As always I am running behind tonight so I don’t expect this to be a hugely long Blog. I will cut to the chase and reiterate what I have been saying on Twitter for the last few Days that I am extremely concerned about the Markets and in particular the Technical Breakdown on the FTSE100 that I will come onto later. In addition to the very Bearish Technical Picture we have the Political Chaos around Brexit which seems to mean Uncertainty for a prolonged period, whatever outcome the Country eventually takes up. Then we have Economic Slowdown appearing in Europe, Japan, obviously the UK and even signs that the Boom in the US is running out of puff with disappointing Jobs Numbers on Friday the latest turn of the knife - and of course very pumped up markets after the longest Bull Run ever and things look very dodgy.
Regular Readers will know I have been cautious all Year and not really doing much apart from looking to Sell Positions a bit and put on Index Shorts and until the Technical Breakdown of the Sideways Range last Week I was prepared to be more open to the idea that the Markets could turn up again for the traditionally Strongest Month of December but it really looks like that is off the cards now - it could happen but the ‘Path of least Resistance’ is most definitely downwards.
As a result of this I have decided to take fairly drastic action with my Long Spreadbet Positions and I will be looking to pretty much halve my current Exposure. This helps me in 2 ways - firstly it means that if the Markets keep falling the damage is greatly reduced but also Closing Positions beefs up my Cash and means I am better able to handle the turmoil. I am in many ways a bit disappointed that I failed to lower my Exposure here earlier in the Year but as I mentioned before up until last Week there was the possibility of the Sideways Range breaking upwards - sadly this was not the case but I am fully of the view that I have let my Leverage get and remain too high for comfort and with hindsight I should have chopped it a bit anyway. Leverage is fine when times are good but a killer when Markets drop. Watch this space for more details on when I actually chop the Positions and I expect it will be tomorrow but I will be keeping all my normal Shares Positions and will be Hedging via Index Shorts to try to offset some damage if my expectations prove correct. I cannot forecast how far down the Markets are going to drop, but I am pretty sure we are in for some tough times going into 2019 and that could put a cloud over the Markets for a while so it is very much about battening down the hatches and playing Defensive for some time yet. Anyway, to hear more about my concerns have a listen to this Podcast that I recorded with @Conkers3 on the TwinPetesInvesting SoundCloud Channel - we also cover several other topics and if you like it then make sure you find time to listen to the other one we did a few Weeks ago because we covered many different topics around Investing in that one as well which I think newer Readers/Listeners will particularly find helpful: https://soundcloud.com/user-479955511/wheeliedealer-and-conkers3-discuss-the-stock-market-sell-off-taking-profits-mellolondon-more Last Week The pain continues with my Portfolio down 2.2% on the Week with Thursday doing the big damage when the Markets dropped down out of their Range. It’s of course very undesirable but from time to time we get difficult Markets and we just have to deal with them when they come along. Sadly it is not all Champagne Corks and High Fives every year. We might get some sort of effort to Rally later in December as per usual but I suspect if we do it will only be a bit of a rebound after most likely more falls. On this basis it is clear that 2018 is going to be a Bad Year for me - and I doubt I am alone. Blog Slate Last Week I published Part 2 of the ‘Control what you can Control and Moving into Cash’ Blogs and I have been working on the remaining 3 Parts when I can. I expect Part 3 will be issued this Week although there is a huge amount going on for me in my other Life and in particular the problems with my Mum persist and that could limit my time to get Blogs done - I will do what I can. Tomorrow I intend to take drastic action on my Spreadbets and this might become a Blog to explain what I have done or maybe I will just scribble it on the ‘Trades’ Page - as usual, when you visit the WD Websites I suggest you stop at the ‘Changes List’ on the Homepage first as that outlines what has been changed (the clue’s in the name !!). We are rapidly getting to the End of 2018 so I will be doing a ‘Scores on the Doors’ Blog in early January - that won’t be an easy one to write !! Trip in a Rented Tardis….. In keeping with the tone of the Markets at the moment, I have to bring out the infamous ‘Bear Markets’ Blog as I am sure many Readers will not have seen it before and existing Readers might appreciate a refresher on the points within it with regards to how I fight the Grizzlies off when times get tough: http://wheeliedealer.weebly.com/educational-blogs/taming-the-bear-how-i-handle-nasty-markets And here’s another Link to the Blogs I wrote about how I use Spreadbets to Leverage up my Normal Shares - in light of what I have been saying about reducing my Exposure this might be an interesting read: http://wheeliedealer.weebly.com/educational-blogs/how-to-use-leverage-safely-and-successfully-spreadbetting-and-cfds-part-7-of-7 There is a list of Links at the bottom which get you to the earlier 6 Parts. Now the Index Charts then…… FTSE100 For time reasons and simplicity (remember, keeping things simple is extremely important with Charting stuff and I am convinced a big error People make is getting too complex and looking at too many Indicators and Signals which just creates Noise and confuses them), I might not show all that many Charts but to be honest it only really needs one Chart to demonstrate why the Markets look ropey on the Technical Analysis basis. As always these days my Charts are taken from the excellent SharePad Software that I subscribe to and if you click on them they should get larger on your Screen so you might even be able to see something. The Chart below is the nub of the problem. Regular Readers will largely recognise this sort of Chart but please note that the Bottom Line of the Sideways Range from 6860 to 7200 I have changed in colour to Red this time just to differentiate it from other Lines on this Chart. This is my actual ‘working’ Chart for managing my Short Positions so I am sticking to my usual format of showing my Spreadbet Positions in Blue and you can see where I opened these where the Blue Arrow is. The explanatory text up above is near where my Stoploss is placed at 7225 and I will explain the logic of this in a mo. The Stoploss Level is that sort of Pinky Line. The Key here is that Sideways Range. I have mentioned for Weeks that if it was to Break to the Upside above 7200 then that would be Bullish and suggest that we have not much to worry about but a Break to the Downside is the nasty scenario and suggests we could be going down to Support at 6400/6500 or so at least. I cannot predict how far it will fall but I won’t be at all surprised if we see 6000. It is important to realise that this Sideways Range has turned out to be a Bearish ‘Ledge’ - this means that the FTSE100 fell, then it consolidated Sideways for a bit while the move down was ‘digested’ and then it has broken down again. It is in effect the opposite of a Bull Flag kind of move where the Market jumps up and then goes sideways for a bit before breaking up higher again (it‘s also the ‘Rising Staircase‘ kind of pattern in reverse). My Green Arrow is pointing to a possible ‘Bullish Harami’ 2 Day Candlestick pattern which was formed with the Big Drop on Thursday and then the move up on Friday. However, although this could be predicting a move up for a bit (highly unlikely because the US Markets got spanked on Friday) it is probable that once the FTSE100 moves up to the Bottom of that Sideways Range again at 6860 ish, it then does a Rebound back down and this would be a ‘Confirmation’ of the Bearish Breakout to the Downside. If it can get above the Bottom of that Range, then I suspect that it would struggle to get far within the Range and it would face Resistance back at the Top of the Range at 7200 and probably drop down off that. This is why my Stoploss is at 7225 - if the FTSE100 Breaks over 7200 on an End of Day basis then it is likely that it can rise more - we shall see but I doubt that will happen. My intention is to lower my Stoploss if the Markets do go my way and fall so my Shorts move into Profit but I want to keep these Shorts for a while to give me some decent Hedge. The other thing of note is where my Red Arrow is which marks a ‘Death Cross’ between the 50 and 200 Day Moving Averages - this is not great and although it can be unreliable, it often means Months of weak Markets ahead.
Next here is the Weekly Candles for the FTSE100 (remember, the Weekly Candles dominate over Daily Candles because they are longer term) and my Arrow is pointing to where Last Week we got a Big Down Candle although it does have some ‘Tails’ - however, this is not a Reversal Candle and it looks like it is suggesting more Downwards Weeks.
You can see how it Broke-down through the Range as well.
FTSE250
Here is something to watch on the FTSE250. My Red Line with the Red Arrow is a Long Term Support Line going back to the 2009 Lows and where my Black Arrow is it looks like the Support is Breaking and this suggests more Bearishness - it might not happen and could be an Overshoot but we will have more clarity in the next few Days I suspect.
This next Chart is interesting - I actually had to check that I had put the right one in for the FTSE100 as they are so similar. This is the FTSE250 Weekly Candles and I think we know what this means……
DAX (German)
Here’s another Weekly Chart with a similar picture - my Black Arrow showing a particularly nasty Black Down Candlestick and a failure of the Sideways Range. A coordinated breakdown of Charts like this on several Global Indexes is clearly not a good thing.
Nikkei 225
Here’s another one to watch. This looks like ‘Batman Ears’ to me and this could be another Bearish Signal suggesting that the Japanese Market is going to get hit as well. The Arrows are pointing at the Ears - it’s like a Cartoonish Superhero ‘Double Top’ pattern…….
S&P500
Finally we have the S&P500 (the DOW is similar in parts and the Nasdaq Comp is very close to this) Weekly Candles. Note the Range between my Green Lines and this is very important - a Breakdown below the Bottom Green Line would be Bearish and with a Big Black Down ’Bearish Engulfing’ Candle from Last Week where my Blue Arrow is, it seems pretty likely that we will see a Breakdown. Support where my Red Arrow is at 2600 is important in the very Short Term and if Support where my Black Arrow is at 2530 fails then we really are in serious do-do. OK, I will leave it there - I think I have scared everyone enough for now !! Be careful out there and Good Luck for the coming Week, Don’t forget to listen to the Podcast, Cheers, WD. (PS, by the way, my New Car is utterly mental !! I guess with 50% more Power and 30% less weight than my last Car it was always going to be fairly perky. Having said that, 47mpg on Cruise Control on the M4 is pretty impressive although I was keeping off the gas).
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