No, I’m not talking about the performance of my Portfolio last week, but this was how Kier Starmer (Labour party so-called Leader) characterized the mess that our current government is creating. He isn’t far wrong !!
The latest GDP figures (looks like they are for August so the situation in September is likely to be pretty scary) shows GDP growth of 2.1% and this was a fair bit behind some expectations of 4%+. After a strong bounce-back after Lockdown was eased, it is clear that growth is slowing and I think the most likely scenario is that growth continues to contract as we get into the ‘Second Wave’ (that’s not waving, it’s drowning !!), and the government policies destroy any remaining flickers of economic life. With such a background it is difficult to get bullish on Stocks although the Charts are telling me that the US wants to go higher, even with the Presidential Election not far away (and the potential for mess that creates). I will look at how the Charts stand later in this blog but just on fundamentals the outlook for the UK is pretty rough and that is without the Brexit situation as well. On the subject of Brexit, it strikes me that a deal will be cobbled together and a lot of the noise we have been hearing is the usual idiot politicians (on both sides !!!) playing the macho bully boys. Pathetic. I hope you like Fudge.
On this basis, I am still being cautious although I closed the S&P500 Short I had for a small Loss (see my ‘Trades’ page for more details) and therefore my Hedging has been reduced a bit. If I see the relevant signals on the Charts then I will be closing all or part of the Short Position I have on the FTSE100 as well. It is unclear as I type if that situation will arise, but if it does, it is likely to happen in the coming week. As ever I will be more driven by what the Charts are telling me rather than the Fundamentals – although the latter look well smelly.
I don’t have much spare cash and I have no ‘Slots’ to buy any new Stocks and, if anything, I am more likely to topup on stuff I already have. I am in no rush because of the backdrop and I am about 65% Long now (Hedging around 35%). For more discussion around my thoughts and the view of Peter @Conkers3, as well as a chat about loads of Stocks and some educational bits, then please have a listen to our latest Podcast TPI 33 which you can find on all sorts of Platforms such as Apple, Spotify, Overcast, Audioboom etc. If you go to the ‘Conkers Corner’ channel you will find it there. You can also hear it on Soundcloud via this link: https://soundcloud.com/user-479955511/conkers3-wheeliedealer-33-risks-of-herding-cine-boo-dddd-itm-lxi-sre-inl-ai-av-aaz If you haven’t heard them before, you might find the back archive of Podcasts worth listening to. To a large extent the material won’t date much. Last Week Well, the Market Gods are definitely looking after me in recent weeks and last week they added 1.3% to my Portfolio which is very pleasant and brings it to being up 2.2% Year to Date from 1st January 2020. It is so nice to be back into the money but unfortunately, I can’t say the same about my Income Portfolio which is now down 10.2% YTD. I’m certainly not panicking and it will be interesting to see how this Portfolio looks on the 31st December 2020 and that is of course the real test. If we have some strength in the winter period as we usually do, then I would expect some of this drawdown to be recovered and there might also be a few more Dividend Payments to come, although of course a few of the Stocks which make up my Income Portfolio had their Dividends cut or axed. You can see details on what I hold in my Income Portfolio on the ‘Portfolios’ page on the main Website, WD1. There is a little bit of cash in it and I might buy something quite soon – although it is quite probable that I just buy more of something I already have, like Glaxosmithkline GSK or Telecom Plus TEP etc. I must say it is such a weird situation to have such rampant economic destruction all around us and yet to actually have recovered all of the paper losses to my Portfolio from back in March/April. I almost feel a bit guilty with so many people truly suffering immense worry and misery, and it is so important to realise how lucky I am when compared to a huge part of the population. Goodness knows how the next few months will play out but it would be really sweet if I can add a few more % and come out of 2020 in even stronger financial shape than when I entered it. Who knows? But I am pretty happy with the Stocks I hold and with my Hedging strategy pretty much working effectively, I am really prepared for whatever the Markets chuck my way. Blockchain Website I got sent an email from Jesus Cedeno who runs a website to do with Cryptocurrency and all that. Anyway, clearly anyone thinking of putting money into such things needs to be extremely careful and it is not something I would do myself. Having said that, I know many people are fascinated by all the Blockchain stuff etc., and you may find this link educational and useful, and Jesus refers to as ‘The Ultimate Beginner's Guide to Blockchain’. I have no commercial relationship with the author or anything: https://www.cryptocoinsociety.com/what-is-blockchain/ Blog Slate I got a bit productive on recent nights and I have managed to write about 90% of an article which I will probably offer to a Magazine to publish first and then it should appear later as a blog to keep my Archive complete. It will be free to read in the Magazine and I will flag up if and when it gets published so WD Readers can benefit from it. That is probably a few weeks away and depends to an extent on publishing deadlines; and the Magazine people might not like it anyway, in which case it will just become a blog straightaway. And then last night I got carried away and wrote about 50% of another blog which is related to one I published a few weeks ago around the importance of getting focused and reducing your ‘Opportunity set’ – hopefully that one will be out later in the coming week on the ‘Educational Blogs’ page on WD1. If I am on top of the time and my memories (unlikely at my age !!) then it was a few days ago that I updated the ‘Monthly Performance’ page with the details for September and I think I updated the ‘Little Black Book’ on WD2 which has lots of ideas in it that need more proper research. After those blogs are finished I am a free agent, but I am sure something else will grab my attention and get me typing. As we get into winter I have no doubt I will have more time and I would like to use some of that to get well ahead of the game and build up a nice backlog of blogs in draft form so it is easy for me to keep the flow coming. From a Galaxy far, far, away After 6 years of doing the WD stuff, the Archive of blogs I have written has got pretty chunky and of course keeps growing week by week as more material is published. To get the full load you can nip over to the ‘Blog Index List’ on WD2 and they are all listed there and the ‘Educational’ ones all have links so you can locate them dead simple. Anyway, from that list I bring you the blog below this week which I don’t even remember writing and it seems quite a biography on what I have been up to in recent decades. It might bore you senseless, but then again it might be a bit interesting !! https://wheeliedealer.weebly.com/educational-blogs/the-appeal-of-long-term-investing Enough already, let’s do the Charts……. S&P500 As is always the case, the Charts I show are taken from the top notch SharePad software that I use and if you click on the images then they should get a bit larger. To close them there should be a Blue Cross in the top right-hand corner. If you fancy using SharePad yourself (or the more advanced ShareScope which is more of a dedicated Technical Analysis platform) then there are loads of adverts dotted around my websites where you can sign up and get a month’s data for free, and I also get a small bonus from the company for introducing you. Look at it as making sure Wheelie’s Beer Fund is well and truly full up to the brim. Thank you. First off we have the Daily Candlesticks for the S&P500 but my focus here is on the 13 and 21 Day EMA Lines (Exponential Moving Average), with the Black wiggly line being the 13 Day and the Red wavy Line being the 21 Day EMA. My Red Arrow is pointing to where we got a ‘Bull Cross’ where the ‘faster’ 13 Day crossed over the 21 Day from underneath. This is a great signal and implies weeks of gains ahead. This was a major factor in me closing the Short Position I had running. I also sensed that the US Markets (particularly the Nasdaq Tech Index which has been super-bullish all year) wanted to turn up again and the Charts backed up this feeling. I have learnt the hard and expensive way, that fighting the Markets when they are bullish and you have a Short Hedge on, is not a good idea.
On my next Chart we have the Weekly Candlesticks for the S&P500 and my Blue Arrow is pointing to a big White Up Candle from last week and this looks bullish – particularly because it seems to have turned up from the sort of Hammer-shaped Candle from 3 weeks ago that my Black Arrow is pointing it.
Up above we have my Green Line at the All Time High (ATH) which is at about 3588 (but we might as well call it 3600). If the S&P500 can Close cleanly over this ATH, then it should go higher.
My next Chart in the bottom window has the RSI for the S&P500 Daily (Relative Strength Index) and on a Reading of RSI 60 where my Black Arrow is, this is not all that high and usually a level of RSI 70 and above is seen as ‘Overbought’. This implies more upside.
My next Chart has the Daily Candles for the S&P500 and the Pink Zone is marking the Upper and Lower Bollinger Bands (these are calculated using ‘Standard Deviations’ which are some sort of mathematical trickery, but you don’t need to know how to work it out because the computers do the hard work for you !!) and my Blue Arrow is pointing to a small White Up Candle from Friday which in itself looks moderately bullish, but note it is up at the top Bollinger Band so it may need to go sideways a bit or ease back maybe.
Just below is the Red Bollinger Midpoint Line (pointed at with my Red Arrow) and this could be support if it does ease back.
Dow Jones Industrials Index
I won’t show the Nasdaq because it is pretty much the same as the S&P500, but I did notice something on the DOW to be aware of. My Chart below has the Daily Candles and the EMAs and my Blue Arrow is pointing to a Bull Cross between the 13 and 21 Day EMAs which suggests more upside. However, my Red Ellipse is capturing a Doji Candle from Friday and this looks a bit like a ‘Spinning Top’ and it is quite likely that this is a Turning Point from which the DOW eases back. I don’t think it is anything to panic about and a small pullback would get some ‘heat’ out so that ultimately the DOW can keep pushing higher. My words in the above paragraph show how important it is to understand the concept of different timescales and how you can be a bit bearish in the very short term (a few days) and yet bullish on a bigger timeframe (like weeks). Train your brain to think this way.
My Chart below supports what I just said above – the Red Arrow is pointing to the Doji Candle from Friday and note how it is up at the top Bollinger Band which would be a natural place for the DOW to ease back from.
Brent Oil Composite
I always look at what Oil is up to because it has a big bearing on the FTSE100 and on the DOW etc. My Chart below has the Daily Candles for Brent and my Black Arrow is pointing to a Black Down Candle from Friday and when you combine it with the big White Up Candle from Thursday, this looks like a Bearish Pattern along the lines of ‘Dark Cloud Cover’. To the upside, there is Resistance at the High of Friday at about $43.56 and then from the ‘Long Tails Doji’ Candle where my Green Ellipse is at $44.31. To the downside, there was some trickery here which certainly caught me out, which is how the Brent Price broke below my Red Line (marked by my Red Arrow) which I thought was pretty bearish; but in the event it turned up and rallied hard. This means Support is now at $38.8 and it that fails it should be a bad sign. My Blue Arrow is pointing to a Bear Cross on the 13 and 21 Day EMAs and this is still ‘in force’ although the Lines are quite close together and we need to watch out for a Bull Cross in coming days.
FTSE100
I have quite a large Short Position on the FTSE100 and it is quite a miracle that the drag from it did not hurt my Portfolio Returns last week too much. It also means I have some Downside Protection if the mood does change but as I mentioned earlier, I won’t fight the Market if I see clear signs that it wants to go higher. First up on the Chart below we have the Daily Candles for the FTSE100 but I am focused here on the 13 and 21 Day EMA Lines. If you look in the Top Left-Hand Corner then you should see my Black Arrow which is pointing to a Bear Cross and this stayed in force and nearly gave us a Bull Cross where my Red Arrow is; but if you look closely you will see it just failed. We are of course now where my Blue Arrow is and we are approaching a Bull Cross very soon – if it fails that is a bad sign but if we get a Bull Cross then I will most likely give it a couple of days to ‘cement’ and I will likely close my Short Position. The beauty of Hedging in the way I do is that I can quickly switch between having my Hedging ‘On’ or ‘Off’ and if the FTSE100 gets more Bullish but then goes ropey again, I can quickly slam a Short on.
In the bottom window on my next Chart we have the Daily RSI and on a Reading of RSI 52 where my Black Arrow is this is pretty much Neutral. What this tells us is that the FTSE100 is neither Overbought nor Oversold and in essence if it decides to make a big move up or down, then there are few impediments and it could move a fair distance.
Next we have the Weekly Candles for the FTSE100 and my Blue Arrow is pointing to a decent White Up Candle from last week. This looks Bullish but the key here is the Resistance up above and that runs something like 6123, 6173, 6342, 6512 (where my Red Horizontal Line is).
Down below there is Support at 5771 and this must hold fast.
And finally we have the Daily Candles for the FTSE100 with the Pink Zone showing the Bollies. My Blue Arrow is pointing to a nice Up Candle on Friday but note it fell back from the High at 6040 and clearly it needs to take this out soon. If it does ease back (it is up near the Top Bollinger Band now so that may limit immediate upside) then there could be Support at the Bollinger Band Midpoint Line at about 5930.
My Sloping Black Line marked by my Black Arrow needs watching as well and this suggests Resistance at about 6100. OK, that’s it for this weekend. Don’t forget to listen to the new Podcast and as usual I will be Tweeting about what I see on the Indexes each night at just after 10pm or so. Cheers, WD.
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Stocks & Markets WheelieBlogsThese 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 !!). Archives
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