S&P: Bearish Pattern Hiding Bullish Power

The S&P 500 (ETF Proxy – AMEX:SPY) is showing a very bearish pattern on its daily chart, however our proprietary 3D Apex Predictive Failure Technology™ is showing a hidden Bullish power reserve which is likely to push price up into a short squeeze in the seek to come.  I have drawn out our forecasted path for price on the chart below. spy 9-27

The Gold ETF (GLD) has tested trend line resistance and is likely to begin forming a range on its daily chart.  I would advocate taking some short term profits on any positions taken in the green zone.

GLD  9-27

Fastenal (NASDAQ:FAST) engages in the wholesale distribution of industrial and construction supplies in the United States, Canada, and internationally. The stock has been selling off steadily, and has just formed a false breakdown on its daily chart.  This is likely the beginning of a more substantial bottoming pattern, with high odds for a retest of the recent range highs as shown here in blue.

fast  9-27

 

If you would like a detailed price forecast for the U.S. Markets, along with information about how low our firm is projecting they will go, and when they will likely bottom, I invite you to watch a recording of a live event we did to a select group of investors last week.  It is free to watch anytime on-demand, and is available at http://emergencybriefing.org

 

Bo Yoder

RBJ Financial

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The FTSE 100’s outlook is mixed and focus should be on the short term

After a long time spent on Government missions and a little bit of holidays I write this note to you being back in London and looking at the FTSE 100 doing its usual “no direction” pattern. The London index had seen quite a drop at the late days of August but for the most part of September its trading has been mostly sideways.
The reason for that is no other than the uncertainty around the global financial outlook which translates into an uncertainty on the question of the 3rd quarter of 2015: when will the Fed raise its key interest rate and how will this affect the global stock markets. Now we’ve heard from Fed boss Janet Yellen recently and she said that she was pleased with how the domestic market is going and hinted that a rate hike in the next couple of months is a very realistic possibility.
However the fact that on a global scale the economy is not doing as well as it does in the States and at the same time the Eurozone is still struggling with very low inflation is keeping investors cautious. With the ECB discussing the possibility of even more easing the FTSE 100 is at a crossroads since there is a lot of correlation between the London index and the European markets and that shows on the trading on the index.
So for this week my intention is to play the ranges in the FTSE 100 and see how the index will react to the upcoming NFP report on Friday. If we see any trading action above the 6,100 points then I will be inclined to go long and try to hunt the previous highs of 6,250 points. Otherwise, the support level of 5,900 points needs to be penetrated in order to consider shorting the index and look for the 5,800 points’ lows of August. In any case, any trading actions should be fast and focused on the short term as the FTSE tends to get a bit volatile ahead and after significant news releases.
If you want daily analysis and signals on the FTSE 100 then my NewsletterPro – Forex Opportunities™ service might be of interest to you. You can find more information on the NewsletterPro by clicking on this link.

alpesh

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Bullish and Bearish views slog it out

In my early years of building a consistently winning trading plan, a mentor, unfortunately long since dead, used to shout across the office “where are the orders”? Those that attend the VectorVest seminars will have heard the story of my induction into stock trading when sharing an office with a chartist in the early 1980,s

During the course of the week past the smartest money had their orders at very predictable places. Smart money likes to buy and sell at extremes. They know that their ability to predict what’s going to happen next is not much better than anyone else but at an extreme they can test their trading idea with little risk. This means they like to buy the market at lows with a tight stop and if the trade works they have a big move ahead. This increases risk to reward. Ensuring that you make lots when you are right and lose little when you are wrong, is what the business of trading is all about.

Hedge fund manager and billionaire trader Paul Tudor Jones takes it further. He requires 5 times more potential upside when he is right, compared to what he will lose when wrong, before taking a position. Traders call risk to reward, R multiples and the concept is covered in detail by Van K Tharp in his book “Trade your way to Financial Freedom”. It’s a book that all traders need to become familiar.

During last week the Ft100 and the VectorVest Composite fell hard at the start of the week. If you remember I felt that this was probable based on the technical picture last weekend. I also talked about my views on the stock market in a theoretic discussion with Zak Mir from Tip TV. This discussion is recorded on this blog and on the VectorVest Facebook page. Please remember my predictions are my best shot at the future and in the words of Mark Twain “The future is a very slippery commodity”

On Tuesday the low of the day on the Composite was defined by a 62% retracement of the range from the “Black Monday” low to the high of the 9th September. The smart and brave money who are Bullish simply bought the level and there was enough around for the level to hold. On Wednesday we saw a bounce and then on Thursday a retest of the level which held. On Friday the bulls had a great day and as we will discuss below so did out high VST stocks.

On Friday afternoon the Composite and the FT100 after a great day upwards found resistance at 62% of the range between the high on the 9th September and the low forged on Tuesday and Thursday this week. That’s where the smartest and bravest bears were sitting in wait. They don’t short lows but short into strength at FIB levels. In afterhours trading the futures market fell into the close from the FIB level.

In summary we have a battle on our hands in the UK market in a tight range where opposite views have each picked levels to test their trading idea to maximize the R multiple if the outcome is favorable. If the trade doesn’t work and they get stopped, then the loss is small and they will make it up and more in the next high R multiple trade. As well as explaining what went on during the week I am hoping that this post will help all understand how large and professional trading funds think. I know that this is far from how most of us manage our own portfolios.

The trends on VectorVest are Down and Down which means both the short term trend and the longer term trend are bearish. The Ft100 in particular rose to the FIB level on Thursday and Friday while charting a text book Gartley pattern. This pattern can only be seen on an hourly intraday chart. It is a bearish pattern and within the downtrend will attract many short positions. The level is around 6120 on the Ft100 cash market. I have discussed the Gartley in a post on the VectorVest UK Facebook page which is where I post short messages (if I have the time) during the course of the week. These also go out on Twitter. After I posted the Gartley on social media on Friday the Ft100 fell 70 points. In terms of technical trades, Gartley patterns in the direction of the underlying trend are high probability events. I took profits as I don’t hold leveraged index trades over the weekend.

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For my investment portfolio the best thing to do at the moment is to follow the advice on the front page of VectorVest. Prudent Investors should stand aside and watch stops carefully. The Color will alert us to when it’s safe to initiate new positions and it’s far too early as yet.

The really positive aspect of this selloff is how the high VST stocks have held their own and prospered. JD Sports is breaking new highs and the builders such as Barratt look like following. Carnival looks positive for a break after the Black Monday move down has cleared out the weak hands. Avon has pulled back and kissed former resistance and looks to be on the move again. The Big Hitters stocks certainly make you sleep well each night and the market action in this downturn tells me that they will blast off when the general market turns. The Barratt chart is shown below.

David

I am hoping that the Black Monday low in the stock market will hold and the FIB low which held on Thursday helps that view. A close above the high of Friday would certainly help as would a daily close above 6120 on the Ft100 cash.

As I detailed with Zak in the video, a break of the Black Monday low (which is a 38% retrace of the range from the Euro Crisis in 2011 to the high of this year) could result in a down move to 50% of that range. This level charts a confluence with the 2007 high and would result is quite a haircut for the stock markets of the world.

Once again the trends are down and we need to proceed with caution until this market confirms a bottom.

David Paul
September 26th 2015

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Be Careful out there

The rally in markets over the past month from the lows of the so named “Black Monday” seems to be running out of steam. The pattern from the low on the Dow has 5 marked waves and the trend lines defining the pattern are converging. It’s not a text book example but the pattern is known as a rising wedge and it’s bearish. The chart is shown below.

The rally in markets over the past month from the lows of the so named “Black Monday” seems to be running out of steam. The pattern from the low on the Dow has 5 marked waves and the trend lines defining the pattern are converging. It’s not a text book example but the pattern is known as a rising wedge and it’s bearish.david paul 19th Sept

As you know I felt the Dow would push to 17155 and it nearly got there. The 30 stock index reversed strongly in the last two trading days of the week. From a classical charting view point a rising wedge in a market that’s trending down where the 50 average is below the 200 day average is a high probability selling opportunity.

Volume analysis is difficult and very subjective but the fall into Black Monday occurred on rising volume while the rally over the last month was on falling volume. The fall yesterday (Friday 18th) occurred on rising volume. When you observe markets falling on rising volume and rallying on falling volume then the bears are in control and there is lots of evidence that this is the case at present.

In the US the sectors that are falling are energy, materials and financials with banks marked down strongly on Friday. Utilities and Reits are holding their own.
Although the analysis above is on the Dow cash my experience tells me that if the Dow falls the UK and SA markets will fall around a nanosecond later.

On VectorVest UK the trends are Down and Down with the underlying trend Confirmed Down since the 30th of July. The advice on the front page “VectorVest does not advocate buying any stocks at this time” should be taken very seriously by all.

I have kept this brief as no amount of words can predict the future on a trade by trade basis. The probabilities favor downside over the next week and I urge you to watch stops carefully. The Big Hitters stocks with strong fundamentals should hold up well but they still need to be managed. Any small losses we can make up easily in the run up into Christmas.

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David Paul
19th September 2015

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Will they or wont they

Janet Yellen has said over and over again that a rate hike in the US is data dependent but she expects to be raising rates before the end of 2015.

Many argue that the recent selloff has already priced in an increase and that gives the FED more room to move. Whatever happens expect a rough ride over the next few weeks. The VIX or the “fear index” is at highs not seen since 2011 and the Euro crisis.

Communication from the FED has been poor to say the least and I just wish they would get on with it and rid the market of this uncertainty. There are enough others around.

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During the week both Iron Ore and Copper prices gained. Although Dr Copper is still within a marked downtrend the metal bounced off a channel bottom and a major FIB level as analysts start to predict shortfalls over the next three years. Whether there is a bottom in commodities or it’s just a rally within a down trend remains to be seen. Even a rally will see a decent run in miners from much oversold levels. That said I haven’t bought any as yet. The Copper chart and the bounce off the FIB 127 level is shown below.

david1

The FT reports that they feel that Saudi Arabia are gaining ground in the battle for market share in oil against the US fracking camp. The oil price has ticked up on that perception from a trend line on the monthly price chart that’s been defining support for the last 10 years. Goldman is predicting further price falls to 20$ but I have found doing the exact opposite of what they say publically to be very profitable.

The bear market in commodities is the longest in history. Trading psychologist Van K Tharp says that we don’t trade markets but our “beliefs about markets”. My belief is that the “bigger the bear the bigger the subsequent bull” and I am looking forward to bumper profits over the next decade in mining and commodity stocks. I will discuss the situation in UK miners in my webcast on Monday afternoon at 130PM UK time. All VV subscribers should get a link. Anyone else who wishes to listen in should call support at o800 014 8974 in the UK and 0800 981 891 in SA.

During the sharp downturn last October and in the rout over the last few weeks the abilities of undervalued shares that are growing earnings both aggressively and safely to hang in there, helps me sleep well at night. Barratt has delivered an excellent set of numbers and with both the fundamental and technical picture looking good I will sit. Avon Rubber has had a fine spell and although it probably needs to come back a tad prior to further gains it remains an excellent investment for the next year.

Lookers has broken up and although I am not onboard as yet, like the look of the share at around 170. I may have missed the level on Friday as the share kissed the previous resistance while making a low for that day at 173. In the noise of the FOMC a 170 order stands a good chance of getting filled. Conservative investors should sit this out until the underlying trend turns upwards and obey the VectorVest guidance on the home page which says “Caution when buying shares at this time”. The Lookers chart is shown below. The chart shows some very important information not found anywhere else but on VectorVest. The Green Line is the valuation while in the window below price is the VectorVest prediction of EPS. An EPS growing from bottom left to top right of the chart is invariably a precursor of a strong move in the share price.david2

During the week I discussed the market and 4 growth shares on Tip TV in an interview with Zak Mir. The interview is recorded at www.vectorvest.co.uk/welcome and its only 10 minutes in duration. I still think that there is a strong rally in equities around the corner up to 17150 odd in the Dow Cash. At that level the stock markets of the world will decide on whether we have a V bottom or another attach on the lows of Black Monday is needed.

As always my Elliott based predictions are fantasy and the trends are reality. Take your signals from the Color Guard on the home page of VectorVest.

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David Paul

September 12th 2015

 

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BO Yoder´s S&P Update

The S&P 500 (ETF Proxy – AMEX:SPY) has bounced away from its lows and is in the process of forming a lower high. Our forecast is that price will wriggle a bit but move higher up into the reversal zone drawn on the chart.  A retest of the lows is highly likely, so my posture remains one of stalking a short if price can reach the forecasted reversal zone.

spy 9-7-15

I don’t think that it is any coincidence that my favorite stock symbols are coming out of the oil and gold sector this week.  These are traditional hedge areas that investors run to when they are afraid about the stability of the stock markets.

The Gold ETF (GLD) looks bearish on the daily chart.  A head and shoulders pattern has formed, and this will likely attract sellers to this market. However, 3D Apex Predictive Failure Technology™, the engine that drives these forecasts is indicating that this bearish pattern is likely to fail, thus hinting that a broader reversal is pending for the price of Gold.

The odds are about 40% that a retest might create a double bottom, but the odds are much higher for a higher low, so watch as price enters the green “buy zone”, and consider taking entry on any signs of reversal or strength.

There is not enough data to forecast an accurate take profits target at this time, I will update this “market map” as more price action unfolds.

gld 9-7-15

Denbury Resources (NYSE:DNR) has held up wonderfully throughout the recent market micro-crash.

A retest of the lows is about a 30% possibility here, so don’t be surprised or worried if that should occur.  As long as price stays above the lower edge of the green forecasted reversal zone, we expect to see this stock build power and launch to the upside as a new uptrend forms.

dnr 9-7-15

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Cherry Picking

The VectorVest edge is quite simple and it works with little fuss. Find shares with both favourable technical and fundamentals stories and buy them when the overall market is rising.

The 5 shares that I am holding have the above characteristics and they are holding their own well in the worst sell off in a long while. They are all trading at less than their VectorVest valuation and have smooth EPS plots rising from the bottom left of the chart to the top right. EPS growth is the engine that drives the share price. In particular Avon looks like on the verge of a major move north once we see some form of bottom in the overall sell off.

I bought the 5 shares in late July when the VectorVest Composite gave a BUY signal which turned out to be chop. I elected to hold the 5 shares (50% of my bank) and watch the stops carefully. I was nearly stopped out on Black Monday)

During the week the market generated a Green Light Buy as defined in last week’s entry. This is an aggressive signal and on Friday the pullback in shares negated this signal and we are back to square 1 with the trend on the Composite being Dn/Dn and showing a red light in the price column. The Composite has traded a double top over the last week at a 62% retracement of the last range and I fear downside in the week ahead.

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I sometimes hear at the talks “Not the Big Hitters again”. I rarely take any notice, as I know and all good traders know, that 90% of the job is to focus on the process of perfect execution of each and every trade. Those looking on seem to think that’s its boring. Years ago I ran a series of short term trading courses with monthly follow up meetings. People would come along and complain that I did that strategy last month. I would have to explain to the class that I do the same thing each and every morning as those who know my Morning Trade will attest.

In the same way I use the Big Hitters Unisearch to find a watchlist of shares and from this I cherry pick my portfolio. The top 10 from the Big Hitters search sorted by VST has appreciated 19.41% in 2015 whilst the Composite is down 2%. The top 10 as found at the start of 2015 was building company heavy and as you know VectorVest recommends no more than two shares from any single area of the economy.

To Cherry Pick I chart all the shares and eyeball the charts which are loaded with Value marked in a thick green line and EPS in a separate window just below the price. If you struggle to get these set up then please call support on 0800 014 8974 in the UK and 0800 981 891 in SA. Remember the old saying to talk to people – the strong silent type has only ever worked for is Clint Eastwood!

First prize for me is a share trading well below its value line with a steadily rising EPS plot that trading sideways in a consolidation. My observations although anecdotal lead me to the conclusion that a break of a consolidation in a share while the EPS is rising greatly improves the accuracy of the breakout.

Lookers is a Big Hitters stock and the share featured in my portfolio during the first half of the year. If you chart the share as discussed above, you should see that it’s trading well under the VectorVest valuation with a smoothly rising EPS plot. While the share was consolidating in a range between 150 and 170 over the last few months the EPS was steadily rising and that pointed to the break which occurred a few days ago on news of an acquisition. The share is now trading at 178 with a VectorVest valuation of 250. This share is in my prospect watch list to consider when the overall market turns.

I hope this helps clarify my Cherry Picking technique and I will be spending an hour on this as the User Group in Bristol on Tuesday evening the 8th September. Please mail me for any info on this meeting.

Please be very careful this week and watch stops carefully. I think most had a good start to the year. Remember that if you take a small loss it will be easy to make that up in the run into Christmas. A big loss will take a lot of fancy footwork to cancel out. There are two types of capital
1. The cash
2. Your emotional capital.
A big loss can leave you in a very poor place and this can hang around in your trading for years into the future. Your mind is hard wired to
a. Associate one moment with a previous moment
b. To avoid both physical and emotional pain
A big loss can cause a lot of pain because of the cash lost and the guilt of not following your rules once more. When another trade comes along your mind (at a very deep level that you know nothing about) compares this moment with the moment that caused the pain. The mind at this deep level will then do all it can to stop you getting involved. I have seen traders get involved with admin, spending weeks on back testing and if fact anything rather than trading its self.

Mark Douglas in his book “Trading in the Zone” discusses the above in great detail and it’s a text that every trader and investor should have on their desk.

Be careful over the next few weeks.

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David Paul
September 5th 2015

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