an hour when those markets have the greatest liquidity.

One caveat: I trade ONLY ETF's -- no individual stocks -- and they are all based upon indexes for those parts of the world.