**HOT OFF THE PRESSES**
We just issued another TPI Podcast - this one ends a bit sharply because we had a tech hassle but we decided to issue it anyway as didn’t want to lose the discussion up to that point !! https://soundcloud.com/user-479955511/wheeliedealer-and-conkers3-talk-investing-returns-ytd-trading-updates-cake-stocks I better say it quietly because I don’t want to jinx things but it is fair to say that 2019 has started pretty well and Indexes are up a bit and thankfully my Portfolio is showing a gain despite getting kicked hard by the Patisserie Valerie CAKE collapse and there really seems to be a much better ‘mood’ to the Markets. The other positive thing that strikes me is that we are getting loads and loads of Trading Updates and Results in, especially the last couple of Weeks, and on the whole they are pretty good and I have noticed that a few Stocks that were troubled last Year are at least not getting any worse in their Trading and some are turning things around. So of course the obvious question is whether or not it is for real?
I am quite sceptical on it - there was a considerable Sell-off in 2018 especially right at the end and this has to an extent been a normal ‘Rebound’ after such a drop but I find it hard to be convinced that this is anything more than that. On the Technical Analysis side of things we have a lot of difficult Resistance above where we are now on most if not all Major Indexes and in this Week’s ‘Investors Chronicle’ Nicole Elliott in her ‘The Trader’ column on Page 25 was going on about a ‘Broadening Top’ formation or a ‘Megaphone’ and I will show this if I remember when I get to the Charts in a while. The argument is that this can be Bearish so it is something to be aware of.
On the Fundamentals we obviously have the ongoing Brexit pantomime but I do get the sense that the utterly worst-case outcome of a ‘Shock No Deal’ exit is so widely feared (rightly or wrongly) that Parliament and the Government will make sure they act to prevent it happening. However, my concern is that it is still a possibility and the danger is that we drop into ‘No Deal’ by accident simply by the sheer incompetence of the People we have foolishly let become our MPs. I have Short Positions on the FTSE100 and the S&P500 in order to Hedge my Long Portfolio and I am happy to keep these on but I have been considering reducing the FTSE100 Short a little as I feel the Risk of No Deal has reduced a bit. We will know more next Week when on Tuesday Parliament is due to be voting on some of the 15 Amendments to the EU Withdrawal Bill and which ones get considered depends on The Speaker who selects them. Also the Government should give us a date on which the next re-run of the ‘Meaningful Vote’ will take place and obviously that one is very important because after T May getting the biggest defeat ever for a Government, she will need the defeat this time to be hugely reduced. It might then take a third attempt against the pressure of time to get her Deal through and probably some tweaks will be needed - it is all pretty uncertain how it will play out. We can be more confident that a Second Referendum is not going to happen because last Week several MPs who were going to lodge an Amendment demanding another Referendum withdrew it as they simply don’t have the numbers of MPs willing to vote for it. It is possible that it comes up again if the mood in Parliament changes but I think the majority of MPs see it as an admission of huge failure on their part and of course it could prove hugely divisive and stir things up even more in the Country - that doesn’t seem at all wise. I note that the Labour Front Bench are also holding firm against another Referendum despite their Party Policy and without Labour backing it is hard to see how it can get anywhere. In addition, it looks like the other big uncertainty of another General Election is off the table because Corbyn got defeated when he tried via a ‘No Confidence’ Vote before and the Libdems are saying that they will not back him if he tries for a General Election again and this effectively kills any attempts via this route. It is also unlikely that the Tories will try for a General Election because their Central Office has apparently done some Polling and the results show that we would get another Hung Parliament but this time it is likely that Labour would form a Minority Government with backing from the SNP and the Libdems. If more certainty is established with regards to Brexit, almost irrespective of the actual outcome, then we could easily see the Pound rising and this might hurt the FTSE100 - so this favours me keeping my Shorts on. I suspect that if things were to go badly messy on the Brexit front (for example the Shock No Deal) then it is pretty likely that the Pound would drop but Stocks would also fall as Risk Assets would not be popular - so being Short on the FTSE100 might work both ways I reckon. Meanwhile over in the US the Government Shutdown is delayed for 3 Weeks which must be a positive but at the same time last Week we got news that another Trump associate has been charged with some sort of Criminal Act - it seems like the Mueller Investigation is getting closer and closer to the Orange One himself and it has to be possible that this becomes a huge issue later in the Year maybe. A bit like the Brexit nonsense it is hard to foresee how things will play out but Trump’s Approval Ratings keep dropping as he fumbles around in his bizarre haphazard manner and it does seem quite likely that he will be a ’One Term President’ - that might be very unpopular with the Markets because they liked how he was juicing things up with more Spending and cuts to Taxes and a dose of Deregulation etc. Obviously if he was to face Impeachment then that would probably upset the Markets as well. And then we can throw in Valuations - the Nasdaq has come off a lot from the Peak back in 2018 but there are still loads of Stocks on silly high Valuations and with the recent bounce the correction in the over-pricing has been reduced quite a lot. It seems likely that the Markets will drop again as these kinds of crazy Valuations tend not to persist for too long. Of course if there was a sudden amazing growth spurt then the Valuations would not be a problem but I simply can’t see that happening - especially as these huge Tech Monopolies are coming under more and more Government scrutiny all over the globe. So despite the improving mood and decent Trading Updates and the recovery in 2018 so far I am not convinced it will last. We shall see……. Last Week After all my talk about the Mood being better and Stocks rising and all that I have to lament that my Portfolio was down 1.9% last Week but that was really because I finally took the hit on CAKE and that was damage to the tune of 4.6% of my Portfolio so in fact the rest of my Portfolio was pretty impressive last Week. I reckon the good performances came from PETS being better than expected and also FEVR did well although it gave a lot of that back on Friday. My Shorts were mixed with the FTSE100 ones doing ok but the smaller S&P500 ones dragging. Funny old Week really….. Of course my Strategy is remaining the same for now. As I mentioned above I might reduce the FTSE100 Short a bit at some point but I am in no rush. I am not interested in Buying anything although now I have lost CAKE I do have a spare Slot - but with the drawback that normally when a new Slot is freed up I get some Cash from the Stock that was sold - in this case I have a Free Slot but without the Cash to buy something new with !! Mello Event I mentioned last Weekend I think that there was a Mello Event on the near horizon but I did not know the exact dates. Anyway, I have just looked at the Website and that is down for maintenance at the moment but @harry_southdown tells me it will be at The Clayton Hotel in Chiswick, West London, on 15th, 16th and 17th of May which is Wednesday to Friday. The Wednesday will be all about Funds. Blog Slate I issued the Final Part (it has links at the bottom to all the other Parts if you have not read them) of the ‘Moving into Cash’ Blogs last Week and I also issued a Blog on a Non-Finance Book, Spycatcher, which I found a pretty decent read - especially on the history of MI6 and the Cambridge Spy Ring which was very insightful. On Friday night I made good progress on a Blog Series I am bashing out that is about how a Nation can structure its Economy and this one has sort of evolved a bit and really is becoming a bit of a lesson in the basics of Macroeconomics - I am anticipating that I can get the first Part out this coming Week and it will probably morph into 3 Parts in total and I should be able to get them out in the usual kind of Weekly drip, drip, drip. If I cannot get one of these out, I have some other Blogs in pretty good shape that I should be able to issue so I am sure something will appear. Once these Economics ones are done I have an idea to produce a Blog (it might be a Series !!) about the actual mechanics of how a Trade is done as I think very few People understand this. I want to include loads of diagrams as I think this will make it much clearer and I will need to think this through a lot before I start writing it all. I could easily find that once I start working on it I realise that it is too difficult and it might not happen !! I have another Non-Fiction Book one to issue and that might come out later this Week if I find the time and I have just finished reading another Jack Reacher Book which was really good fun and typically a bit silly but I will probably write something about that when I am in the mood for it. We are also nearing the end of January so I will need to update the ‘Weekly Performance’ page soon as well - that will probably be next Week though. From the Basement…… I see the Psychological aspects of Investing as very important and something we all need to pay attention to as they can help a lot. The Link below is to a Series of Blogs I wrote some time ago that are very much on this subject and you can find the Links to the earlier Parts at the start of this one: http://wheeliedealer.weebly.com/educational-blogs/maybe-were-not-in-control-after-all-part-3-of-3 Onto the Charts then and let’s look for those Megaphones !! FTSE100 As always the Charts I show are taken from the excellent SharePad Software that I use and if you click on them they should grow bigger so you can see more detail. On the Chart below we have the Daily Candles and the Pink fuzzy bit around the Price Line is the Bollinger Bands - but I have widened out the Chart so you can ignore these Bands because I am merely using a Screen I had already set up to illustrate the ‘Megaphone’. My Blue Lines are pointing out the ‘Broadening Top’ or ‘Megaphone’ that Nicole Elliott was talking about. Obviously the most important Line here is the bottom of the Loudhailer which I have pointed at with my Blue Arrow - if the Price falls below this Line significantly and is unable to get back above it (note my choice of words there - just at the end of December the Price did drop out of the Line but this could be either a bad fit on the Line or simply that the Price is not as Bearish as the December break-down suggested), then there could be trouble on the way.
Something else Nicole mentioned was that the Long Term Uptrend was still intact at the moment - on the Chart below I am showing that with my Red Lines which form the Uptrend Channel since the 2009 Lows and this is similar to what I showed last Week I think. This means that it is important for the FTSE100 to stay above around 6400 or so - if that fails, then there could be more trouble to come.
The Chart below zooms in and it is quite similar to what I showed last Week and it is obviously just a progression of 5 Days. My Green Arrow is pointing to a Hammer shaped Candlestick from Friday but note that it is ‘Inverted’ and in this context it could mean that the move down of the previous 3 Days is weakening. It is not a great Signal though and clearly the inability to hold the High on Friday is not great - I think it was a reaction to the Pound rising in part.
It looks like 6800 is important Support now and if that fails early next Week then it seems likely we will go lower. Note also that on Friday it touched the Dark Blue Wavy Line which is the 50 Day Moving Average and then fell back so that Moving Average is acting as Resistance. It is not great that the Price has dropped below those Red Parallel Lines (the Black touching Arrows are pointing at these between 6850 and 7200) again and this is suggesting more weakness. There is however Support at 6700 and 6600 which helps if we do see more falls. This is my ‘Working’ Screen because I have some Short Positions on the FTSE100 and the Blue Lines pointed at with the Blue Arrow are where I put the Shorts on. My Red Arrow is pointing to where there was a ‘Death Cross’ between the 50 and 200 Day Moving Averages and at the moment both those Moving Average Lines are falling so there is not much sign of any attempt to turn up properly yet (look for the 50 Day MA to start sloping upwards).
In the bottom window on the Screen below we have the MACD (Moving Average Convergence Divergence) Indicator and where my Black Arrow is we are right on the verge of a Bearish MACD Crossover - this is shown in the Signal Lines format and in the Histogram Bars format. This is not the best Indicator but it does have an element of predictive power and suggests that the Price is most likely to fall in coming Days.
This one is not so easy to see (if you have access to a Charting Package / Website then you could set these Lines up yourself and get a better look), but where my Black Arrow is we are really close to a Bearish Crossover between the 13 and 21 Day EMA Lines (Exponential Moving Average). I find these are a great indicator and usually pretty predictive. If you look back at the Top Left then you should see a Red Arrow and this is pointing to where we had a Bearish Cross and then the Price fell for a long period. Just a few Days ago we had a Bullish Cross and it looks like that one might be quickly negated - that is unusual really and perhaps shows just how weak the FTSE100 is. We might of course narrowly dodge a Bearish Cross - we should know in the next couple of Days.
Now we have the Weekly Candles for the FTSE100. My Black Arrow is pointing at a Big Black Down Candle for last Week and this is clearly not pretty. Note also that it is back within the Downtrend Channel between the Green Lines - looks like its attempt to escape this Channel has failed.
Looking at those Charts I would say my Shorts are probably the right way to be positioned.
S&P500 We have the US Non-Farm Payroll Numbers on Friday (usually these are 1.30pm UK time) and they tend to affect things on Friday afternoon so that can add to the usual Friday silliness. I’m starting with the Weekly Candles simply because I had it set on this Screen Set-up when I did the FTSE100 one just a moment ago and this has some interesting aspects. My Black Arrow is pointing at a Hammer Candle from last Week and in the context of the run up of 5 Weeks of gains, this could be a signal that a turn down is coming. Note also that the Price has got up above that Green Line with the Green Arrow and I would expect this to be Resistance - so it might be that it overshot and is now going to turn down again. 2675 looks pretty important Resistance now and that is the High from the Week before Last. After that we have Resistance at about 2685 so that might be tough to get above.
Next we have ‘The Big Picture’ and all I want to focus your attention on here is the Blue Line with the Blue Arrow which marks the Long Term Uptrend Line from the 2009 Lows and as long as this stays intact, then Bulls should stay fairly happy. 2300 is really the important Level here - if that fails I think we should get worried.
The Screen below is my ‘Working’ Screen and therefore there are loads of Lines which are probably best ignored !! My Red Arrow is pointing at a Red Resistance Line and look how the Candle from Friday (pointed at with my Black Arrow) is nearly at that Red Line and Bulls need to see the Price up over that Line.
Note the Candle from Friday was a Small Doji thing and sort of implies that neither the Bulls nor the Bears had the power to force the Price in the way they wanted. It was also unable to hold the High on Friday which is not great. The important nearby Resistance now is about 2675 and the Price must get over this early next Week if we are to take out that Red Line. The Big Blue Ellipse is highlighting a Zone of Resistance between about 2675 to 2820 and that could be difficult to wade though. Note also the Bearish ‘Death Cross’ between the 50 and 200 Day MA Lines (the Blue Lines) and note how they are both falling still.
Now we have the Heiken Ashi Candlesticks - remember these are utterly different to the usual Japanese Candlesticks - and my Red Arrow is pointing to a nice White Bullish Candle and this suggests more gains.
Turns out I am actually using the next Screen as my ‘Working’ one and my Spreadbet Short is shown on this one. Anyway, my Red Arrow is pointing at a Bullish Cross between the 13 and 21 Day EMAs and this suggests more gains to come (ouch, I am short !!).
I need to finish this so the next Screen is the last one. On this one we have the Daily Candles with the Bollinger Bands shown by the Pink Zone around the Candles. My Black Arrow is pointing out that the Price is up near the Top Bollinger Band.
That’s it for this Week, Good Luck and all that and make sure you listen to the Podcast, Cheers, WD.
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