This is my first Market Blog for 2019 so I better wish all Readers a ‘Happy New Year’ and all that. I must say it is a very welcome change as 2018 was a pretty mucky Year for me in so many ways and I am well happy to see the back of it. In addition, I am hoping that things will now be getting ‘back to normal’ after the Christmas Period because as much as I love a break from the Markets and stuff, it actually starts to irritate me that things are just so ‘on hold’ when we get to this time of Year. It’s all the silly things that get me like how TV is just so appalling (yes, it really is worse than ever !!) and how the Houses of Parliament clear off for Weeks and Weeks so the Political News is all pretty non-existent which hasn’t helped with the Brexit fiasco and even the Supermarkets and stuff go a bit weird and you find their Shelves are poorly stocked often and they start changing the layouts back after redoing them to expand Xmas ranges and of course now you can’t find anything you want !!
And of course on the Markets things always go very strange over the Year End and we have low volumes and really daft moves and it is not really much fun I find and of course there is not much News coming out of Companies etc. I hugely welcome things being ’back to normal’……
I know many Readers (maybe I should have typed ’Listeners’ !!) will be well happy to see @Conkers3 and myself have recorded another TPI Podcast and you can find it here:
This is a Link to the Twin Petes Investing SoundCloud Account and you want the Podcast at the top which is the latest one. If you haven’t listened to the others we have recorded then you might enjoy them because we cover a lot of topics and it is not only stuff that needs to be ’timely’, if you see what I mean (something to note is that if you cannot hear one of our Voices then it is probably because of the Stereo effect that we have on them - so you might have a Speaker not working or your Balance might be wrong).
In the Podcast I talk about my Returns for 2018 on my Portfolios which were overall very disappointing and I will be covering these in detail in the ’Scores on the Doors 2018’ Blog which I have just about half written and I intend to issue that later this Week if I can get it finished off suitably. Here is my ’Scores on the Doors’ for 2017 and I will follow the same Breakdown so this gives you an idea of what you can expect to see (but with much worse Numbers !!!):
I hinted at this in the Podcast but I just want to cover again my thoughts at the moment on what I can and should do differently in 2019 and going forwards. There are 2 ideas that are really burning into my Brain which are:
Anyway, those are the thoughts I am having and in truth I have been thinking this way for a long time now and I am mulling it over. I have just finished reading ‘The Art of Execution’ by Lee Freeman-Shor which you can find in ‘Wheelie’s Bookshop’ and I intend to do a Blog on it in coming Weeks/Months but I have to say that I was hoping that this Book would give me more insight on my thinking around this fundamental change of approach but to be honest it hasn’t really helped me - although in fairness it certainly has made me think about things.
However, there is a big ‘BUT’ in this. My existing approach has served me well over many Years and for this simple reason I am very careful about doing big fundamental changes to how I go about things. This means that for the time being I will keep these two Ideas firmly in the WheelieBrain and consider how and if they would help - and I will see how things play out sticking to how I currently do things. A clear trigger to adopt these changes would be if 2019 goes badly for me and if it is clearly down to the kind of problems that adopting the two new Ideas would likely solve. At the moment I am seeing much of my 2018 performance as a blip and I am working on that assumption. One thing that hit me hard in 2018 was a fairly high exposure to Retail Stocks which were clearly an area that got hit very hard in 2018 - obviously this was unhelpful but it does not mean that I should do a radical change to my approach in itself. We shall see.
Another impact resulted from the change to Spreadbetting Regulations via the ESMA Rules - this meant a huge increase in the amount of Cash that gets tied up as Margin Deposit and I was not ready for this change with insufficient Cash in my igIndex Account. As a result, I didn’t Short as much as I should have done and I did well on a FTSE250 Short but it could have been so so much better if I had the size of Position I now have on my Shorts. Typical of the Regulators to actually increase my Risk !!
Oh, and another thing that hurt me was that I had let my Spreadbet Long Exposure get too high - I have already addressed this by chopping my Long Exposure in half and it is now at much more manageable levels - this is something I must be much more disciplined about in the future and some thoughts I am having are to keep my Long Spreadbet Exposure via individual Stocks at the much lower level I now have and to use Index Trades with strict Stoplosses to increase this Long Exposure (or to go Short) as appropriate. No doubt I will write more about this (and bleat on about it on the Podcasts) in the coming Weeks/Months.
As an extremely welcome change after the recent down Weeks at the end of 2018, my Portfolio was up 0.25% on the very short Week but of course much of this was due to a huge bounce on Friday but I suffered the drag of my Short Positions (I have Shorts on both the FTSE100 and the S&P500 - see my ‘Trades’ page for more details) so I didn’t get the gains that Long-only Investors would have got. However, I am very happy to have my Shorts on as Hedges to lower the effective Long Exposure of my Portfolio as with all the Brexit silliness and with the US Indexes looking very ugly in the Big Picture, I expect much more Downside in all Markets is the most likely scenario in coming Weeks/Months. I will dig into some Charts in a bit to see how things are shaping up as we head into 2019 properly.
Just to clarify, as for pretty much all of 2018, my Strategy remains the same of mostly doing not a lot. I am in no mood to Buy anything and my focus is on looking to Sell down existing Positions if something runs up too high (not much of that going on although I have done really well on AVAP, TEP, AXS lately - all 3 of which I want to keep) and I am keeping on top of my Hedging and might even add a little more Short on the S&P500. I just don’t see this as a time to be ‘Brave’ or in other words, ‘Reckless’.
Insights from a Mate on the Car Industry
This bit has nothing to do with anything really but I just fancied lobbing it in because I thought it was interesting and I know many Readers are Car Nuts a bit like myself but it is also a good insight from a Business point of view.
A few days after Xmas I met up with a few old ‘School Mates’ from Swindon and we met in Avebury which is the famous Stone Circle place. I say ‘School Mates’ but in truth they were sort of my age at School but I knew them more as a result of my first Job when I worked as a kid for Bejam Frozen Food Centres which evolved into Iceland (and where I worked for something like 7 Years and got to the position of Store Manager before realising it was extremely hard work for not a great reward and I left to go selling Motorbikes - but of course that is yet another diversion to what I am supposed to be writing here !!).
Anyway, one of the guys I actually know from a Motorbike Club that I used to go to on a Tuesday night and meet at a Pub in Wootton Bassett (the place where they did all those Funeral Processions for our fallen Troops from Afghanistan and Iraq etc.) and he used to be a Plumber but 25 Years ago he stopped doing that and for all that time has worked on the Production Line which now builds the Minis in Swindon (in fact, I didn’t even realise they were building the Minis there). Anyway, I asked him what was the biggest change in the factory (eons ago it was called ’Pressed Steel Fisher I think) and what had been done to improve the Quality of the Cars that are made these days from back when they were producing some pretty crappy Cars at the time when British Leyland had just ended (thank goodness !!) and I guess he started when they were called Rover and he worked on Cars like the old Honda collaboration things like the Rover 400s, 200s and later the Rover 75 etc.
His answer was really interesting. Back when they built those old Cars he and his co-workers used to do Steel and Aluminium welding and stuff and this meant that there was huge variation in the quality of the welds and of course this hit’s the ‘Gaps’ and the seams on the body of the Cars and all that. He said that what changed things was how Robots and Computers now do all the work - a Robot can weld a particular bit of a Car and it can do thousands and thousands and they are all precisely the same - that is something no bunch of Humans can achieve and even one individual Human could not ensure such consistency of Quality. Here we are just talking about the Welds but you can apply exactly the same principle to building of every bit of a Car - so this means that not only has Robotisation resulted in increased efficiency and speed of making the Cars but it has also hugely boosted the Quality and the Reliability of the End-Products.
This has been taken to another Level as well - my Mate told me that now his Job is merely to load the Robots - he just takes bits of an Assembly and puts then into a Robot in a particular way and then the Robot just gets on with making the part. My Mate works on Doors and they just make loads and loads and loads of Door Assemblies every day which then get moved to another part of the Factory to be stuck on the Minis. He said the work is pretty tedious but after so many Years he is more in retirement mode and is winding down so he is not too bothered about it and seems to be able to ‘zone out’ and just work like a Robot himself !!
This time of Year it is always good to be thinking about your Approach for the coming Year and to be setting out Rules to apply and all that. This Blog which I wrote many Years ago now, should help you in this task:
And earlier in the Week I put this Blog out on Twitter but of course many Readers might have missed this - but it is highly relevant this time of Year and we even allude to the subject in that Podcast which I mentioned above:
As I mentioned I made good progress on the ‘Scores on the Doors 2018’ Blog and I am going to focus on getting this done so that will be the next thing that I publish and hopefully I can get this done over the Week but I have a lot on. On top of that I am aware that I have a Blog to finalise in that ‘Moving into Cash’ Series and it is pretty much written but needs tweaking. I’ve also got the ones about how a Country’s Economy can be organised in sort of a 60% completed state and I forced myself to learn how to use Microsoft ‘Paint’ to enable me to create some simple diagrams (I used to use Powerpoint back in my working days and became quite a whizz at that but I don’t have such tools these days and I find that Paint is totally different and not at all intuitive - it was a nightmare but I understand it a lot better now).
And I have a few ‘Non-finance’ Book Reviews to work on which include ‘American Sniper’ and I watched the DVD on that last night and quite enjoyed it although I think the Book is hugely superior and there were lots of bits in the Film that most watchers probably wouldn’t understand and you need the insights from the Book to really figure out what is going on.
And of course I then have a gazillion Blog Ideas to work on so I should be able to keep the flow coming !!
Better look at them Charts then…….
Well, after I have troffed a Sainsburys Vegetable Biryani anyway……Yum
That Biryani tasted remarkably like a Fish Pie - I must have grabbed the wrong ‘Ping Meal’ out of the Fridge….
As always the Charts I show are from the excellent SharePad Software stuff I subscribe to and if you click on the pics they should grow larger on your Screen so you can see more details.
I want to look thoroughly at the S&P500 because I have a Short Position on it and I want to be very up to speed on what is going on and more importantly, what Technical Events and Levels need to change in order for this to become something to go Bullish on or to get even more Bearish etc. In that vein, here is the Big Picture first.
Apologies for the ‘messiness’ on this Chart (and on others I will show you for that matter !!) but these are my ‘Working’ Screens and I have put in lots of Text Boxes and other Lines and stuff so please just focus on what I am pointing out in this text. On the S&P500 Chart below we have a very clear Uptrend Line which goes back to the 2009 Lows and this is marked in Blue with my Blue Arrow. As long as the Price stays above this Line things are reasonably positive on a Long Term view.
I am throwing in a quick distraction here as I wanted to look at the Nasdaq Composite on the same Long Term timeframe going back to 2009. In this case my Red Line marked by the Red Arrow is the Long Term Support and the Blue Arrow is pointing to where we are roughly at the moment - this says to me that the Nasdaq Comp could continue to fall quite a lot and still be within the Longer Term Uptrend - that would probably hit the S&P500 if the Nasdaq falls more and that Tech Index is pretty over-valued in my opinion.
Now another bonus which is the DOW but you will need to interpret this yourself (hey, I have given you the Uptrend Line !!!) - this is similar to the Nasdaq and could drop more and still be within the bigger Uptrend.
Back on the S&P500, this next Chart has the Daily Candlesticks going back around 5 Months and what I am really interested in here are the 2 Wiggly Lines - the Red 21 Day EMA (Exponential Moving Average) and the ‘faster’ Black 13 Day EMA. Look at the top of the Screen where we have the Black Arrow and this is pointing to where these Lines did a Bearish Crossover and what Bulls now need to see is a Bullish Crossover which is clearly the opposite. At the moment this Indicator is Bearish and it looks some way off changing to Bullish despite the huge jump up on Friday. I find these 13/21 Day EMAs one of the best Signal things there is.
Next my Green Arrow is pointing to the Big White Up Candle from Friday and this is good in as much as how it got above Resistance from the Candles of previous Days but look how it is now up at that 21 Day EMA Line and if you look back you can see that it has struggled lately to get much above this Line. But more vitally, look at my huge Rectangle which is capturing a Zone of Resistance which runs from about 2600 up to 2850 and I suspect this will be very difficult to wade through.
The Blue Line near my Text Box is where I opened my recent Short Position and the Purple Line up above at 2700 is where my Stoploss is - I want a wide Stop so that the Price has room to wiggle without Triggering my Stop because I want my Hedges to be in place for the time being as I see potential for trouble in coming Weeks and Months. To be really sure the Bulls are back in Town, I would want to see the Price up over 2850 really but note my 2700 Stop is up around where the Black Downtrend Line is (a move over this Line would be a promising sign).
To the downside, 2346 is now Crucial Support which must hold.
Here’s another view of the S&P500 Daily with more of a take on the Support and Resistance. Sorry about the mess again but in this case please look at the Green Arrow which is pointing to the Green Line which was the Bottom Line of a fairly flat sloping Uptrend Channel which held for most of 2018 but the Price broke-down through it recently. Anyway, the point is that ‘Former Support becomes Resistance’ and vice-versa so the Support that the Green Line previously gave is most likely to be Resistance now which is another way of saying that 2600 to 2650 could be difficult for the Price to get up above.
The other thing to note on this Chart is where my Black Arrow is - this is pointing to a ‘Death Cross’ between the Dark Blue Line which is the 50 Day Moving Average and the Lighter Blue Line which is the 200 Day Moving Average - these are not the most reliable for Signals but they always occur before a huge Bear Market !!!!
On my next Screen, please ignore the upper Window and focus on the bottom Window. Here my Black Arrows are pointing to a Bullish MACD Cross (Moving Average Convergence Divergence) in both the Histogram ‘Hump’ format and the Signal Lines format. However, I find this is only a very short term signal and is not overly useful. On the strength of this evidence, I would expect a bit more upside in the very Short Term but seeing as Fridays are nearly always weird and the move on this Friday was pretty extraordinary, I would not be surprised to see a Pullback on Monday or very soon after……
In the bottom window on the Screen below we have the RSI (Relative Strength Index) for the S&P500 Daily. My Black Arrow is at about RSI 40 and this is a pretty low level so it can rise from here but note how the RSI recently peaked out up to around RSI 55 which is where my Blue Arrows are - so that could cap any moves upwards.
In the upper window we have the Daily Heiken Ashi Candles but to be honest they are not clear at the moment.
Next we have the Weekly Candles - my Black Arrow is showing an Up Candle last Week and this built on the Up Candle from the Week before. This suggests more upside but note the constraints with Resistance up above as I have discussed on earlier Charts.
Remember this was a very short Week as well and the big move on Friday was perhaps typical of a short sharp rally within a bigger Downmove which often happens when you get a lot of Short Positions being closed in a panic which creates an element of ‘false’ buying (to Close a Short you in effect ‘Buy‘ it back).
Next we have the Daily Candles for the S&P500 with the Bollinger Bands above and below with the bit in the middle shaded Pink. My Black Arrow is pointing out how we are near the Upper BB which is at about 2566 and this could cap any move up now.
I don’t want to spend ages on this now but I will chuck in a few bits regarding the FTSE100 which hit me.
First off here is a Chart with Daily Candles for the FTSE100 and the Bollinger Bands above and below. Note my Arrow showing we are at the Upper Band so it could struggle from here. Note also my Diamond from recently which broke to the downside and might be a problematic Zone of Resistance now anyway.
I guess some good news on the next Chart which is a Big Picture on the FTSE100 with my Red Line and Red Arrow marking an Uptrend Support Line. At the moment the Price is above this and as long as we stay above this line then there is hope for Bulls. This means the Price must stay above about 6500 - so we are near a crucial level now.
Sorry about the mess !!
Another Chart with a lot of stuff on it. In this case I have zoomed in on the Daily Candles for the FTSE100 and first off please look at my Green Arrow which is pointing to the Up Candle from Friday. Look how this is now up near the Bottom Red Horizontal Line which was the Bottom of the Range between my Black Arrows which ran from about 6850 to 7200 and remember that ‘Previous Support becomes Resistance’ so the chances are that 6850 will be very difficult to get up above and after that the Range up to 7200 will be difficult as well.
My Red Arrow is pointing to a Bearish Death Cross between the 50 and 200 Day Moving Averages and this is something that could be a problem.
My Blue Arrow is pointing to the Blue Lines where my Shorts were opened and my Stoploss is the Purple Line up above the Top of the Range at about 7200.
Next my fave 13/21 Day EMAs and my Red Arrow shows the Bearish Cross and we are yet to have a Bullish Cross which is what we need to really start feeling better about the FTSE100.
With all the Brexit silliness and the ‘Meaningless Vote’ likely on something like the 14th of January, it is hard to see how UK Stocks can really make much headway.
OK, that’s it for this weekend. Don’t forget to listen to the Podcast - the feedback we have had so far has been superb so Listeners are clearly liking the format and the stuff we are chatting about on them.
Stocks & Markets WheelieBlogs
These tend to be more Markets and Stocks related and timely - the Blog Page on the Main WheelieDealer Website has the 'Educational' stuff (well that's the theory anyway !!).