I’m convinced that we are through the worst of Winter now and Summer is just around the corner !! I base this on the simple fact that I was sat out in my garden on Friday for a couple of hours in the sunshine and it was such a welcome change to feel some warmth after the grinding chilly months. And on top of that, there was a Preview programme on Eurosport last night for the World Superbikes season and when Bikes are back on the Telly you can be sure Summer is here !!
Of course this means yet another distraction for me as I start to think about digging the garden and what crops I’m going to shove in this year (current thinking is not very much - I got a bit fed up with stuff not really delivering the veg last year and I might just go for Spuds and Courgettes and not much else this year. They are easy to grow and reliable and I will actually eat them !!) and I want to focus all my efforts on doing the things in life that I enjoy this Summer and this will probably mean lots of trips to the Pub !!
Before I forget, I think the US Markets are closed on Monday for Washington Day or something.
Some Investors Chronicle snippets I was reading ‘The Interview’ which is on page 57 of the Investors Chronicle from 1st Feb to 7th Feb 2019 (the one with ‘Bargain Shares‘ on the front cover), and Hugh Young who is the ‘Head of Asia’ at Aberdeen Standard Investments, was the victim this time. Anyway, one bit he talks about really struck me and I thought it was worth repeating here: “People have retreated from growth stocks and realised they should be careful of things you would have to pay 40 or 50 times earnings for, or companies that don’t have any earnings,” “They’ve realised it’s not all blue sky and upside, and [are] looking at cash flows, balance sheets and dividends, which suits us. We’re a tortoise rather than a hare, and it looks like a bit of a tortoise market.” Just after reading that I picked up the Investors Chronicle from 30th November to 6th December 2018 (with ‘Letters from America’ on the front cover), and that article which is on page 28 includes this bit which I liked: ‘To its credit, Artko doesn’t shy away from risk in its update and is clear what the trade-offs have been for superior performance since inception. Portfolio manager, Peter Rabover, explains the approach: “First, investing is risky - especially in microcap public equities and special situation securities. Second, we are often wrong. However, as the saying goes, this is a feature not a bug. Recognising that we are fallible and that real capital impairment risk exists leads our investment decision process to think in probabilities of outcomes rather than decisive proclamations of certainties in the future performance of our investments.”’ I really like that one. I am a big believer in the idea of ‘Probabilities’ and take the view that nothing is certain or definite in dealing with Markets and the best we can do is take a view on how likely or not a particular outcome happens to be. Anyone who buys a Stock in the sure knowledge they are going to make Money is quite possibly going to get a few surprises and the cognitive dissonance of this will explode their brains. It also plays to my view that diverse Portfolios where things are Position-sized to Risk and no one Stock can sink your Battleship is the way to go. New Podcasts I’ve had a busy few days on the Podcasts front having recorded one with Justin on Thursday which you can access via the link on the ‘Podcasts/Videos’ page and on Friday I recorded another Twin Petes Investing Podcast with @Conkers3 which you can listen to at the link below. Just be warned that there are a few bits where it goes ‘echoey’ when I am speaking and it is a bit annoying but stick with it as it soon sorts itself out and we cover a lot of topics and specific Stocks on it. https://soundcloud.com/user-479955511/wheeliedealer-conkers3-talk-buying-stocks-rising-markets-azn-clin-cake-more By the way, the topics we talk about on the TPI Podcasts are very much of a ‘generic’ nature so they won’t really go Out of Date and you should be able to listen to older ones and still get a lot out of them. Last Week/Strategy A bit of a frustrating Week for me where my Short Positions on the FTSE100 and the S&P500 hurt me but I did not get the offset from my Long Share Positions which resulted in a hit to the Portfolio overall of 1.1%. The FTSE100 moved above a critical Resistance Level this Week when it got over 7200 and I will show this in a bit on the Charts section. This is Bullish Behaviour and from a technical/charting viewpoint it is likely to go higher. Of course this is a pain for my Short Hedges but I have made the decision, rightly or wrongly (probably wrongly knowing me !!), to let the Positions run. My rationale is that my Hedges are in place to save me from the potential damage that a messy ‘No Deal’ Brexit could do to my Portfolio and for this reason the Hedges are very much based on an Event happening or not and it is not something that is predicated on a Price Level. I had decided on a Stoploss Level at something like 7260 or so when I originally put the Hedges on but I have decided to over-ride that and let the Positions run. I may live to regret this !! It is a bit infuriating that the Shorts are probably bigger than is ideal but it often seems to play out this way - the Shorts hurt a disproportionate amount when the Market is rising but when the Markets fall and you want the Shorts, they don’t seem to help proportionately as much !! Sods Law and all that. The catch is that it is hard to know in advance how big to size the Shorts and I tend to take a ‘best guess’ approach which in this case has not really gone to plan. Having said that, at least I know next time to do them a bit smaller. Obviously as we mention in the Podcasts, Brexit is a total farce and it is unclear what is going to happen and although I still think it is unlikely, a messy ‘Crash out’ No Deal Brexit could happen and I would expect this to hit the Markets hard as the general mood moves to ‘Risk-off’. Throw in the increasing signs of Economic trouble in various Countries and it leads me to the conclusion that this strong bounce in the Markets has no real underlying sense behind it and I am of the view that things could change very quickly (it is really astonishing that we are not that far off the All Time Highs, particularly in the US, when you consider all the challenges that are mounting up). We are now something like 6 Weeks from the official Brexit Day (29th March) and I suspect that as we get nearer to the crunch point we will see Buyers holding off and Stocks are likely to come under pressure. At the moment the Pound has been falling and that might have helped the FTSE100 but I can easily see a situation where if the focus moves to a messy No Deal Brexit then the FTSE100 will fall along with the Pound. Conversely if a Deal does get done then the Pound could rally strongly and this might hurt the FTSE100 - so this leads me to thinking that it is worth living with my Hedges even though it is a bit uncomfortable at times !! The focus on Brexit Events will move to the 27th February when T May is due to put her Deal back to Parliament for the ‘Meaningful Vote’ (in theory she could bring it back earlier but I doubt that would happen as she seems to be deliberately ‘Running down the Clock‘ to try to pressure all people involved into making a decision). If that gets through this time, then we should be able to breathe a sigh of relief and I would expect the Pound to rally and perhaps Stocks will like it but that might be more in the FTSE250 and smaller Stocks which don’t seem to have rallied as hard as the FTSE100 has. If the T May Deal fails yet again on the 27th then I think we could have big problems and that might cause some jitters. A possible outcome is that the Cooper/Bowles Amendment comes into play and T May has to ask for an Extension to the A50 Leaving Date but there is absolutely no guarantee that the EU will grant such an Extension and it needs all 27 Countries to back such a move and it is not hard to imagine the odd awkward EU Member voting against such a request. It is likely that the EU will only grant an Extension if there is a reason which lines up with their desires - in other words for a Second Referendum (this is the EU dream because they love our Money) or a General Election or to complete a Deal that is already agreed - but without such good reasons it could easily be a big problem. Another thought is that the run up in Stocks lately seems to be implying that Market Participants are ‘pricing in’ a successful outcome to the Brexit ‘Negotiations’ and the Parliamentary Vote. On the basis of “It is better to travel than to arrive” and “Buy on rumour, sell on fact” it could be that if we do get a decent outcome, then the Markets will actually sell-off. That is yet another complication. So with all that in mind, my Strategy is as it has been for months and months and months - I am not doing much and just letting things play out. It is irritating as hell because I want to be able to get stuck into Stocks again and get researching some stuff to Buy etc. but until we have more clarity on the ‘Big Picture’ I am not happy to waste my time on pointless ‘work’. Blog Slate I had an unusual sudden burst of enthusiasm last night and this resulted in me adding a Link to the Podcast I did with Justin to the Website and I also updated the ‘Little Black Book’ with loads of Stock Ideas that Readers might find interesting and a route to further research. I was quite surprised how many entries had built up in my Notebook but I guess that is indicative of just how time flies and something that never ceases to flabbergast me !! I think it was on Thursday that I published the 3rd Part of those Blogs about ‘How to structure a Nation’s Economy’ (anyone else noticed how I tend to put Blogs out on a Thursday night? It is not intentional but things often seem to play out like this), and I think the Final Part is in a reasonable shape so with a little more work on it early in the coming Week I should be able to get it published soon. I was going to write another Section in it but I have decided that the subject concerned there will get its own Blog at a later date as I have now switched my attention to a new Blog idea about the exact process that is involved when we Buy and Sell a Stock and I have been working on some Microsoft Paint drawings to illustrate the process. This has not been at all easy and a few days ago I was worried that it might be ‘Mission Impossible’ but after a lot of work on the pictures last night I feel a lot happier about it and I now have 3 very good diagrams which I can probably use as the basis for a Blog and I will try to start writing this at the end of next Week. My thinking is that as I start to create the Blog with the words and stuff this will clarify my ideas and it may result in a few more diagrams but I have little view at the moment as to whether or not this is the case. We shall see. An upshot of learning how to produce some basic diagrams with MS Paint is that I have now resolved how I can actually create a different Blog that I have been going on about for years but I had never actually figured out how to create it in practical terms. This is one where I want to explain very simply how Jason (@Stealthsurf and www.tradingbases.co.uk) operates his ‘mechanical’ Trading Methods and I have explained and illustrated this many a time in the Pub with mates by throwing my arms around wildly in the air but been unsure about how to write a Blog on it. Anyway, now that I can use MS Paint it gets hugely easier and I can just draw a bunch of diagrams which will explain it. So hopefully I can get onto that one soon because it is a very useful concept for Readers to understand even if they are not ‘Traders’ as such themselves. From the Archives In the latest TPI Podcast I mention how Astrazeneca AZN received a Takeover Bid from Pfizer a few Years ago and how this was the Market giving Investors a very good steer on what the AZN Stock was potentially worth. Anyway, it is a useful framing tool that I use a lot myself and this Blog talks all about it: http://wheeliedealer.weebly.com/educational-blogs/listen-to-what-the-market-tells-you-on-takeovers-includes-iom-888-itq-ffy-goal-mks This is just one of billions of Blogs I have scribbled over the last 4+ Years and if you go to the ‘Blog Index List’ which sits on the WD2 Website, then you can see the full List of Blogs and the Educational ones now all have Links so you can find them dead easy. Anyway, let’s check them charts…… FTSE100 As always, the Charts I show are taken as ‘Screen Grabs’ from the excellent SharePad Software that I subscribe to and if you click on the images they should grow bigger so you can see the details (assuming I uploaded them correctly to the Website !!). It is always ‘Best Practice’ to start with the Big Picture and a long timeframe when ‘analysing’ Charts and below we have the FTSE100 going back to the Lows of 2009 and showing the Uptrend Channel which is marked by my Red Lines and my Red Arrow is pointing to the Bottom Line of the Channel and this must hold for the Uptrend to keep running. This means it must stay above 6500 or so. Earlier I was mentioning how incredible it is that Stocks are up near All Time Highs after a 10 Year Bull Market - this is clearly a Bull Run that is long in the tooth (it can keep going higher but we are now talking about the longest Bull Market in history and at some point we will have to face the music……)
These are my actual ‘Working’ Screens that I use for my Short Positions and as a result they are a bit ‘messy’. Anyway, I will try to point out the important bits. My Green Arrow is showing where the Candle from Friday broke-out over 7200 ish (this was marked by the Red Horizontal Line) and it Closed at 7261 on Friday and needs to rise over this Level obviously. If it keeps rising, then the Light Blue Wavy Line which is the 200 Day Moving Average comes into play at about 7300 and then above that we have some pretty strong Resistance from the Black Line which is where the ‘tail’ of my Green Arrow is at about 7500. Before that 7400 is a psychological ‘round number’ sort of Level which might be difficult.
The Red Arrow is pointing to a ‘Death Cross’ which we got between the Light Blue Wavy Line 200 Day Moving Average and the Darker Blue Wavy Line 50 Day Moving Average. This is still a concern and we need to see the 50 Day MA move back over the 200 Day MA to be very sure we are back on the Bull track - however it is a positive sign that the 50 Day MA has turned up a bit. The Blue Arrow is pointing to the Blue Horizontal Lines which mark where I opened my Short Positions - you can see why I am hurting !!
Next in the bottom window we have the RSI (Relative Strength Index) for the FTSE100 Daily and on a reading of RSI 66 this is getting high and it could easily turn down from here. RSI 70 is usually seen as ‘Overbought’ and we are clearly up near these levels. You can see that over the last couple of years we had some extremely high RSI Readings up near RSI 80 and it is worth noting what happened afterwards !!
Next up is the Weekly Candles for the FTSE100. My Black Arrow is pointing to a Big White Up Candle from last Week and this is Bullish. You can see where it smashed through 7200 where the Red Horizontal Line is.
Finally we have the FTSE100 Daily Candlesticks with the Bollinger Bands above and below and shown by the shaded pink bit. My Black Arrow is showing that the Price hit the Upper Band on Friday and then fell back. The Price can ‘hug’ the Band and go higher but quite often it turns down or goes sideways from here.
S&P500
I will only show the FTSE100 and S&P500 because of time constraints and these are the ones I have Short Positions on. If you follow me on Twitter you might see that I tend to Tweet late at night during the Week about Index Charts etc. and these usually cover many more Indexes with the key things that are happening. You can follow me via @WheelieDealer or on WD2 there is a Twitter Feed you can see anyway without you needing a Twitter Account yourself (I think there is one on the Homepage as well). Again this is my ‘Working’ Screen below so you will need to ignore much of the mess on it. My Black Arrow is pointing to a White Up Candle from Friday and note how it got above the 200 Day MA which is the Light Blue Wavy Line marked by my Red Arrow. Next look at the Blue Arrow which is showing the 50 Day MA Line and note this is sort of flat and not moving up yet. Note also that there was a ‘Death Cross’ between the 50 and 200 Day MAs back in December 2018 and it would be good for Bulls to see this reversed with the 50 Day MA moving above the 200 Day MA. My Big Blue Elliptical Splodge is showing a big Zone of Resistance and it is impressive how the Price has got through most of this - but we are nearing All Time Highs now and I suspect those will be difficult to get over.
In the bottom window below we have the RSI for the S&P500 Daily and on a Reading of RSI 64 it is high but can go higher. I would not say this is ‘Overbought’ but any more rises and we will soon be up at such Levels. Markets can easily turn down from RSI 64.
Below we have the Weekly Candlesticks for the S&P500. My Black Arrow (I have no idea why it is so massive !!) is showing the Big White Up Candle from Last Week and this looks Bullish. Note there is Resistance at 2800 and then just above at about 2820. We are then not far off the All Time High (ATH) at about 2940.
And lastly we have the S&P500 Daily Candles with the Bollinger Bands above and below. My Black Arrow is pointing to where we are up at the Top BB and on this evidence we might get a pullback or a move sideways.
OK, that’s it for this Weekend. I hope you all have a prosperous Week and if the Sun shines then get your Butt outdoors and make the most of it !! Cheers, WD.
Unusually there is a PS to this one - on the Podcast I mentioned how Clinigen CLIN had turned up from its 3 Year Uptrend Support Line - this is what I was on about: My Blue Arrow is pointing to where the Price is now and note how it pulled down to the Long Term Support Line (the Black Line) and then it turned up.
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