Of course it would have been extremely rude of me to not take advantage of the sunshine on Friday and to spend a delightful lunchtime in the garden of the White Hart with a few investing mates, and hopefully I can squeeze in a few more such afternoons before the Indian summer finally gives up the ghost.
Or perhaps more pertinently, before we are banned from going to Pubs again. This meant that I wasn’t particularly focused on what the markets were doing on Friday but I can’t say I was hugely shocked to see the US Markets coming off quite a lot and the FTSE100 also had a bit of a weak day. With the incessant narrative of impending Second Lockdown Doom, it is no surprise that people are hesitant to buy Stocks and we can combine this with the upcoming US Presidential Elections, Autumn being traditionally weak, and US Tech massively overbought, and the ingredients are clearly there for more downside.
Oh, and I forgot Brexit mess and the fact that C19 is looking perky in much of Europe as well. Anyway, all that is pretty irrelevant really because what I am much more interested in is that the US Markets have either done 13/21 Day EMA ‘Bear Crosses’ (Exponential Moving Average) or are highly likely to do one in the next few days, and this tends to be highly predictive (and reliable if used with care) of significant falls to come in the weeks ahead. I will show this in my Charts bit later in this blog but Regular Readers (I call them the ‘Prunes and Figs’ brigade) will know how profoundly I defer to this Signal.
Last Week Funny old week really with my Portfolio managing to rack up a pretty sweet gain of 1.7% leaving it just shy of Breakeven since January 1st by 0.5%. I am about 40% Hedged via FTSE100 Short Spreadbets (see my ‘Trades’ page on WD1) so this is even more of a pleasant outcome. I don’t recall any particularly big rises on my Stocks but I know WATR, AXS, IGG, CLIN, put out decent Updates which of course gives me a bit more confidence that these can probably do ok in coming months – unless of course the whole World goes truly daft again like it did in March/April; but that is not my expectation and I am clinging to a (possibly deluded) hunch that any drop won’t be anything like as painful as back then. Anyway, with the US Markets giving Bear Signals I am quite keen to put a Short on probably the S&P500. An obvious Short could be the Nasdaq but my concern there is that it will be extremely fast moving and the ‘Snapback’ Rallies that you get in Bear Market slides could be really painful – I reckon a Short on the S&P500 (US500 on igIndex) would be a bit ‘slower’ but move in the same direction, and with my hands-off and very much End of Day approach, it would probably suit me to go for something a little more sedate. I’ll see how the Charts look on Monday and Tuesday night and if they give me the right signs I will Short the S&P500 but I won’t go mad on it. Other than that I don’t intend to do much and I don’t have much spare Cash anyway and certainly no ‘Slots’ although I do ultimately want to add a few more Positions to my Income Portfolio. If you go to the ‘Portfolios’ page on my Website then you will see what I am holding and where. As always I will Tweet out any Trades I do and I will be commenting on the Indexes just after 10pm most evenings. Blog Slate A couple of days ago I put out a Blog on the ‘Educational’ page on WD1 which looks at the kinds of Returns that a Short-Term Trader should be making; but I suspect that even Long-Term Investors will find it an interesting read and some of the basic points like regularly taking time-out to destress and think about what you are doing are very worthwhile. Fortunately in recent days I have thought up a few fairly straightforward Blogs for me to write and I hope to crack on with these in coming days. I have been finding time quite rare recently and that is probably mainly due to the decent weather and my focused drive on enjoying as much of it as I can. I am very conscious that my ‘Work-Life’ Balance is not always quite where I would like it to be and I am trying to squeeze the Health Management and Day-to-Day living stuff and also the things I do for WheelieDealer and for my own Personal Investing, so that I free up more time for my social enjoyment !! Yes, I am flippin’ selfish !! I suspect that as the dying days of Summer drop away (oh, it is such a shame, do they have to?) and especially if we go into Lockdown again, then I will have more time to do some WD stuff and I hopefully will be able to build up a nice ‘Bank’ of Blog Drafts so I can continue to keep up a steady flow without having to get at all stressed about making sure I always have something written and ready. Later this week I expect we will be recording the next Podcast TPI 32 and already a couple of helpful listeners have given us some good ideas for topics to cover and I have written them down on my outline guide for the Recording and I will make sure we cover them (and if we don’t manage it in TPI 32, then they should get covered in TPI 33 !!). If you haven’t heard it yet, then the most recent one, TPI 31, is on the ‘Twin Petes Investing Podcast’ page on WD2 and of course you can find it on loads of Podcast Platforms. From the Lockdown Dungeons As always, the full list of Blogs I have scribbled over too many years for me to care to remember, can be found on the ‘Blog Index List’ page on WD2 and most of them have Links so you can just click away to your Heart’s content. I am bringing you a slightly different one this week. This is actually a ‘Buy Rationale’ blog that I wrote about Accsys Technologies AXS which put out an AGM Statement at the end of last week and I thought Readers might find it interesting. This is a pretty high-risk situation with the Company still not generating Cash, but the future potential is very appealing with several new Plants either being built or due to be started and if they decide to go ahead with a US Plant then that could be very significant. https://wheeliedealer.weebly.com/educational-blogs/accsys-technologies-axs-buy-rationale I don’t hold much but if they ever get near to making proper Money then I would be keen to buy more. Enough of that, let’s look at these blessed Charts……. S&P500 As per always, the Charts I show are taken from the superb SharePad software that I use and if you click on the images then they should get a bit bigger on your Screen. I’m starting with the S&P500 because that is the one I will most likely do a Short on in coming days. I will look at the Nasdaq Comp in a bit because that one is relevant, but I probably won’t bother with the DOW because it will be pretty much tracking these anyway. On the Chart below I have zoomed in so we can see what is happening with the 13 and 21 Day EMAs (the Black Line is the 13 Day EMA and the Red Line is the 21 Day EMA), and where my Blue Arrow is we have been ‘treated’ to a Bear Cross as I suspected. As I keep saying, this is not definitive (no Technical Analysis stuff is ever 100% right) but I find it is highly predictive, and at this time of the year and with the Fundamental Backdrop as I outlined earlier in this Blog, I suggest this will be a good predictor of a Fall this time. My Red Arrow is pointing at a Black Down Candle from Friday but it did manage to Close up off the Low which is at 3292 – and that now becomes the Key Support that we need to watch and a failure of this level on an End Of Day (EOD) Close Basis would be a Signal for me to go Short. Note the previous important Support was where my Black Arrow is at 3310 and this failed on Friday with the S&P500 going below during the day. It’s really not difficult now – we just need to watch 3292 closely.
In the bottom window on my next screen we have the Daily RSI (Relative Strength Index) for the S&P500 and on a Reading of RSI 47 where my Black Arrow is, this is just around Neutral (that is 50) and this means if it wants to fall then it can drop a long way before it becomes Oversold.
Note how in recent Weeks I have been highlighting that these Indexes were Overbought according to this Indicator and yet again that has been proved to be correct. But obviously “You can’t time the Markets…….”
Next we have the Weekly Candles for the S&P500 and my Blue Arrow is pointing at a Down Doji for last week and note how it has a long ‘Wick’ showing that it could not hold the High of the Week.
The significant thing here is the ‘Long Tails’ Candle marked by my Green Arrow from a couple of Weeks ago and note how that Candle ‘Engulfed’ the previous Week’s Candle in a Bearish way. This marks the Turning Point I suspect. If you look back through my Blogs you will probably see I commented on this at the time or it might have been in relation to the Nasdaq which would have done similar I assume. Down where my Red Horizontal Line is at about 2965 (marked by my Red Arrow) there should be very good Support and before that there should be good Support at about 3000. If that fails, then Support should kick in around 2700. This means there should be about 300 Points of downside at least which is nice for a Short if I can get one on soon (but I have learnt not to ‘jump the gun’ and that it is better to wait for a clear Trigger).
The next Chart is interesting. This is the Daily Candles for the S&P500 with the Pink Zone marking the Upper and Lower Bollinger Bands. My Black Arrow is pointing to where the Bottom Band is and the S&P500 moved up off the Low on Friday around this level. My Red Arrow is pointing to the Bollinger Bands Midpoint and it will be interesting to see if the S&P500 struggles to get above that Midpoint.
Now check this out – in the Bottom Window I have put a Blue Ellipse around the Volume Bar – that is a big spike and suggests there was commitment behind the drop. That is obviously not a good sign.
Nasdaq Composite
As I guessed the Nasdaq Comp is very similar to the S&P500 (Big Tech Stocks make up 20% of the S&P500 so they are bound to have a big impact) and my Chart below shows that there was a 13/21 Day EMA Bear Cross where my Blue Arrow is. This suggests more falls and the Candlesticks are almost identical to those on the S&P500 with the Key Support now being 10640. Where my Black Ellipse is there is a Zone of Support down to about 10200 and below that there should be decent Support around 10000. If that fails, then we are looking at Support down to 9500/9400 (I would be surprised if we go below those). My Black Arrow is pointing out a ‘Hanging Man’ Candle from a few weeks ago – I pointed out at the time that this was a problem. But of course “You can’t time the Markets……..”
Brent Oil Composite
Lot of interesting stuff here. First up note my Blue Arrow which is pointing to the Bear Cross on the 13/21 Day EMA Lines and then look at how those Lines have tightened up on the strong rise in the Oil Price last week but we now need a Bull Cross or the weakness will continue. My hunch is that the move up will fizzle out and the Long Tails Candle from Friday (which is in my Green Ellipse) looks like it could be a Turning Point downwards. The High from Friday was $44.31 and this is now Key Resistance and the Low was $43.07 which is Key Support near term. To the downside we have good Support where my Red Line is marked by my Red Arrow at $39.3. To the upside we have strong Resistance up at $46.55. I have a Short Position on the FTSE100 and a rising Oil Price could be troublesome for me. I am not panicking and will look at the FTSE100 in a bit but I need to track that Oil Price. I struggle to see how the Oil Price can sustainably rise if Stockmarkets get weak and the mood goes very much ‘Risk off’ which I think is most likely.
I am including the next Chart because it is Technically ‘nice’. This has the Daily Candlesticks and my Black Arrow is showing how the Price moved to the Top Bollinger Band on Friday and then fell back. My Red Arrow is pointing at the Midpoint Line and it will be interesting to see if that can hold as Support if the Brent Price does drop back.
FTSE100
First up I am interested in the 13/21 Day EMAs and where my Black Arrow is we had a Bear Cross and this is still just about in force. Where my Red Arrow is the Lines are really tight together but if you look just above my Blue Arrow you should be able to see that the 13 and 21 Day EMA Lines moved very near to one another recently but did not manage a Bull Cross. I suspect this will happen again.
On this next Chart I have zoomed in to just a few Daily Candles and you should be able to see that the 13 and 21 Day EMA Lines have not yet crossed. However, it is worth appreciating that it is often you get a bit of a False Signal which soon reverses and goes the other way. This is why it is unwise to act on a 13/21 Day EMA Bear Cross or Bull Cross straight away and it is better to wait a few Days and see how things play out a bit; if you use them in this way you increase the reliability and predictability hugely.
Next we have the Weekly Candles. My Blue Arrow is pointing to a bit of a Bearish Shooting Star or perhaps you would call it a Gravestone Doji. Whatever you call it, it looks Bearish to me and shows how the FTSE100 moved up last week only to fall back.
To the immediate upside 6123 is Key Resistance and to the Downside we are now really focused on 5778 - and if that fails on an EOD Close basis, then that would be a Signal to Short more.
In the bottom window on the next Screen we have the RSI for the FTSE100 Daily and on a Reading or RSI 49 it is pretty much Neutral which means it can fall or rise a heck of a lot !!
And finally for the FTSE100 here are the Daily Candles and the Bollingers. My Blue Arrow is pointing to a Small Down Candle from Friday and note how it Closed pretty much on the Bollinger Midpoint Line which could be decent Support and it is just above 6000 which is a psychological level.
Note again that in the lower window we had a Spike in Volume which isn’t good on a Down Day.
FTSE250
If the mood does go very much ‘Risk off’ then I would expect Smaller Stocks to get battered because they are seen as Higher Risk and Market Participants will want to get out of them and move to ‘safer’ Assets. This is an interesting Chart. My Blue Ellipse is trying to highlight how the Bollinger Bands on the FTSE250 Daily have ‘squeezed’ together and got really tight. This usually ‘resolves’ in an EXPLOSIVE move and my concern is that if the mood is ‘Risk off’ then that has to mean downwards.
Lastly we have the Daily Candles for the FTSE100 but I am really looking at the 13 and 21 Day EMA Lines here. At the moment they are just about in Bull Mode but when a Market moves sideways like the FTSE250 has for ages, then you can get a lot of unreliable Signals.
OK, that’s it for this week, take care out there and be aware that the Markets are looking a bit wobbly. Good Luck !! 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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