EWT For The Week Of June 29th, 2009

As mentioned in my previous post, the $10.15 gap proved as a good area of resistance as after the gap-up on the 24th, EWT bumped into that area (high of $10.19) and couldn't proceed any further.

Chart below:



Once again, the tell for EWT will be the TAIEX open which is a day before the US markets open. I did manage to enter into more of the Sept 09 Puts, $10 strike, at $0.70. Ideally, I am looking for $8.30-$8.80 to take profits on these puts. Prices for short entries remain the same (see previous post linked above).

Also, I should mention I will be gone for about about 10 days give or take, traveling around Taiwan. Will have limited internet access, so no updates likely for a week or two. Will chime in with small edits if I see something in EWT charts. Let's just hope we can get some more bear market action so that I don't even have to pay attention to the market for this mini-vacation of mine!

TAIEX Up 4% Currently

A glance at the TAIEX is showing a gain of 4.71%, as of 12:09PM, Taiwan-time.

That would give EWT an estimated boost in price of around a similar percentage (if these ETFs actually work like they should). Here's my road map for tomorrow on EWT:



With a TAIEX close of anywhere around 5% up on the day, that would put EWT very very close to the $10.15 gap fill created last Monday. EWT will gap up tomorrow, and what I will be watching for is how it responds to the gap fill level. Although unlikely, if it can take that out and proceed higher to the second gap (at $10.37), that's where I would look to start adding to my EWT puts. A $10.48 level also represents a 50% short ambush from the recent lows to the highs off of June 1, 2009. The $10.37 and $10.48 levels will be hard to reach tomorrow, but if the U.S. markets sustain a larger rally, it could boost EWT as well. In any case, watch for these levels.

As I predicted, Ma Ying Jeou's ratings have dropped, in-line with the stock market.

More Support From U.S.

Congressman Robert Andrews from New Jersey has sent a letter to President Obama, asking for his assistance in urging Ma Ying Jeou from intervening in the Taiwan Foundation for Democracy.

Robert Andrews, a Democrat from New Jersey, said in a letter to the White House that the TFD’s existence and present general policy directions were very much in line with the “fundamental values of democracy and human rights which Taiwan shares with the US.”

It goes on to ask Obama to “urge” President Ma Ying-jeou (馬英九) and his administration to “let the TFD do its useful work the way it had done over the past six years.”

This should be a good test of character, in a way, to see who the man behind the "Harvard Law name," is really. For the most part, I believe President Ma is not scared of the Taiwanese people. What he may be scared of is the international community paying attention to what Ma is doing in Taiwan.

For obvious reasons, Ma Ying Jeou should not be meddling with removing and replacing the people inside TFD. It should be easy to see that this is just another step in the KMT's silent (apparent) goal of dismantling democracy quietly. All you need to control a country is to suppress dissent and opposing political views- once you shut that out, the people have nothing else to listen to except the one-party government. When you add all these small/large events together from DPP politicians being jailed (not just CSB), to political activists being fined and charged with violating the Parade and Assemblies Act even though Ma claims to uphold the U.N. Rights Convenants.

We need all the support that Taiwan can get. If you are living in the state of New Jersey, it would be nice for you to send a thank you letter to your congressman, Robert Andrews.

Channeling EWT

EWT happens to be channeling an approximate $0.30 range, starting this Monday, all through OpEx Friday expiration. Upper range of $9.83, lower range of $9.51. It would be wise to stay out of entering positions until we break out of this narrow range. The open on Monday in Taiwan should be indicative of where EWT will open in the U.S. markets.

The chart:

Arms Sales On Deck?

Washington sources say that Wang Yi (王毅), director of China’s Taiwan Affairs Office, will be in the US next week for talks with the US State Department about potential future arms sales to Taiwan.

Is there any reason for this? An obvious break from one of Reagan's Six Assurances, which stipulates that there will be no prior consultations with the PRC about arms sales to Taiwan. Likely as a result of this, the article states that the US State Department is unwilling to confirm this, as well as all parties involved are being vague as to whether a meeting is actually happening or not. But:

a source with close ties to the State Department and Taiwan said that Wang would visit and that the weapons sales would be high on his agenda.

The irony I find in all of this, putting aside the consultation with China issue, is that at first glance, it would seem that Ma Ying Jeou was actually putting Taiwan's interest in the forefront. After all, Taiwan as a whole, regardless of party, has pretty much always been for the acquisition of arms (esp. the F-16s) for quite some time, dating back to the CSB era. Now with the "warming" of ties, and general support for the sale in the US congress, we might just see that.

But, I beg to say that this acquisition of the F-16s may actually be harmful to the U.S. in the long run. One of the main reasons in the past for the U.S. having reservations about selling advanced weapons and fighters to Taiwan was the fear of a possible annexation of Taiwan by China. This would indeed let China acquire U.S. weapons technology that would definitely not be beneficial to the U.S. and the world. What we do not need is a bigger China with a bigger stick, on par with the U.S.

Perhaps this is just another bargaining chip that Ma is willing to use to curry favor with China in order to receive more "goodwill." That is, the annexation of Taiwan will be accompanied with weapons technology.

EWT Update

Still studying for my last final, just a chart and a few words:



From my previous post, I mentioned:

... although I do see a bounce coming on EWT as it is quite oversold now. Signs of weakness in EWT (places to consider going short if it acts as resistance) are at $9.84, a short ambush from the gap high, ...

And sure enough, the next day we got the bounce at the open, and hit $9.83 as the high of the day, off by 1 cent (I highlighted the area with the box). That would have been a great short entry there. The Sept 10 puts remain at $1.00/$1.15 bid/ask. Also notice that it has creeped back into the channel drawn, and so for future short entries, I would once again look at $9.84, and then $9.95. Caution on entries though, as this is OpEx week, and we might get some large whips to the upside or downside. Although EWT is not heavily traded compared to others, we might get a pin close to $10 for Friday.

Iran Elections - A Warning to the People of Taiwan

As I'm frantically studying for my last finals of my undergraduate, this is going to be short, but I hope to cover this more in-depth later.

As you may or may not know, Iranian elections on June 12, 2009 have been the news of this week on CNN.com, mainly due to the allegations that the elections were rigged or votes mishandled, or purposely mishandled. Here's one of many stories covering it, from Bloomberg.com.

Pictures and Videos here (may be graphic).

Also, a better in-depth look at the elections and the time leading up to it by a former correspondent for TIME. In the last paragraph, the author notes:

I am not ashamed of having voted in Iranian elections past, but I have a fresh appreciation for the wisdom of Shirin Ebadi, who from long experience battling the Iranian regime had accurately recognized her foe. And I am still not certain that I will boycott elections in the future. If people had not voted in Iran on such a grand scale, the world would have assumed once again that people had chosen Ahmadinejad as their President. Now Iranians have made their discontent clear, and though their votes have been discounted, their voices have been heard. Ahmadinejad may remain President of Iran, but his legitimacy has been shaken to its core, not just before his nation but before the world. Iranians managed that by voting, and it is a powerful accomplishment indeed.

This is what I want all you who are Taiwanese to take notice. Do not ever take for granted your right to vote and choose. Even if it is rigged, the strength in numbers of the outpouring of anger against the Iranian elections is at least a glimmer of hope that they can grasp onto.

So in the upcoming DPP referendum as to whether or not to put the ECFA to a vote, I urge you to urge others, to urge their parents and friends to vote on the issue. Regardless of if you are for or against it, vote on it. Because when enough people get mad enough and upset enough, there will be real change. Not the Obama change that was based on good feelings and social popularity (how many Obama voters did you know were actually really mad and upset, and I mean really mad, to the point where they would protest on the streets? I can think of, exactly none of my friends). So the DPP has an advantage already, because we know, and the DPP knows that there is already a decent amount of Taiwanese in Taiwan that are upset with the current Ma administration, so much as to take to the streets on 5/17.

Nothing truly has come out of that rally, but little by little, support is gathered. Do not stand by and wait for what is happening in Iran to happen in Taiwan. Do you really want to see millions of Taiwanese, once again in the streets with blood flowing and police fighting you and your family?

Also, for the Americans, a look at the Iran elections and how we, as Americans, are failing Iran and the world, by Karl Denninger.

Finally, latest news says 7 killed in attack in Tehran (albeit it is reported that the killed were attacking a military post). Is this just the beginning? Best case, this is it, and maybe the demonstrations are put down peacefully. Worst case? This becomes the Tianamen Massacre of Iran's history.

EWT - Down She Goes

I'm busy with finals this week, so my posts will be brief.

A quick update on my trade of EWT. As predicted, we saw a gap down on EWT from the get-go and then basically drifted sideways for the rest of the day. As I am looking at this trade on the longer time-frame, I am not exiting my short position here, although I do see a bounce coming on EWT as it is quite oversold now. Signs of weakness in EWT (places to consider going short if it acts as resistance) are at $9.84, a short ambush from the gap high, to the lows of the day; $9.94, a 50% gap fill, and $10.15 as a full gap fill. As you'll see below, I also put in a channel, and we basically dropped out of that channel early in the day, but wiggled back in by the end. I see the $9.90-$9.94 as a decent area of resistance where shorts could be added.



As it is OpEx this week, I don't see EWT moving much more lower than where it was today. For target prices on the short-term, I see $9.25 and $8.75.

And lastly, the Sept 09 Puts, $10 Strike now trading at $1.00/$1.15, bid/ask.

Breaking Down Barriers

Another "peace" and "confidence" building measure on "both sides" has the Taiwan military taking down the underwater sea barricades (spikes) and landmines on Kinmen. As with all previous agreements that have symbolized the growing "peace" between the two sides, Taiwan once again takes it up the butt and China runs away with nothing.

Notice that it is only Taiwan's side that is removing defense measures from a strategic military point on Kinmen. Is China also removing some defense measures in Xiamen also? How about those 1,400-1,800 missiles that are or will be ready for Taiwan over the next couple years (hard to get exact numbers, but the main idea is that China has not reduced the number of missiles pointed at Taiwan since the cross-strait "peace measures" started last year on May 20th, 2008)?

Are the Taiwanese worried yet? Not yet, but the way I see it, lets hope for the 2nd phase of this bear market to ensue, because as long as the stock market continues up, the sad thing is that the majority of Taiwanese will continue to put up with Ma Ying Jeou.

EWT Short Entered

I entered a short position via Sept 09 Puts, $10 Strike at around $10.13 on EWT. Cost basis is $0.85. Updated chart below:



There is a battle at the $10.15 line, and if it resolves to the upside, I may stop out at the current double top around $10.50.

Edit: May be a bit early to tell, but so far EWT looks like it will be moving down on Monday's open in the US considering that the TAIEX just closed 3.45% down. So far so good. And I'm making no predictions here yet, but just last week, a manager of a Taiwan fund called for 15,000 on TAIEX by 2011, and that "Taiwan stocks will be driven by “the China factor,” Lin said. “We have China on our side.” Let's keep this in the back of our minds as we head into 2011. For some reason, I find it so hard to understand how some people get these positions in these funds. How can one predict the price of a stock/index 2 years away? Furthermore, basing it on one factor, you also have to take into consideration the other side, what if China's economy stalls or also falls in this economy with a depression looming? Things for you to think about.

A Quick Update on EWT

Updated 5 day chart:

Things to notice is that after the gap down on Tuesday, we filled that gap on Wednesday and proceeded to wander downwards for the majority of the day, save for the end of day crap we've been getting lately. I believe the technical term for that is, gap and crap. What I'm looking for on Thursday and Friday's trading session is either another price rejection off that gap down level of 10.37, or if we can get above that, looking for supply at the 50% retrace from the lows of today to the close on Friday (10.43-10.45), and finally the last line would likely be the highlighted boxed area on the right of the chart, where a few trendlines meet.



I will likely enter into an initial short position on EWT on Friday if we look like we'll be closing below that 10.65 area, barring any strength in the stock (if) as it moves towards that target area.

See my previous post for more information on this trade.

Edit: Updated chart after Thursdays market. We got a bounce off the high on Monday at 10.52 to the exact penny, and sold off from there. This is looking good for the short setup, and so I will enter a short position in EWT tomorrow with the 10.70-10.75 being my stop level price. Are you ready to see some lower approval ratings for Ma? Because this chart is saying so.



Edit #2: FPP Asset Management claims recent rise in Taiwan stocks is done, and is "no longer compelling" to buy. The director of FPP Asset Management goes on to say that "“Cross-straits [sic] is mainly hot air and it is getting the locals excited, which is always a worry.”" As always, take so-called "expert" recommendations with a grain of salt, but in this case, this one is seeing what I'm seeing in the charts.

Ma Positioned for KMT Chairman

Reneging on his previous promises to not serve as both the president of Taiwan, as well as the chairman of the KMT, Ma apparently has no problem going back on his word. This is a great move on Ma's part as it puts him right in the middle of the CCP/KMT talks that are dangerous towards Taiwan democracy. There is hardly any oversight in what goes on in these party-to-party talks, and add to the fact that after agreements have been made, the LY in Taiwan does not even put them up for a vote, it just goes into affect by default.

One reason for this being a great move for Ma is that now he can totally skirt the issue of introducing himself as President Ma of Taiwan in front of Hu Jintao. Instead of coming up with stupid reasons such as, "it's a non-issue" or something of that sort, he can officially say he is meeting Hu Jintao as the chairman of the KMT party.

So now we have the actual president of Taiwan, likely to meet with the CCP, but serving as only the party head. What does that look like? CCP, KMT, meetings... party heads that are dual serving as state heads. It should remind you of the old CCP/KMT rivarly of the past under a unified China.

Going a little bit further into the article, what exactly does the following mean?

“I thought it would be unnecessary [to double as KMT chairman] when I took office last year, but I now believe that the party and the government should fully cooperate as we have faced various challenges over the past year,” Ma said.

He's saying that the party and government need to cooperate, as if they are one- so he becomes the leader of both to mitigate that problem. But what's not mentioned is, what about the other party? The DPP? But I guess Ma is right on one part, there are challenges between the party and the government appearing- just so happens it's because of Ma's move to become the KMT chairman:

KMT Legislator Lo Shu-lei (羅淑蕾) held a different view, expressing concern about the impact of Ma’s decision. Now the president would enjoy absolute power and no one would be able to influence his decisions, she said.

“He can do whatever he wants,” Lo said. “No one can control him anyway. He now becomes the most powerful person in Taiwan.”

Taiwanese should be worried when the KMT are even becoming antsy about their president, and soon to be, party chairman's, political moves. This is something that is refreshing to see, and more of this, on both sides, would be beneficial to Taiwan as a whole. That is, a move away from the traditional KMT and DPP party-line of, unification, and independence, respectively.

Finally, as this editorial in the Taipei Times today points out, Ma has repeatedly invoked in the past, Lord Acton's quote of: "Power tends to corrupt, and absolute power corrupts absolutely.”

May I ask, President Ma, what exactly are you trying to achieve here- more power, dare I say?

Taiwanese need to have the ability to use referendums and initiatives because at this rate, Ma Ying Jeou will have already served up a platter of Chinese Taipei (ahem, Taiwan), to Hu Jintao, and more than half of Taiwan will be left on the sidelines, wondering how it happened.

Other tidbits:

• I've been delightfully surprised at the positive news coming out of the U.S. in terms of support for Taiwan lately. Today, reports on a push for F-16s, and a call on Obama to sign for the sale of them quickly.
• I'm still watching EWT, and it's continuing to behave in a way that says we should short EWT and go bear on the TAIEX. I may take a short position on EWT by end of week if the diagonal line contains the upside of EWT (as mentioned in the previous post here).
• I recently added other Taiwan blogs that should be of interest if you are interested in reading more about Taiwan politics and news. Of notice is today's post on Taiwan Matters! highlighting Jerome Keating's recent article on why Taiwan is Taiwan, and China is China. The actual article by Keating is here, titled "The civil war that was never ours." I strongly recommend reading this, as it is short, succint, and to the point. And, it should also open your eyes up to how wrong media can be, and how far-reaching CCP propaganda can go.
  

Is EWT's Move Over?

Here's a couple chart of EWT, an ETF in the US Markets that tracks the TAIEX.



Here's a 9 month chart of EWT. Today's gap down in EWT takes us below the ascending diagonal that has contained the bottom side of this bear market rally since the start of this move back in March 2nd. What I would like to see this week is for that trendline to hold the upside of EWT, basically meaning it would not fill the gap it created. Following is a 60 day chart.



Should get a good idea of where the trendline is now. Also, with another end of the day, rip your face of rally, we got a backtest of that line and bounced off the line. A closer look on the 2 day chart shows you how well this trendline worked.



Amazing huh? Anyways, what are the implications for this back in Taiwan? Well, assuming that this correlates well with the TAIEX moving down, the KMT and Ma Ying Jeou may actually get run into more problems later on this year. I'm contributing the recent indifference towards what Ma is doing to the fact that the general population's stocks have been doing well over the past couple months.

It's pretty easy to see that Ma Ying Jeou's approval rating has fallen (last year) and risen (this year) along with the stock market. With a falling stock market (potentially to resume soon), will likely come falling approval ratings on Ma Ying Jeou and likely the government (KMT controlled in general).

The DPP should take hold of this opportunity to gather support from the public against Ma and the KMT's recent policies of One-China economy and their push to unify Taiwan and China in all but name.

Disclaimer: No position in any Taiwan stocks, but I will be looking to play Taiwan to the short-side upon confirmation of the above.

June 2nd Rally in Seattle

I wasn't there, but since I covered it briefly a few days ago to encourage Taiwanese and whoever else that wanted to support the cause in Seattle to join, here's a blog of a person/group that went:

RAINU has some coverage in Chinese with videos.
A group on Flickr just for the 6/02 Rally in Seattle.
Soarhevn on Flickr with more pictures.

Here was a good overview of what the rally was about, which I found a few hours before Ma touched down in Seattle.

Rally participants desire all people who support human rights, the right to assemble, and the right of self-determination to join them in calling on the ROC government to respect human rights and stop trying to unify the economy of Taiwan with China. The US government must also end its silence and begin actively voicing to the ROC government that they must uphold human rights and respect the rights of Taiwanese to determine their own future.

Check out the comments below as there's a decent discussion, or perhaps just flaming back and forth by some. I made a few comments in an attempt to just say that this rally is not about Taiwan Independence, not about pro-DPP, not about pro-CSB. At the most basic level, it's simply in support of Taiwan's right to determine their own future as quoted from above.

This link was posted on Facebook and I got some comments from my cousin who also linked it on Facebook, where some friend of his was slightly disapproving, or at least asking why there needs to be a rally for Taiwan's human rights, democracy, etc. I know it's easy to think that all is good in Taiwan when you are going with the flow. But, you never know how little human rights you have until you go out there and test it to see what rights you actually have. Check out this recent post by Claudia Jean over at her blog about how students were threatened or "strongly suggested" not to participate in rallies.

If you want to wait until Taiwan's human rights are to the point of that like 3rd world countries under oppression of guerilla fighters, then it'll be too late by then.