Well, we’re right at the end of 2018 now and what a Year it has turned out to be. Usually around this time we would be expecting the Xmas Santa Rally to get underway and of course it might happen this Year as per normal but somehow I have my doubts. Judging by the weakness we had in the US on Friday and how the attempt to Rally in the Days before soon fizzled out, it strikes me we have a lot more pain to come yet (I will look at the Charts on this later in this Blog). It won’t surprise me at all if these unpleasant Markets carry on into 2019 and obviously with the utter Uncertainty of Brexit it will be very difficult for the UK Markets to perk up and the risk of more Profit Warnings across many Sectors is still very much with us. You might have heard but the News has been reporting poor Footfall in Retail this Weekend due to the atrocious weather with it down around 7% overall on what is usually the Peak Weekend before Xmas.
The key to the Brexit farce really is about Certainty - once we get some sort of solid way forward I expect to see the Markets Rally - however ‘Bad’ the outcome might appear. However, from where we are at the moment there is absolutely no Certainty and several ‘Options’ keep coming up but none of them can be picked out as a definite one that will be taken up. There is clearly a big push by the Political and Media Elite for a re-run of the Referendum but this is only coming from the ‘Remain’ side of things and it’s far too simplistic to think that this would resolve anything, like the Supporters claim it would. The reality is that even deciding on the Question to ask would be fraught with arguments and the damage it would do to Democracy is a huge risk - playing with fire and all that. Not to mention the time it would take to perform it and that would just add yet more Uncertainty and if the end result was ‘Leave’ anyway, then we will have wasted another Year p*ssing about.
I really have no idea where this goes - although one thing that hits me is that if Article 50 gets extended to reduce the damage of a ‘No Deal’ Brexit or to enable some other ‘Deal’ to be created (T May’s Deal is just pathetic and I cannot see anyway in which it gets through Parliament so they might as well get on and vote on it tomorrow to get the pain over with and kick that ‘Option’ into touch), then the benefit of this is that it would suggest that both the UK and the EU are keen to avoid the worst possible Outcomes (although there can be no doubt that the Dangers of ‘No Deal’ are being massively hyped up - mostly by the Second Referendum proponents) which might enable a Floor to be established for Stocks because the really nasty Outcomes are less likely. It really is a remarkable mess and the incompetence of our MPs is beyond belief. Anyway, I am pretty bored with it all as I am sure most people are - but we can be pretty sure that the next few Months will be difficult for Stocks however things play out and there are several Nasty Possibilities like a General Election which increases the Risk Corbyn gets in and of course a ‘Shock’ No Deal Brexit where the incompetent Government has prepared very little to reduce the damage. We need to watch out for these and of course they would mean considerable hits to Stocks most likely. Last Week No great surprises that my Portfolio suffered again with a Drop of 1% on the Week - this might have been slightly exaggerated by the Costs involved in me Closing a load of Long Spreadbet Positions on Monday (see my ‘Trades’ Page for more details) but it just adds to a dismal Year. I have some Shorts on the FTSE100 and it is quite possible I add to these at some point although I am reluctant to add much around the Xmas Period because the thin Trading Volumes can cause some choppy moves and of course we might get some sort of Santa Rally which would hurt Short Positions (although really these are ‘Hedges’ so I would most likely gain more on my Long Positions). On the Political front it is worth commenting that Last Week was probably one of the most momentous of many of our Lives. For a Government to be in such a mess and to face a No-Confidence Vote in the Leader of the Tory Party is not an everyday event. I still don’t think Theresa May is out of the woods and it is highly likely that her Cabinet get together and say “It’s time you stepped aside…….” and got her to resign. She has made yet another dumbass decision in announcing that she will not stand in the next General Election and therefore doing a superb impersonation of a Lame Duck (I think that brings her List of awful decisions up to about 15 now). So the upshot of all this is that for me “Nothing has changed, nothing has changed” (I am sure I have heard that somewhere recently) and my Strategy remains the same of doing very little and just letting things play out. I have no interest in buying anything as I think ‘Cheap’ Stocks will most likely be a heck of a lot ‘Cheaper’ in a few Months - I see no need to do anything much in the circumstances. I might Short more and that is about it and I am very happy seeing the Dividends keep slowly trickling in. Blog Slate I published Part 3 of the ‘Moving into Cash’ Blogs last Week and I have Part 4 in a very good state so it won’t take much ‘work’ from me to get it into shape and ready for publishing later this Week. However, my Mum is really in a bad way and the end is clearly near so I might be rushing down to Swindon at any point and this could eat into my time to get stuff done. I will do what I can and that is it really. The Final Part of those Blogs needs a fair bit of work so that might not appear until into January - and I then have the ‘Scores on the Doors 2018’ to write which will be an utterly miserable experience when I have to confront the damage my Portfolio has endured this Year - oh well, I guess 2019 will struggle to be worse !! (oh no, what have I said?). I have also made a very good start on a Blog that is about Macroeconomics and how a Nation’s Economy is structured - I think Readers will find that quite interesting and although we often hear the mantra “Ignore Macro and just focus on Stocks” I have no doubt this is only true to an extent and obviously the events around Brexit have surely taught us the limitations of this mantra because it cannot be doubted that Macro Uncertainty has done huge damage to Stocks this Year. On top of that I am doing some other stuff which Readers will find out about in due course which I think will be very popular - but it is something I need to keep quiet about for now. Oh and of course we should be doing more TwinPetesInvesting Podcasts and the response to the latest one has been extremely pleasing and encouraging - if you have not heard it yet, then you can get to it via this Link: https://soundcloud.com/user-479955511/wheeliedealer-and-conkers3-discuss-the-stock-market-sell-off-taking-profits-mellolondon-more If you like this then on my ‘Podcasts/Videos’ page there are loads more things like this - you can find them on the WD2 Website and there is a Button on the Homepage of the main Website to take you there. While I think of it, due to our Technical Expert @Conkers3 doing the clever stuff with the Sound and Edit and suchlike, we have this amazing leading-edge Stereoscopic Sound on the Podcasts - this means that if you have the ‘Balance’ set wrong on your Listening Device then you might only hear one of us speaking or perhaps if one of your Speakers is kaput then you would get this problem - someone raised this with me the other day. On the plus side, several Listeners have told me they really like how the Voices appear on different Speakers - it works really well in the Car apparently. I also have several tweaks to do to the Website and maybe the break from the Markets over the Xmas and New Year period will free up some time for me to get these done - we shall see. Time to get all Nostalgic…… This Week I have dug out this Blog from the fairly recent past for you. If you want to endure more of this sort of stuff, then if you go to the ‘Blog Index List’ on WD2 (again there is a Button on the Main Site Homepage) then all the Educational Blogs now have Links so you can get to them easy peasy. I am in a super generous mood so here is a Link to the Blog Index List for you: http://wheeliedealer2.weebly.com/blog-index-list.html I often get asked for more details about the Technical Indicators I use and the best way to get more understanding of these is from some Blogs I wrote about OPAY a long time ago where I went through the Indicators in a fair bit of detail - at the bottom of this one you can find Links to all the OPAY Blogs. In addition, if you get in the habit of reading these ‘Weekend Markets Blogs’ every Week then I cover lots of Charting Concepts as I show the situation of the Indexes and stuff later in the Blogs: http://wheeliedealer.weebly.com/educational-blogs/how-did-i-learn-charting-stuff On that note, lets look at some Charts - I am particularly interested in the US ones because the moves on Friday were pretty meaty to the Downside and it might be telling us more trouble is ahead. Clearly the Trumpster is having a few ‘challenges’ and if more happens regarding the Mueller Inquiry then the Markets would take this very badly. Trump is truly bonkers but the Markets like his deregulation and tax giveaways. Nasdaq Comp As ever the Charts I show here are taken from the SharePad software/Web thing I subscribe to. If you click on the pics then they should get larger in your Screen so you can see more detail. I’m starting with the Nasdaq because this US technology Index is the one that has had a stunning run up and has led the Bull Market and it seems to be showing signs of weakness that will likely pull the other Markets down as well, as we have seen in recent Weeks. Of course the likelihood of growth is strong here but there is most definitely an argument to be made that the Tech Index has run up too far and got over-valued. Let’s start with the Big Picture and here is the Nasdaq Comp going back to just a bit longer than the 2009 Credit Scrunch Lows and my Red Line (with the Red Arrow) is Long Term Support that really has to hold. This implies that the Nasdaq Comp could drop back to around the 5750 area and still be OK in terms of the Long Term Uptrend but of course that is a fair old drop from where we are now so it would inflict quite a bit of pain. My Black Line (with the Black Arrow) is a Shorter Term Uptrend Support Line which ran from early 2016 - you should be able to see how recently the Price has fallen down through this Support.
On the Chart below I have zoomed in a lot and put in some really important Arrows which I will now explain. First off we have the Red One at the Bottom Left and I am pointing to crucial Support here at just above 6600. Next we have more Near-term Support where my Blue Arrow is which is just above 6800 and note back in April 2018 this 6800 Level was tested as Support previously.
My Black Arrow is pointing to a Bearish Cross between the 13 Day and 21 Day EMA Lines (Exponential Moving Averages - this means the more recent Days get a heavier weighting when the Moving Average is calculated) and note how this is still ‘in force’ and until we get a Bullish Cross the other way we need to be worried about this Index.
On the Screen below again I have zoomed in and first off look at my Black Arrow which is pointing to the Big Black Down Arrow from Friday - this is obviously Bearish and note how it turned down off the Inverted Hammer Candle which is marked by my Red Ellipse and that found Resistance at 7200 and then turned down - so the Inverted Hammer was the Pivot.
My Green Arrow is pointing to a Green Resistance Line which is capping any Rallies at the moment - for a more Bullish situation to develop we need the Price to Breakout of this Green Line to the upside. My Blue Arrow is pointing to a ‘Death Cross’ between the 50 and 200 Day Moving Averages (the Dark Blue and Light Blue Wiggly Lines) - this is obviously not a great thing and it could mean weakness ahead although it is not a hugely reliable Indicator.
On the next Screen ignore the Upper Window because I have just scrunched what I showed in the Chart above so that we can see the Indicator in the Bottom Window better. My Black Arrows are pointing to a Bearish MACD Cross (Moving Average Convergence Divergence) in both the Histogram Bars and Signal Lines formats. This is not the best Indicator but needless to say this is Bearish in the short term now.
S&P500
In several ways the S&P500 seems to be tracking the Nasdaq Comp and of course if the Tech Index falls then it is highly likely to take the S&P500 down with it. This is of course because Tech Stocks make up a fair bit of the S&P500 anyway. Not only that, it is pretty much a given that Major Indexes around the World tend to be pretty closely correlated. First off here is the Long Term Picture for the S&P500 going back to the 2009 Lows - my Blue Line is showing the Uptrend Support and this is clearly very like the one I showed earlier on the Nasdaq Comp - check it out. This one implies the S&P500 could drop back to around 2300 to 2400 which is a fair drop from the current 2600 area - perhaps around 15% downside. Of course if the Blue Support Line fails then we are in serious poo.
Next I have zoomed in on the Weekly Candlesticks for the S&P500 and first thing please note the Green Lines which seem to be marking a wide Uptrend Channel which looks like it is being broken to the downside where my Red Arrow is as a result of Last Week’s Candle. My Black Arrow is pointing to Support around 2530 and this must hold or we are in trouble - before this there is Support at 2550 and if this goes it is not a good sign.
I won’t show the DOW this Week because it is very similar - again it is a Bearish looking picture.
FTSE100 This is the most interesting one for me because I have some Short Positions on this one (see my ‘Trades’ page). First off we have the Big Picture going back to 1995 and please look at the Red Lines (the bottom one is pointed at with my Red Arrow) which form an Uptrend Channel which has been in force since the 2009 Lows. My Black Arrow is showing roughly where the Price is now and this implies that we could drop back to about 6500 - 6600 and still be OK within the Uptrend. Obviously if we drop out of this Uptrend Channel then that is very bad. If such a nasty scenario develops, then there is Support down around 6000 and then 5500 which is worth knowing. Next look at the Blue Line with the Blue Arrow - this is former Resistance which became Support when it was broken above but now the Price has dropped back below it which is not good.
Please ignore the ‘Noise’ on this Chart. First off look at the Red Arrow which is showing a Bearish Cross between the 13 and 21 Day EMAs - this is still ‘in force’ and clearly that is not good - we need a Bullish Cross on these Lines before we can start feeling more confident that the FTSE100 can go up. I find these Crosses on the 13/21 Day EMAs some of the best Indicators there are.
My Green Ellipse is trying to highlight the Down Candle from Friday and this seems to have turned down off the ‘Narrow Body Doji’ from Thursday which looks like being a Pivot. It is promising for Bulls that on Friday it managed to Close up off the Lows of the Day but even with this it is not a great picture and certainly there are no signs of an imminent ‘Santa Rally’. 6670 is now important Near Term Support and if this fails then expect more falls.
Next we have the Weekly Candles for the FTSE100. First off look at the Green Lines (I have marked the Upper one with the Green Arrow) and these seem to be defining a Downtrend Channel which is now in place.
My Black Arrow is pointing to a Small Up Candle from Last Week and in the context with the previous Week it is a possible ‘Bullish Harami’ 2-Candle Pattern - this might trigger a move up but in my mind the ‘Context’ is not great because these 2 Candle Patterns tend to work better after several Down Candles beforehand. We shall see.
FTSE250
First off we have the Long Term Chart which shows the Uptrend Support Line from the 2009 Lows and the key thing here is that where my Black Arrow is, the Support Line has been broken and this is not good.
Next I have zoomed in on the Daily Candles and my Black Arrow is pointing to a Down Candle from Friday and like the FTSE100 and the US Indexes it looks like this is turning down again. The key here is Support at 17500 and if this fails then expect more downside.
OK, I have scared myself enough for now. Good Luck in the coming Week and I hope you can ignore the silly Markets and get out and do your Xmas organising !! Cheers, WD.
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