Doves at the ECB and a Chinese rate cut

Dovish remarks from the ECB and the FEDs failure to raise interest rates has precipitated the view that cheap money will be around well into 2016. Shares were already doing well on Friday following the ECB hinting at further QE in December. The market was then taken by surprise by a 0.25% Chinese interest rate reduction to 4.35 %. This is the 6th time the Chinese have reduced rates in the last year.

The combined actions of these countries was enough to push the stock markets of the world out of a nasty trading range. The Dow had been becalmed at a 62% retracement of the range between the 2015 high and low and on Thursday and Friday broke upwards to my short term target of 17650. I have been writing about this level for some weeks and have explained the importance of the level over the past two weeks. The level is also discussed in a TIP TV video that’s on this blog. I have been long of the Dow on a spread bet for most of this month and took profits on that trade on Friday. I am still holding my shares which are unleveraged positions and they all look fine.

The high of the day on the Dow on Friday was exactly defined by a 78% retracement of the annual 2015 range and this is a very important level. Above this level then the bull market is well established once more. Let’s hope that this is the case but I would not rule out a nasty pullback soon above this level. As discussed last week I feel that further moves will be highly volatile affairs as the bull that started on March 9th 2009 is becoming mature. In Elliott speak we are in a wave 5.

The 78% level will attract short sellers during the week ahead so please internalize that the AB=CD pattern charted by the rally from the Black Monday low is looked upon by FIB based traders as an ideal and high probability shorting opportunity. It’s still a time to be vigilant and heed the advice on the home page of VectorVest. Stay in the moment and don’t allow your mind the luxury of hanging out in the past or future. As an EOD trader your present moment is defined by the Primary Wave and the underlying trend. In this moment all is good.

On the VectorVest webcasts that I do every two weeks my Dow spread bet was discussed in some detail. Also I have been as sure, as one can be in this business that the Euro was going to fall and get down to parity with the dollar. After a painful few days it was a great week for that trade. The Euro fell from 62% of the last range and from a text book Gartley pattern to the tick. On Friday it broke the channel that the Euro has been trading within since March. A good place to get onboard or to add to the position would be a kiss of the channel. I am doing a webcast on Monday afternoon at 130 BST and will discuss this trading opportunity.

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In the UK the VectorVest program gave the strongest BUY signal already on the 8th of October (a confirmed call) so the strong move on Thursday and Friday was of no real surprise. As I write the Primary Wave is UP and we have three Green Lights showing in the Color Guard. The Green Light BUY has been confirmed by the RT kicker timing system which shows that the Composite is rising and the momentum of the move is rising. A very strong situation. The Composite of the UK market is shown below

Avon Rubber is the star of my portfolio and has broken up and is now trading at 11.35. I need a few more of these. Barratt and Carnival look highly likely to break from ascending triangle patterns while I see Saville and Howden Joinery seem to have found support after a disappointing week. BPI is in profit and both the technical and the fundamental position looks exceptional.

alpesh

I am holding all my shares and will add three more over the next few days to be fully invested after observing the market action on Monday morning.

Many thanks to all of you that came along and supported us at the Investors show yesterday. It was great to see you all.

David Paul
24th October 2015

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The FTSE 100 is battling to remain bullish while it remains above 6,400 points

So after a week of trading sideways within a limited range the FTSE 100 looks to pick up some momentum today. What I am looking at right now as I am writing this note to you is an attempt to stay above the 6,400 points’ support and look for higher ground.

It makes sense for the London index to try and do that as investors that drove the index above the former resistance barrier at the 6,400 points’ level are now backing their trades. Their way of thinking has a lot to do with the expected monetary policy events scheduled for this week and namely the FOMC meeting on Wednesday.

As we already know the case for the Fed to raise rates right now is out of the question and very difficult for the next 2 months. There is still the chance that they might go ahead and pull the trigger on December but this is not the most likely scenario as it would require more than impressive results across all sectors in the US domestic economy and no headwinds ahead.

The reason I am detailing this to you is because that’s the thought process taking place in the mind of every professional trader and major market participant right now. And that way of thought will affect the way the FTSE 100 will trade ahead of the Fed meeting in 2 days.

So to simplify things I believe that the FTSE will try to remain above the 6,400 points’ support which is a pretty good basis to establish some long positions and look for the index to re-test the previous highs of last week. That is of course if it manages to remain above that support area and for now it seems capable enough.

Again my focus is on the short term as no one knows what Mrs. Yellen and her colleagues will say during their meeting and to tell you the truth I’d rather be out of the market at that time waiting to re-establish positions after I have a much clearer outlook.
I would like to remind you my new stock trading service that covers the best stocks in the UK and the US markets. The Artemis Stock Trading is the best way to build and develop a robust stocks and ETFs portfolio with daily suggestions on what to buy and what to sell. You can find more information on Artemis Stock Trading by clicking on this link.

Alpesh Patel uses Sharescope Pro for his investment analysis

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The exit from the 6,350 – 6,400 points’ consolidation will hint us on FTSE’s outlook

This week I am writing to you as I am preparing my presentation for the FinTech Innovation Showcase in Berlin where the most forward-thinking companies in Europe will present their innovative ideas for the financial services industry. I will be presenting my low cost-no fees asset management model that my company will launch soon to cater for the ever-changing fund management business sector.

While going through my notes about low costs, no fees and complete transparency when it comes to managing our clients’ funds I am looking at the FTSE 100 being in a state of consolidation. Last week was quite a ride for the index that came off the 6,400+ points’ level to trade below the 6,300 points support and back above it again.

I have talked about this theme of uncertainty in the market in my recent notes to you and given that this week has only a few opportunities for momentum to pick up I remain focused on the short-term rather than taking any larger positions on a broader scale. I do think though that later in the week the release of the Retail Sales report from the UK will offer some incentive to traders to get involved.

My feeling is that this month’s Retail Sales numbers really have a chance to surprise to the upside, the recent uptick in wages’ growth and the low inflation allow the opportunity for buyers to go out there and spend more money. Would that mean that the FTSE will pick up momentum on a more medium-term outlook?

I doubt it to be honest so I will remain short-term focused and I will look at the London index from a mainly technical standpoint. I think that the exit from the current consolidation between the 6,350 and 6,400 points’ levels will provide some friction as traders will look to take advantage of this small breakout opportunity.

To the downside my targets lie around the 6,300 points’ area where the previous lows are situated and we also find the 200-period EMA. A potential breakout higher above the 6,400 points’ barrier will expose the 6,450 points’ highs but again I will look to move on these quick opportunities as swiftly as possible without hunting any farther goals.

I would like to remind you my new stock trading service that covers the best stocks in the UK and the US markets. The Artemis Stock Trading is the best way to build and develop a robust stocks and ETFs portfolio with daily suggestions on what to buy and what to sell. You can find more information on Artemis Stock Trading by clicking on this link.

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Bo Yoder’s S&P Analysis

The short squeeze in the S&P 500 (ETF Proxy – AMEX:SPY) is now complete as price has taken out the stops set above the 9/17/15 highs.  There is still a little bearish power to be dissipated, but our forecast is for price to reverse in the zone we drew a month ago. ($202-207). Look for signs of reversal in that area and expect to see a retest at least of the lows near $187, if not a complete breakdown leading into panic.

spy 10-17

Micron Technologies, (NYSE:MU) never got down into the green zone to qualify a setup. Now, with our prediction in the SPY for a significant bear leg, it is time to reduce long exposure. Taking this chart off my list as the risk now is that it will set up and start to work out, then get slammed by the overall markets as they turn lower.MU 10-17

 

The Gold ETF (NYSE:GLD) is an exchange traded fund that tracks the price of an ounce of gold. When last I spoke of this ETF, price had formed a head and shoulders reversal pattern, which 3D Apex Predictive Failure Technology™ told me was likely to fail.  Fail it did, and now price is about 7% higher.  If the SPY drops hard, you would expect to see a rally in gold as these two markets are traditionally inversely correlated.  I’ve added a new green zone within with you could add to the position or open a new long position in gold as we wait for this super-cycle to turn and deliver us the next step in the world’s great economic “reset”GLD 10-17

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Still deciding

The stock markets of the world had, by the standards of the past few months, a quiet week to the close on the 16th October 2015. The Dow closed well and reversed an earlier selloff on Wall Street to close at 17200 plus.

Last week I detailed the options with the Bull and Bear variations still in place as I write on the 17th October.
1. The bears will look upon the advance since the 29th September as a wave C of an ABC corrective wave within a bear market. As I have written, this wave C should continue to move up before the downward pressure starts again. The selling orders will be sitting without doubt in my mind, at the 78% retracement of the range defined by the annual high to the Black Monday low. That’s at a level of 17690. Within this postulated wave C there is a clear 5 wave pattern being charted and the pullback midweek will be labelled by those of a bearish view as a wave 4 of this C wave. Friday’s positive close broke through the 62% retracement that was holding the Dow most of the week and I am hoping that next week will bring a fast advance to the 17690 level and my decision point. I am long the index based on this view since the 2nd October.

2. The Bullish case regards the selloff from the annual high to the Black Monday low as a complete wave 4 of the bull market that started in 2009. This means that the move up since the low on the 21st August is the start of a wave 5 in this bull market with many months to run. A wave 5 rarely has the momentum of a wave 3 and thus the rise in volatility that we have experienced over the past few weeks. This wave 5 will be constructed from 5 waves as normal and I would expect wave 2 of 5 to start after the trend has pulled lots of people into the market. Wave 2 of 5 (which will be a strong fall) will start above the 17690 level I spoke of above. When that’s over wave 3 of 5 will start and that, I am hoping, will be a very strong upward move. This move will be called the “Santa Rally” by journalists with no skin in the game. The bulls, of which I am one, will need strong nerves in the weeks ahead to stay in the game. I would suggest several reads of “Practicing the Power of Now” by Eckhart Tolle. The text will instruct in how to stay present and focus on what’s happening now in relation to your trading rules. It’s a vital skill and more important that all of the analysis in the world compiled.

Once again the views above are my own ego based subjective assessments of the market based on Elliott. The facts are the trends as defined by the VectorVest program. The underlying trend is UP and that trend has been confirmed by price action. That’s means the most conservative signal on VectorVest has fired and is positive. The short term trend has been volatile and remains Down as I write with VectorVest suggesting NOT to buy any shares at this time.

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I am 70% invested and will wait until the Primary wave turns to UP and we are back to a UP/UP trend position. The star of the pack is Avon with the laggard being Savilles. The latter has pulled back to support and I am watching the share carefully. The fundamentals remain good as defined by Value, RV and RS on the program and we can easily be making a “Lost Motion” setup. The Lost Motion setup is what I have taught in the Round the Clock Trader series and if you haven’t seen this we can organize a link to view the presentation with pleasure. Savilles needs to hold above the stop loss at 840. I suspect that this is exactly the place where I should be buying this share and that my entry was optimistic and probably a little sloppy.

BPI.L has found support and on Friday rose from that support. I am happy with my entry on this share and simply used a pullback to previous resistance as the entry. I think there is a big move ahead here based on the large “Cup” formation on the weekly chart over the past 2 years. The chart is shown here over the last five years.david paul

Barratt found support during the week at 62% of the last range and with the annual seasonality just about the start I feel strongly that a break up will occur soon. The results from the builders have been good and there would seem to be little chance of interest rates moving in the next year. Help to buy is going to around until 2020 and I would expect the trend in these stocks to continue. They are all rated exceptionally well on the VectorVest program.

Good trading to you all.

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David Paul

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Traders should look to the inflation report on Tuesday to get a feel for the FTSE 100’s outlook this week

Alpesh 75So after a week of trading the FTSE 100 seems to have established a foothold above the 6,300 points level and actually on Friday the index printed a 6,400 points’ high. Last week I was explaining why I thought that the FTSE wouldn’t be able to extend the gains it had accumulated up to that point but it seems that investors didn’t see things the way I did.

The reasoning behind the fresh gains was the content of the minutes from the last Fed meeting on monetary policy released last week. You might have noticed that I usually correlate the developments across the sea with the way the FTSE is trading and especially fresh news from the Fed and their tightening agenda. This is because from a fundamental standpoint this is the most influential debate at this point of time and stock investors are timing their positioning according to when the Fed will pull the trigger.

Regarding the FTSE 100 and its trading action during the week ahead, I am undecided at this point on whether the index can extend its gains and climb even higher. And I say this because the release of the UK inflation levels tomorrow can make a huge difference on the way investors will look at the London index.

There is a significant difference between the bullish rhetoric from the Bank of England recently arguing in favor of a higher interest rate policy soon and the string of bearish reports and metrics from the domestic economy pointing towards a prolonged period of accommodative policy. So if the inflation report tomorrow proves to be another warning sign of slowdown in the UK market then investors might disregard the voices of policymakers and bet on rates staying low and the FTSE climbing higher.

I would consider the 6,450 points’ high as an important resistance level and if the London index succeeds in overcoming it then I would my attention on the 6,500 and 6,580 points’ levels. On a different scenario, if the FTSE turns lower then I would consider the 6,300 points’ area as the immediate support floor that could restrict any further losses.
I would like to remind you my new stock trading service that covers the best stocks in the UK and the US markets. The Artemis Stock Trading is the best way to build and develop a robust stocks and ETFs portfolio with daily suggestions on what to buy and what to sell. You can find more information on Artemis Stock Trading by clicking on this link.

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Bo Yoder S&P Update

The short squeeze in the S&P 500 (ETF Proxy – AMEX:SPY) continues as forecast.  If the markets don’t gap up radically on Monday, I would suggest that intraday traders watch for long opportunities as the odds are high for a sharp intraday trend once the market triggers stop losses above the 9/17/15 highs.

I have drawn out our forecasted path for price on the chart below, so that you don’t get sucked into a short near the $200 per share area.  I am looking at the $202-205 area as the most likely place for “the big short” opportunity that I have been waiting for.

SPY 10-10

Micron Technologies, (NYSE:MU) set up its inverse head and shoulders and the first wave of buying seems to have exhausted itself.  The bullish power is still rising in this stock, so any pullback into the green zone would act as a second chance entry for those who missed the initial rally.  Our target stays stable near the $20 per share area as indicated by the blue box on the chart.MU 10-10

I have received several emails asking questions about “short squeezes”, so I found a great example of this market behavior, and thought I would turn this next chart into a mini-lesson.

Hewlett-Packard (NYSE:HPQ) is as stock that has been trading in a downtrend since a top formed in January, 2015.  Any trend trading strategies would have given short signal a long time ago, and it is logical to assume that any shorts in this stock are sitting on a large open gain.

The most aggressive buyer in any market is a short trying to capture paper profits!  HPQ recently gave a clear reversal signal in the form on a double bottom, and this action was the confirmation the shorts needed to begin to take defensive action.

You can see how the bars got “wide”, showing aggressive buying without much liquidity on the offer. This is a classic bullish trap, as the aggression you see shown on this chart is not “real buying”, but rather buying to take profits on short positions before those traders move on to another opportunity. This means that there will be a powerful bullish surge, then no real follow though as the squeeze energy wanes.

Many will see the next pullback as a buying opportunity, and while these CAN produce scalp type gains for the agile trader, a short squeeze doesn’t mean that a sustainable bottom has formed. 3D Apex Predictive Failure Technology™ is forecasting that HPQ will retest its lows at minimum, and has a very real chance to break down to new lows.

So, scalp away, but dear reader…the bottom IS NOT IN, and I don’t want anybody who reads my words to get seduced back to the long side and stuck when things turn lower!HPQ 10-10

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

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Three Green Lights

On the last weekend in August just after the Black Monday low I wrote an entry which detailed the sequence of events which occur at each and every turn of the market. I suggested that the best course of events was to wait until a signal appeared that suited your risk tolerance. Please reread that entry if you are unsure of this sequence. The article was entitled “Wait for the Green”

On September 30th the Primary wave on VectorVest turned upwards and on October 8th the Primary Wave was confirmed by the RT kicker trading system. Also on October 8th the underlying trend turned UP and it was confirmed by market action. The latter is known as a “Confirmed Call” and it’s the most conservative signal in the VectorVest program. For three signals to occur on a single day is uncommon and it measures a sudden change in the market. The risk trade was firmly on during the first week of October 2015.

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The Color Guard on the home page of VectorVest talked us all through the sequence of the turn and today advocates buying safe, undervalued stocks that are rising in price at this time.

I added to my portfolio of shares over the period buying into BPI.l at support at around 720 and HWDN.L at 480. Howden Joinery and all building related shares took a knock late in the week from the construction slowdown figures which were blamed on a wet August and labour shortages.

Avon Rubber remains the star of my portfolio and its performance is keeping the 7 shares in the black. I bought the share at 800 and it’s now very overbought at 1040. I need to find a few more of these.

On the international front the cold war being played out in Syria by the major powers worries me. Russia is taking the lead and no doubt is after access to major oil reserves and pipelines. The US is less interested in these as they are nearing oil independence. The leaders of the two main nations clearly have little in common but for us all they need to get some dialogue going.

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My prognosis on the theoretical position of the stock markets of the world is going to plan. Again in this blog I have described my Elliott based view that the bull market which started on March 2009 still has legs.

The wave form presently being charted could be either a bearish or bullish and we will only have an answer to that when the Dow gets up to my target of 17650. So let’s look at options.

1. The bearish scenario is that the wave down from the 2015 high to the black Monday low was a wave 1 in a bear market. The Dow has since charted an A wave up and B wave down. At present the Dow is charting a C wave upwards which would complete a bearish ABC correction or Gartley pattern. Wave A and C should be the same size and that produces a confluence of techniques at the 78.6% retracement (17650) of the annual range or fall. On Friday the Dow approached the 62% retracement of the annual range and I have no doubt that some bears will have their short orders at this level and the market may take a day or two to get through. I still think under the bearish case that a further push north is probable.
2. The bullish case as defined by my very subjective Elliott analysis is that the fall in stock markets from the 2015 high to the black Monday low was a wave 4 corrective wave in the bull market that started on March 2009. This means that the current push upwards is the start of a wave 5 which should last well into 2016. Wave 5 moves have a much higher volatility than the wave 3 move of the past few years and I would expect the path ahead to be rocky and marked by strong swings. Don’t be surprised to see a fall to 62% of the range between the black Monday low and the high of the current push (above 17650) in the next few weeks. This would be wave 2 of 5 and it won’t be easy. After that’s over the wave 3 of 5(the Santa Rally) will start and that should bring a smile to our faces.

The VectorVest program suggests that option 2 is playing out at present and the increase in the breadth of both the UK and South African markets over the past few days adds weight to my Elliott studies. I have wrestled with Elliot’s work for the last 30 years. The present situation on the Dow cash is shown in the chart below.

I think that “resilience” of high VST shares that I spoke about last week will be particularly important in the weeks ahead.
David Paul
October 10th 2015

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Position Sizing – the key to keeping losses small while Maximising Profits

What is the single most important thing that is required to be a successful Trader? Keeping your losses small and your Profits large. But the vast majority of Traders do now know how to achieve this. This is where Position Sizing comes in.

Position sizing is a way to adjust the number of Lots, Contracts or Shares so that you take the same % Risk on all your Trades, this then keeps your losses small. But then, and this is the important part, your Profits must also be large, but not just large in monetary terms, they must also relate to your losses. Let’s take a look at an example:

PositionSizing

In this example we have a Short Trade on a US Stock, where we calculated the number of Shares to Trade based on a specific % Risk on the Trading Account. In this example 0.5% of $20,000. The Profits was then +5.9 times greater than the initial risk. This is important because the Profits then relates directly to any losses.
Whether you Trade Stocks, Shares, Futures or Forex, Position Sizing is a key part to any successfully Trading plan, so come an join Steve Griffiths, of MTPredictor Ltd (www.MTPredictor.com) at 3pm London time, Thursday 15th October, where he will be discussing how to apply Position Sizing in your own trading, Register now.

About Steve Griffiths

steve_griffiths_150wSteve Griffiths started as a Private Trader 28 years ago, dissatisfied with the Technical Analysis Software available at the time, Steve developed and then released MTPredictor in 2001. For the last 14 years MTPredictor has continue to help Traders across the World in their own Trading, in particular in keeping their losses small and Profits large by using Position Sizing built into the software.

 

Register here to join Steve on his LIVE webinar at Round-the-Clock-Trader, 3pm 15th October 2015

 

Contact Steve

Email: Admin@MTPredictor.com

Website: www.mtpredictor.com

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Resilience

Psychological resilience is defined as an individual’s ability to properly adapt to stress and adversity. Stress and adversity can come in the shape of family or relationship problems, health problems, or workplace and financial worries, among others.

The Resilience I would like to mention here today is the resilience shown by those stocks that have high VST on the VectorVest system. As a default all the shares on the LSE and Aim and ranked by descending Value, Safety and Timing or Trend (VST). These shares have not moved down in the markets sell off over the past few months and allow their investors to sleep well each evening.

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As I have written here many times I have developed a search on the Unisearch part of VectorVest that finds shares that have a high earnings potential (Relative Value) that are presently undervalued and growing their earnings safely. The top 10 shares on this search (known as the BIG HITTERS) have gained 21% during 2015 while the Ft100 is down around 10%. The search is the basis of all of my investing and trading. For example, if I wish to swing trade in a share over a few days to a week, I always wish to ally the technical setup with the fundamental position of the share. If both are positive then the chances of success are much higher.

Recently on the “Round the Clock” trader I detailed a swing trading technical trading plan (Watch the replay on 6th October at 1900 GMT)  that can be used with high VST stocks and I will be repeating this at the London Investors Show on October 23. The show is being held at the Novotel hotel in Hammersmith.

Over the last week the VectorVest Composite of the UK came back and tested the 62% retracement of the last range once more. The Dow cash in the US did the same while the broader US market as measured by the SP500 retraced and bounced from a 78.6 retracement of the last range. On Friday the US reported a poor jobs number and this will probably result in rates being kept low well into 2016.

During last week the short term or Primary Wave trend turned up for two days but at the end of the week both the Primary Wave and the Underlying trend are down. The advice of “VectorVest does not advocate buying stocks at this time” is sound.
I am 50% invested from the last week in July and I am watching the shares carefully. Avon has done well but the 4 others are around what I paid for them. Including commissions and with the Avon profit I am flat. This is the resilience of high VST shares that I started this entry with, which has greatly impressed me.

The chart of BPI.L looks very strong to me. On a weekly view over 5 years the share has charted a two year rounding bottom (or cup pattern) after a strong advance. The old high was broken a few days at around 7 pounds. I was hoping for a pullback or a kiss of this level during the week. This can still happen easily but the share had a very strong day on Thursday past.

david1

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Howden Joinery (HWDN.L) is a share that was good to me a few years back. After a strong run this share has pulled back slightly to previous resistance at around the 4.70 level. Over the last few weeks the share has charted a fairly text book inverted head and shoulders pattern which would seem to ready to break on the upside. The share is trading at 4.88 while the valuation on VectorVest is 7 pounds. The earnings potential (RV) and earnings safety (RS) are excellent.david2

When the general market turns I will be considering both of the above shares but for the moment will sit and wait and follow my rules.

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David Paul
October 3rd 2015

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