Amongst several other big potentially negative events like no Trade Deal in the ongoing Brexit discussions and all the chaos a messy Presidential Election Campaign in the US could cause, the clear big looming threat is the likelihood of a Second Lockdown which seems to be increasing by the day.
There is no doubt the number of Infections is rising rapidly and I heard on one of the TV News Broadcasts that they were doubling every 7 days across the UK – that seems fast but at the height of the first problems they were doubling every 3 days. It is very possible that the Infections speed up though and that may not be helped by the Government saying the restriction to 6 people meeting up will come in from Monday – it is obvious that many groups of people are going to party like crazy over the weekend and feed the inferno.
Whether or not we should be doing another Lockdown or a ratcheting up of Restrictions is sadly not too much of a debate happening in political circles yet; and it is pretty much invisible on the Mainstream Media but it seems highly likely that as more restrictions come in, and a Vaccine seems pretty far off and uncertain, then the sense of all this will surely be questioned by many (it’s almost as if the Mainstream TV Media is deliberately shutting down such debate).
It does seem a bit arse about face that we are protecting the NHS when really its function is to protect the population !! Anyway, the rising Infections and tendency of the Government to make popular judgements rather than showing leadership or doing the right thing, will most probably mean more restrictions and a virtual Second Lockdown (it will be a Lockdown in all but name most likely) and subsequently the Economy will be in trouble again. After the remarkable bounce on many Stocks since the first Lockdown and the run up in Tech Stocks especially, a sizeable Drop seems pretty near guaranteed. Anyway, lots of this we discuss on the latest Podcast TPI 31 which was released on Friday and you can find it at the link below on Soundcloud or via the ‘Conkers Corner’ Channel on Apple, Audioboom, Spotify, Overcast etc.: https://soundcloud.com/user-479955511/conkers3-wheeliedealer-31-winning-stocks-asc-avct-fdev-tsla-wine-futr-ggp-pfd-fevr Last Week I am quite pleased to have gained 0.7% on my Portfolio last week and it is now down 2.2% since January 1st, after having nearly touched Breakeven for a second time but dropping back. The FTSE100 bounced last week and was actually up on the week which means that my Short Position suffered, but as we will see in the Charts section when I get to it, I suspect that much of the bounce was just a reaction after having a strong push down the week before. I increased my Short early in the week so I am now about 38% Hedged and I might add a little more and am even considering a Short on a US Index – probably the S&P500 if I do go for it. I am a bit cautious because any ‘snapback’ Rallies are likely to be vicious due to the Tech components so I would not want a huge S&P500 Short. Based on Fundamentals and ignoring the Price Action last week, many of my Stocks put out some excellent news, such as Hipgnosis Songs Fund SONG announcing a game-changing acquisition; MPAC announcing an acquisition and Aviva AV. dumping a majority stake in its Singapore operation; Decent Results from FEVR (listen to the Podcast !!); Strong Results from Somero SOM and restoring the Dividend; Good Results at TM17; A significant deal at Bango BGO to enable payments for Chinese and Korean TV Streaming (and Results due on Tuesday). Apart from SOM the share price reaction was limited but in time I suspect the value in all of these will come out. So in light of my big picture concerns and in line with my comments on the Podcast and what the Charts are telling me, I am not doing much on the Stock side and I am focused on getting my Hedging right and will probably increase the Hedges a bit more as I mentioned. Blog Slate I seem to be quite snowed under with stuff to do at the moment and I guess that has not been helped by my attempts to be in The Pub as much as possible !! I guess that situation will ease as we head towards the more pants weather (I noticed that it was very dark in Windsor at just 8pm this evening and that is clearly a sign of the imminent change), although we are having a bit of a traditional September ‘Indian Summer’ which is extremely welcome and may mean a few more runs out in the MX5 with the lid down. I plan to get something out later this week and it might be something building on a recent Blog I wrote about how I see Focus and Specialisation as a very good idea. I also have another Draft Blog in the pipeline which takes a string of Tweets that I sent out early on Friday morning regarding Returns and what Day Traders/Short Term Traders should be achieving, and I intend to add more text to clarify and explain more where I think it is needed. The Tweets have a lot of useful stuff in them so it seems a good idea to convert them into a Blog and have them in the Archive for future reference. Even if the did cause a bit of a stir…….. I managed to get around to updating the ‘Monthly Performance’ page for August and I wrote a few notes around it as well. I probably need to update the ‘Little Black Book’ with what is in my actual physical Little Black Book and if I get the time I will do this. Oh, I shoved up the Photos from the WheelieBash as well and you can see these on the ‘Events’ page on WD2. From Previous Summers Digging in the Archives this week, which you can find on the ‘Blog Index List’ page on the WD2 website, I alighted upon this old bit of scribbling which came in 3 chunks. You might find it a worthwhile new read or a revisit !! https://wheeliedealer.weebly.com/educational-blogs/diversification-am-i-enjoying-too-much-of-a-good-thing-part-1-of-3 https://wheeliedealer.weebly.com/educational-blogs/diversification-am-i-enjoying-too-much-of-a-good-thing-part-2-of-3 https://wheeliedealer.weebly.com/educational-blogs/diversification-am-i-enjoying-too-much-of-a-good-thing-part-3-of-3 Onto the Charts then…….. Nasdaq Composite As always my Charts are taken from the superb SharePad Software I use and if you click on the images then they should grow larger for you to see more details. Much of the Rally since the Markets tanked in March/April has been driven by the incredible strength in US Tech and the Pullback on the Nasdaq has big implications for all other Markets with the big Tech players making up a large part of the S&P500 etc. And of course we always get Contagion where Sells on one Market spill-over to others. If you read my Weekend Blogs quite often then you may have noticed my obsession with the 13/21 Day EMA (Exponential Moving Average) Lines and how they interact. Needless to say the Nasdaq Comp is doing some very interesting (and worrying if you are Long on the Nasdaq and US Tech) things and my Red Arrow on the Chart below is pointing out how we are in the process of doing a ‘Bear Cross’ where the Black 13 Day EMA Line drops down through the Red 21 Day EMA and is usually highly predictive of a sustained fall being on the way. The Bear Cross is not quite triggered yet and, indeed, it can occasionally give a False Signal in a sideways Range-bound Market, but in this case I suspect that is unlikely because the Nasdaq has had an extreme run up and on a Fundamentals basis the Global Fears are mounting just as we arrive in Autumn, with September being usually the Worst Month. For a valid and reliable Signal, I suggest giving a Bear Cross a couple of days and awaiting Confirmation in the form of supporting things like Bearish Candlesticks etc. If you look at my Green Arrow on the far left (let’s call it the ‘Corbyn Corner’), then you should be able to see what happened when we had the last Bear Cross and the subsequent plunge in Prices. This was only reliably abated once we had a ‘Bull Cross’ where my Blue Arrow is and obviously if we do get a proper Sell-off, then we will need to look for a Bull Cross once it starts to bounce. My Black Arrow is pointing out how the Nasdaq Comp had run up too far (look at my Blogs from previous weeks and you will see this developing and my comments on it) and how a ‘Hanging Man’ Candle pinpointed the Turning Point from which the Nasdaq collapsed. But of course “you can’t time the Markets” and Technical Analysis is nonsense…….
There might be a tiny bit of hope for Bulls here although I have my doubts. My Blue Arrow is pointing to a Doji Candle from last Week and this could be signalling a Turning Point from which the Nasdaq rallies but I cannot see this playing out. The fact is the Nasdaq rallied earlier in the Week but then fell away and Closed near the Low for the Week. The key here is Support at 10728 – if that fails on an End of Day basis then I think we are in trouble.
In the bottom window on the Screen below we have the Relative Strength Index (RSI) for the Nasdaq Comp Daily and where my Black Arrow is we are reading about RSI 47 and if you look to the left you can see that there is still potentially a long way to fall if the mood does stay grumpy.
The fact that the RSI has dropped below the Neutral 50 Level is seen by many Technical Analysts as a bearish thing in itself, although personally I only tend to really take notice when we have extreme Readings like where my Blue Arrow is when we were ‘Overbought’ or if we get down around RSI 25 again and become ‘Oversold’. Look how the Overbought RSI predicted the drop…….and if you are interested in knowing when to Buy in again, then a Low RSI Reading will give you a useful steer.
My next Chart has the Daily Candles for the Nasdaq Comp with the Pink Zone marking the Upper and Lower Bollinger Bands. My Blue Arrow is pointing to a Down Candle from Friday but note it did manage to Close a bit up off the Low of the day but really this looks quite Bearish to me.
The key is that Support at 10728 which was the Low from Friday and below that we have Support from the Bottom Bollinger Band around 10500 and down around 10000 is naturally a psychological Support Area.
Dow Jones Industrials Index DOW
I won’t spend ages on the DOW but my Chart below has the Daily Candles and my Blue Arrow is pointing to a ‘Long Tails Doji’ from Friday which could be a Turning Point up for the DOW. The key here is support at 27448 and if that fails then expect the DOW to keep dropping. It is looking a bit more steady than the Nasdaq and this will be because it has less Tech exposure. However, look at how the Black 13 Day EMA Line is heading towards the Red 21 Day EMA Line. We might yet see a Bear Cross on the DOW as well.
Next is the Weekly Candles for the DOW. This doesn’t look so great with my Blue Ellipse marking a Doji Candle but this doesn’t look like a Reversal Candle much to me.
On the DOW Bollinger Band situation, on the Chart below of the Daily Candles, we have my Red Arrow pointing to the Red Midpoint Line and this could be Resistance at about 28200. Above that there is Resistance from the Candle from Wednesday at 28206. Above that Resistance at about 28500 could be tough.
To the downside there is Support from the Bottom Bollinger Band at about 27190. If things get really smelly (quite possible) then there is a decent Zone of Support around 25000 and before that 26000 might save the Bull Bacon (that’s a bit surreal but I’m not telling porkies).
I won’t show the S&P500 but it is quite similar to a mix of the Nasdaq and the DOW, but note the 13/21 Day EMAs are not far from a Bear Cross. I have however been mulling the idea of Shorting the S&P500 if I do decide to Short more in coming days, but I would await a Bear Cross on the EMAs anyway.
Brent Oil Composite I am always focused on Brent Oil because it impacts the FTSE100 in a big way and I am Short on the FTSE100. On my Chart below the big development was the Bear Cross where my Blue Arrow is between the 13 and 21 Day EMA Lines and until we get the opposite, a Bull Cross, we can expect trouble. If you look back where my Green Arrow is, that shows a Bull Cross. My Red Horizontal Line (marked by the Red Arrow) at about $39.3 is vital Support and if this fails then Oil is highly likely to go a lot lower. Note how Brent has been going Sideways for a few days and this could well be a ‘Bearish Ledge’ from which the Price drops again. To the downside, there is Support at $34 and then there should be very good Support at $30. A move above about $44.6 might suggest things are improving.
Next we have the Weekly Candles for Brent Oil Comp. My Blue Arrow is pointing to a Down Candle from last week and this don’t look great.
The bottom window on my next Chart is interesting. This has the Daily RSI Levels and my Black Arrow is pointing to a Reading of RSI 34 and it has turned up. Maybe we will see some sort of bounce or perhaps the fairly low RSI Reading can unwind with a bit of a Sideways move (that is probably the most likely outcome).
Note that many times before the RSI went a lot lower and if we get a proper Sell-off across all ‘Risk Assets’ like Stocks etc., then I would expect Oil to go lower like before. So my hunch is a bit of a Sideways move that pulls up the RSI and then we drop again.
The Bollingers might help. My Chart below has the Daily Candles for Brent Oil Comp with the Pink Zone showing the Bollinger Bands. My Red Arrow is pointing to the Red Midpoint Line at $42 and that could be Resistance if we do get a move up and my Black Arrow points to Support from the bottom Bollinger Band at $38.
FTSE100
My Chart below has the Daily Candles for the FTSE100 and first off note the Bear Cross on the 13 and 21 Day EMA Lines where my Black Arrow is, and until we see a Bull Cross on this Indicator, we need to be concerned. My Blue Arrow is pointing to vital Support at 5778 (this was what I mentioned in the Podcast TPI 31) and if this fails there is a wide Zone of Support down to about 5400 and 5350 which is marked by my Black Ellipse to the left. A drop below 5778 would be a Signal to Short more. To the upside there is Resistance particularly at 6173, and my Green Line marked by my Green Arrow is a Resistance Line that could be troublesome. In fact, there is a really clear Downtrend Channel since early June if you draw a Parallel Line to my Green Line at the bottom (I will let you envision this).
Some hope for Bulls on my next Chart which has the Weekly Candles. My Blue Arrow is pointing to a nice Up Candle from last Week and that could suggest more upside in the short term. However, remember my comments about Resistance and the Downtrend Channel I mentioned.
In the bottom window on my Chart below we have the RSI for the Daily on the FTSE100 and my Black Arrow is pointing to a Reading of RSI 49 which is pretty much Neutral. What this says is that there are no extremes here but if we do get a strong move to the upside or the downside, then it could travel quite a long distance.
And finally we have the Daily Candles with the Bollinger Bands for the FTSE100 and my Blue Arrow is pointing to how the Candle from Friday is quite near the Top Bollinger Band (which is at 6080) and the High on Friday was at 6058 and it dropped back by the Close. I would not be surprised if we get a drop on Monday in line with the weakness in the US from Friday.
To the downside the Red Line which is the Bollinger Bands Midpoint could be Support at 5935 and below that the Bottom Band is at 5790. If you move back from the Chart and view it from a distance, the Downtrend Channel I have talked about is represented very well by the Pink Zone. OK, that’s it for this Blog, good luck for the coming week and don’t do nuffin’ rash and crazy. Cheers, WD.
6 Comments
Lee
9/13/2020 12:15:17 pm
Thanks Pete another good read. Would you not be tempted to short the NASDAQ assuming a 13/21 bear cross or is it too volatile for you?
Reply
WheelieDealer
9/20/2020 10:05:06 am
Cheers Lee, you have pretty much answered your own question. I suspect the Nasdaq would make a good Short but it will likely move a lot 'faster' than the S&P500 and I prefer something a bit easier to manage - particularly because I don't like to make Trading Decisions during the Day and the Snapback Rallies on the Nasdaq could be vicious. I am probably worrying about nothing but I just feel more comfortable with the S&P500.
Reply
Tom
9/14/2020 11:41:14 am
Hi Pete!
Reply
Gold Finger
9/15/2020 07:24:13 am
I do not understand the obession here for "hedging". It fraught with timing issues. Anyone shorting US markets since march have lost heaps of money or been extremely nimble.
Reply
WheelieDealer
9/20/2020 10:24:20 am
Hi Gold Finger, Have a look at the response I just wrote to the Comment above from Tom. In terms of the timing there is no difference between the timing for moving to Cash or the timing for putting on a Hedge - it is the same. If you go to my 'Trades' page you will see how I did in March. I find it is far superior to any other technique and buying Gold is highly unpredictable because it cannot be relied on to rise when Markets fall. In fact, in recent months Gold has risen with the Markets.
WheelieDealer
9/20/2020 10:20:33 am
Hi Tom, Thanks for the feedback and don't worry about the rant - I think you are spot on and that the UK Economy faces some extremely tough times and our Political Class are a bunch of muppets and utterly useless. I tend not to overweight what is going on with the Fundamental picture and I just stay 100% Invested pretty much all the time and just turn my Hedging on and off when I see the need (with most of my Decisions driven by what the Charts are telling me). As you say, the Markets make little sense at the moment but I don't argue with what the Charts are telling me.
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