Well, we’re into the Final Quarter of the Year now and the window is closing on adding to Portfolios and coming out with a half respectable result for the Year. As things are going it is pretty likely to be a lacklustre year for me and I am hoping that I can squeeze some more out of my Stocks before we get to December 31st but with Brexit and plenty of other stuff to worry about (like the US Mid Term Elections), it is obviously not going to be easy and I am still largely more concerned with preserving my Capital rather than ‘putting the hammer down’ and going for more Risk, more Long Exposure and more gains (hopefully). As with much of 2018 I am just sitting tight and letting my Cash build up as I sell the occasional thing (Takeover Bids always welcome !!) and it was very nice to see some Dividends flowing in Last Week which helps boost the Cash.
I will get onto September and October in a bit but usually the tail end of a Year is a pretty good time for the Markets and to a large extent so far 2018 has by and large followed the normal Seasonal Patterns. I certainly contend that UK Stocks are not expensive and in parts they look downright Cheap but of course they can stay low for sustained periods when everyone is nervous and not ready to commit Big Money on the Long side of things. Anyway, more on that all in a bit.
Phil Oakley (@PhilJOakley on the Tweetster) now writes for Investors Chronicle and back a few Weeks in the magazine from 7 September 2018 (Green Leaf on the cover with ‘Cannabis Inc’ as the Headline) he wrote a couple of Pages with the title ‘Are quality shares overvalued?’ which is worth reading and thinking about. Anyway, in this text there were some particular bits that I liked and I am reproducing them here:
"Warren Buffett’s investing partner, Charlie Munger, sums up the trade off between quality and price well when he says: “It’s better to buy a great company at a fair price than a fair company at a great price.” Back in the 19th century the prominent artist and thinker John Ruskin arguably summed it up even better: “It’s unwise to pay too much , but its worse to pay too little. When you pay too much, you lose a little money - that’s all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do. The common law of business balance prohibits paying a little and getting a lot - it cant be done.” Like many things in life, paying up for quality is the right thing to do as long as you don’t pay too much. Paying a little bit more for a good bottle of wine or getting a proper piece of furniture instead of a flatpack often tends to work out better in terms of satisfaction and long term use. Applying the sane principle to investing in shares makes a lot of sense to me.” Note - John Ruskin was talking about Products etc. in general I think rather than specifically about Stocks. You may have read the Blog I issued Last Week which had a Buffetty flavour (ha ha, caught you all out by saying I wouldn’t do a Blog while I re-jigged the Websites !!) and if you have not looked at it yet I recommend you do so. It starts off with the 7 Minutes or so Video that I included in the Weekend Blog a few Weeks back and I have then put a load of comments below which give my take on what it says. It stands out to me that Buffett puts over so much supremely useful Advice/Insights into how to be successful at Long Term Investing and in a way it is too simple and I think many Readers will have heard this stuff many a time and not really understood or ‘taken on board’ the significance and profound importance of what the Legend is saying. I have no doubt that I understand it very differently today than I would have done 10 Years ago. Some things you really can only get by Experience. Last Week Yet again the Markets seemed really choppy and volatile and on a Daily basis my Portfolio was doing some pretty crazy Intraday Swings and I have no doubt it was best to avoid it all and go out and enjoy the last bits of the Summer Sunshine and only look at how things Closed at the End of the Day. I enjoy looking at my Stocks during the Day using the ADVFN App but in many ways I often think I should just completely ignore it and only look at 5pm…….(having said that, to an extent I am a bit religious about how I do things and I follow the maxim “If it ain’t broke, don’t fix it” and there is so much wisdom in that (Buffett must have coined it !!). However, on the flipside, when I go to the Pub during the Day I rarely look at my Stocks and I am quite happy to leave my Daily Checks until later in the Evening - although of course that might be an unfair comparison if I am a little lubricated. But despite all this daftness my Portfolio managed a Gain of 0.7% overall and this was partly helped by my Overseas Unit Trusts (see my ‘Portfolios’ Page for a full detailed breakdown of what I hold) which were helped by the Pound dropping against the Dollar. Needless to say I was pretty happy with that and I think September, despite its reputation, worked out quite well for me. I will do the ‘Weekly Performance’ for September in due course (probably the Week after next) and that should give more detail on how I did) so I am pretty happy but I am a bit irked that my Portfolio is still a few % off where it was back in something like May or so - it just shows how grating 2018 has been. But of course Summers often are pretty soggy for the Markets. I got a bit lucky with Boohoo BOO and Entertainment One ETO both doing chunky moves and they are big Positions for me which helped. AA continues to be a pain in the posterior but that is a small Position (see my recent Blogs ‘The Diminishing Problem’) so it didn’t do much damage to the overall Portfolio. On the whole I think I have some decent enough Stocks and a lot look downright Cheap (EMR, MPAC, SIV, AV., AIR, GFRD, GOCO, SDRY, TEP) and I expect some more Dividends to drop in so if I can navigate the Brexit Rapids in a calm and measured way then with Luck I should be able to be smiling on December 31st - as always I will be watching the Indexes and looking to make some Money on the Short Side if things look a bit iffy - but I am being extremely careful after having had a run of poor Index Trades earlier in the year. So in essence my Strategy remains the same - I am not doing much and reluctant to Buy anything and with an emphasis on Selling/TopChopping if the opportunity appears and I will be looking to Hedge with Index Shorts if need be. It is US Non-Farm Payrolls again on Friday I think so expect some choppy behaviour that Day (Friday’s need no encouragement to be crazy !!), and of course we have the Conservative Party Conference which has the potential to cause some swings in the Pound although I will be very surprised if anything truly dramatic happens this Week. Boris is talking on Tuesday I think and of course that is a ‘Must Watch’ cos it will be raving mad but no doubt quite funny. October Remember my copy of the UK Stockmarket Almanac is rather Out of Date (at least it’s not mouldy yet) as it is from 2016 but the Monthly Trends don’t really change much and it gives a good idea of how particular Months typically behave. Anyway, my ancient book says that October is usually a decent Month and it is the 5th best Month which is not bad at all (especially when you bear in mind that on average nearly all months give a gain) and the FTSE100 has historically risen by 0.7%, with 74% of Octobers being positive. However, the Book says “October is a puzzling month for Investors”, and it goes on to point out that since 1984, 7 of the 10 largest One Day Falls have been in October !! So Volatility is the name of the game. On this theme, such classic Drops like 1987 ‘Black Monday’ and the ‘Wall Street Crash’ in 1929 were both in October I believe. But a bit more positive, in recent times October has tended to produce a positive Return and in the last 22 Years it has only fallen by the end of the Month for 5 of those Years and this record is only bettered by December (bear in mind my Book is from 2016). The choppiness is outlined when you find out that a typical October tends to rise for the first 2 Weeks but then fall back and the final few Days are really good with the Final Day of October being the strongest ‘Final Day’ of the Year. The Book explains this as follows (remember, this might not be the true reason but it is plausible): “October marks the end of the weak six-month period of the year so many investors are looking to increase their exposure to equities towards the end of the month.” So this of course lines up with “Sell in May and go away, and don’t come back until St. Ledger Day” (or Halloween if you prefer), and all that. The Book also points out that October has been historically weak for Gold, Silver and Oil. Blog Slate As I mentioned earlier, I published a Blog with a Warren Buffett Video in it last Thursday and this was partly because I had already produced it in a pretty good Draft so I did not need to tweak it much and also because I have made good progress on the Website revamp and although I need to do more, I was bored with it all and fancied slinging a Blog out !! With the Website changes under control (there are a few more adjustments and rewrites I want to make and I will try to do these when I have the time), I will be issuing ‘Educational’ Blogs during the Week going forwards I hope and to this end I did some work on those ‘Stock Buy Checklist’ things Friday Night and they are taking shape so I expect to issue the first one which is about Income Stocks later in the coming Week. If you look at the ‘Blog Index List’ which now sits on WD2 (there is a Button at the top of the Homepage on the Main Website) you might notice that when I published the Buffett Blog I also Linked it back to the Article and of course in an Ideal World (sadly we don’t have these although Jeremy Corbyn seems to live in one !!) I would Link all of the Educational Blogs back to their full Articles and I did this on a few of them to see how long it would take and it is quite a protracted exercise. I think it would add a lot of value to the Website in making things a lot easier for Readers to find so I would like to do this in the future maybe and perhaps I will attack it periodically when I don’t fancy doing anything else and the Rain and Snow are chucking down outside my Bungalow !! Whatever, from now on as I publish the Educational Blogs I will Link them back as I update the Blog Index List. I know it’s a pain in the rear end when I move stuff about on the Website(s) and I promise that it won’t change now for a long time - hopefully it will just evolve in terms of more info getting shoved on it. The Podcast idea has inched forwards and hopefully something will appear on this soon. Tardis for the Ladies With a new Female Doctor I thought it appropriate to jump into the Tardis and Police Box my way back to the Blogs of the past and this enabled me to dig out the following piece for your sufferance whilst you watch the New Series of the Time Traveller…. Oh, I must just mention that the Ladies have had another hugely significant occurrence today when Ana Carrasco became the first ever Female World Motorcycle Champion when she won the World Supersport 300 Championship in Magny Cours in France. Girls are still very rare in Bike Racing so this is quite an achievement. It was very cool because she had a T-Shirt with a big Number 1 on it and the words “Pink Power - Ride like a Girl” (she always uses a Pink Helmet). Quite a refreshing Role Model for young girls and far more inspiring than those awful Hollywood Divas (who mostly seem to just want publicity anyway !!) These are back from the days when I didn’t have the good sense to include Links to all of them in the Final Part so I have included Links to all 3 bits: http://wheeliedealer.weebly.com/educational-blogs/targets-helping-improve-your-aim-part-1-of-3 http://wheeliedealer.weebly.com/educational-blogs/targets-helping-improve-your-aim-part-2-of-3 http://wheeliedealer.weebly.com/educational-blogs/targets-helping-improve-your-aim-part-3-of-3 That’s covered all the stuff I wanted to whiz through so let’s do some Charts….. S&P500 As always my Charts are taken from ShareScope and I have done screen grabs to show them. If you click on the Charts they should grow bigger so you can see more detail. The US Markets are just off their All Time Highs and with such behaviour the Bulls are really still in charge here and any drop back in recent Days is simply a healthy Pullback and not much to be worried about. My Chart below has the Daily Candlesticks for the S&P500 going back about 8 Months ish and the Uptrend that is loosely within my Green Parallel Lines is pretty much containing the moves up. Note the Moving Averages - the 50 Day MA which is marked by my Blue Arrow and the 200 Day MA which is marked by my Black Arrow - are both rising and this is Bullish stuff. I was talking about a ‘Healthy Pullback’ a few words back and my Red Line marked by the Red Arrow is trying to show exactly this kind of move down from the All Time High Peak. In terms of the Daily Candles themselves, it is noteable that the US Markets have been unable to hold their Intraday Highs and this means we have had several Inverted Hammers on the trot - but in this context they don’t really mean a lot apart from just a continuation of the move downwards. In terms of Support I would expect it to be pretty strong where that Previous All Time High was at 2873 and just above this and around it there looks to be a Zone of Support. The Blue 50 Day Moving Average Line (Blue Arrow) should be Support as well.
With September now complete it is valid to check out the Monthly Candlesticks so let’s see those now. My Chart below has the Candle for September Highlighted in like a Lime Green Circle and this Candle is what I like to call a ‘Spinning Top’ Doji but although this can be a Reversal Candle from which the Monthly Candles then drop, it is not all that reliable as such a signal. For example, something like a ‘Shooting Star’ or an ‘Inverted Hammer’ etc. would be a much more predictive Reversal Candle - however, a ‘Spinning Top’ like this is telling us that the rising Trend of Monthly Candles might be weakening (in other words this Index could keep rising but expect some sort of proper Reversal Candle in the near future - but it is not something to panic about yet).
Dow Jones Industrials Index (DOW)
This one is a bit similar to the S&P500 although of course it has only just made a new All Time High where my Yellow Circle is on the Chart below, whereas the S&P500 is a bit more advanced than this. Like with the S&P500 we seem to be having a bit of a Pullback but maybe there is Support around 26350 which is the Low Point from last Wednesday 26th September. If that does not act as Support almost immediately, then there is quite a Zone of Support where my Green Box is. Note that after the sort of ‘Abandoned Baby’ Candlestick we got when the new All Time High was made which is highlighted by my Yellow Circle, we then got 3 consecutive Big Red Down Candles and this could be a Bearish ‘3 Dark Crows’ Pattern which might be suggesting more falls. However, like I have just mentioned there is good Support not far below and also the Blue 50 Day MA Line should be a Support Area.
Now we have the Weekly Candles for the DOW - my Yellow Circle is capturing what looks like a Bearish 2 Day Pattern - I can’t remember the name (is it ‘Dark Cloud Cover’ or something like that?) but it is in effect the opposite of a ‘Bullish Harami’ which you get at the bottom of a sustained downmove. So this suggests we might drop more from here.
Nasdaq Composite (US Tech)
These are the Daily Candles for the Nasdaq Comp - as with the other US Indexes we are up near the All Time Highs and betting against the Bulls when they are this eager might be unwise. The key here is that 50 Day MA Line which I have pointed at with the Blue Arrow and as long as the Price stays above this then expect more upside. If it drops below that might suggest the strength is weakening but we would need a pretty significant Technical Analysis development to suggest the Bulls are finally giving up. There is no sign of it yet. My Yellow Circle is marking the Candles of recent Days and they really have just been not doing much and making a few Dojis.
Next is the Weekly Candles for the Nasdaq Comp and my Black Arrow is pointing at a Big White Up Bullish Engulfing Candle (it ‘Engulfs’ the Candle from the Week before) and of course this suggests more upside ON A WEEKLY BASIS. Note, we could get weakness in the next few Days but still produce a gain over the Week etc. That is the thing with the longer term Candles - you need to let them form up and the ‘IntraWeek’ wobbles don’t matter.
Now we have the Monthly Candles for the Nasdaq Comp and it is interesting because Last Week we got a ‘Hammer’ Candle which is in my Yellow Circle and in the context of a rise up, this could be a Reversal Candle from which we fall in coming Months.
Nikkei 225 (Japan)
This is not one I am particularly interested in because I have no direct exposure to Japan but I as I punched through the various Index Charts using ShareScope (you hit the SpaceBar to go down through Charts which you have set up in a List) I noticed this ‘Shooting Star’ Candle on the Nikkei which I thought I would show. Of course my Yellow Circle is highlighting this Candle from Friday and in the context of a Run Up it could be a Reversal Signal. However, the Nikkei is very affected by the Yen so it is quite a choppy one.
The bottom window on the ScreenShot below has the RSI (Relative Strength Index) for the Nikkei and on a Reading of RSI 70 it is obviously pretty high and although it can go higher, it is supporting the Sell Signal given by the Shooting Star on the last Chart.
FTSE100
I’m not sure where to start on this one - there is so much going on !! I’ll start off with that Green Downtrend Line which I have marked with my Green Arrow - the FTSE100 needs to get over that if it is going to tackle the All Time High again. My Red Arrow is pointing at a Red Down Candle from Friday and note it had a long ‘Tail’ which shows that the FTSE100 recovered during the Day from its Low Point which was at pretty much 7475 and this is now important Support in the very short term. Note the Price Action now is taking place around both the 50 Day and 200 Day Moving Averages (the Blue Arrow and Black Arrow respectively), and look how the 50 Day MA is very near a Bearish ‘Death Cross’ which if it happens is a bit of a concern. To avoid the negative effects of such a Death Cross, then we need some serious strength in the FTSE100 now. It is possible that the FTSE100 is turning down from the 50 Day MA and if this is the case and we get some proper falls, then Support where my Yellow Box is should be pretty strong and if it falls below the Yellow Box then that would be a worry - although there is more Support where my Green Box is and then the Pink Circle. If we do turn down now and put in a 3rd ‘Lower High’ then that would really not be good. Note also there is a lot of Resistance to the Upside above where we are now - so if we can make some progress upwards, then it might be hard work.
That last Chart was a bit negative in many ways but there is some hope for Bulls here. I love this Indicator and where my Red Arrow is we have just had a Bullish Cross between the 13 and 21 Day EMAs (Exponential Moving Average) and usually this means some Weeks of gains ahead although of course no Indicator is perfect. Where my Yellow Arrow is we had the opposite Cross - a Death Cross and as you can probably see this was very predictive of what happened next.
Now we have the Weeklies - where my Green Arrow is we had a ‘Long Tails Doji’ or Spinning Top as I call it which is not definitive but could mark a Reversal Point downwards.
This is more promising - in the ‘Big Picture’ stuff of the Monthly Candlesticks we were treated to a quite nice Hammer (where my Blue Arrow is) and after the Down Candle of August this is quite promising and could suggest we rise from here. So September actually was an Up Month for the FTSE100 which is quite unusual.
Next its the FTSE100 Daily Price Candles with the Blue Wiggly Bollinger Bands above and below. Where my Green Arrow is we are very near the Upper Band and it is quite possible that we turn down from here - which is of course consistent with what other Indicators/Signals are telling us.
Yet more Bearish evidence - these are the Heiken Ashi Candlesticks and of course you interpret them in a very different way to ‘Normal’ Candles. My Black Arrow is pointing to a White Up Candle but where the ‘Body’ has gone Narrow - this suggests the move up of the previous White Candles could be about to turn down. Watch for the Candles to turn Red and if they get Big and Red then there’s trouble.
FTSE250
I’m beginning to wish I hadn’t looked at these Charts because they aren’t looking all that good. Next we have the FTSE250 Daily Candles and first off look at my Green Downtrend Line (Green Arrow) like we had on the FTSE100 but this time we have more of a Downtrend Channel which is made with my Red Line (Red Arrow) as the Bottom Line of the Channel. Not pretty. Look at how the Darker Blue 50 Day Moving Average Line is moving down towards the Lighter Blue 200 Day MA - this is lining up a ‘Death Cross’. My Black Arrow is showing a Big Red Down Candle from Friday and the run of Down Candles from Last Week looks pretty ugly. 20050 is important Support not far below.
On the next one my Black Arrow is showing where there was a 13/21 Day EMA Death Cross and this is still in force.
Next it’s the Monthly for FTSE250 - a Big Red Down Month which doesn’t look good. OK, it managed to get slightly up off the Low of the Month but overall this looks Bearish.
I’m not really surprised that UK markets are looking a bit weak - with all the Brexit uncertainty I suspect many Investors are behaving just like I am and not doing much - we would rather park our Cash and wait for some huge Potential Dangers to be properly resolved. This means a lack of ‘Buying Pressure’ and to attract Buyers to part with their Cash the Prices need to drop and look ‘cheap’. The FTSE100 is of course much more affected by a Weak Pound so perhaps that will come into play in coming Weeks as the Brexit Talks grind on. The US Markets look a lot better. I will monitor the Charts closely as usual and it is quite possible that I will put an Index Short on to Hedge in the coming Week if I get some clear Signals. I’m really depressed now so I will leave it before I start looking for the Bottle of Pills and the Razor Blades…… Good Luck for the coming Week - keep your head and don’t do nuffin’ daft !! Cheers, WD.
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