Bo Yoder on Bullish S&P

The S&P 500 (ETF Proxy – AMEX:SPY) is pushing up into the blue box as forecast.  There is still a bit of bullish energy that needs to dissipate before short exposure can be taken with the highest odds, but I will be on the lookout for any reversal patterns that form as price pushes up closer to the $200 per share level.

SPY 2-28-16

Gilead Sciences (NASDAQ:GILD) is still digesting it’s recent bottoming pattern.  There is a small surge in bearish power that we are forecasting will take price down into the green zone, to form a higher low and thus confirm the bottom.  The first profit target would be at the 50 SMA (Orange line), then depending on the power readings at the time we can update our ultimate price target someplace near the $100-$105 per share area.

GILD 2-28-16

 

The false breakout we predicted in McDonalds (NYSE:MCD) continues to build power for its next leg down.  The range that we forecasted has formed, and the price action suggests that a breakdown is imminent. We still believe that it would be prudent to take partial profits as price reaches down into the area on the chart indicated in blue.

MCD 2-28-16

Bo Yoder,

RBJ Financial

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The dark side of trading…

Every day, all around the world, traders make mistakes. Mistakes are part and parcel of trading and we have to accept that sometimes these are going to happen. However, there are mistakes that traders make that should never happen…

Unfortunately, every day, traders make the worst kind of mistakes that can wipe out their entire account and therefore see them become just another statistic of being a failed ex-trader. Over-gearing and not using protective stop-losses is what causes this. Quite often, over-gearing comes as a result of over-confidence. When a trader has had a good trading period, that’s often the point where they are at their most vulnerable.

You see when a trader has become over-confident, they are more likely to feel that they can now do anything and be successful in the markets. They ignore the old rules about risk management and believe stop losses ‘don’t apply’ to them.

Now we have the recipe for the perfect storm. It’s now only a matter of time before they get into a trade with too much size (relative to their size of account) and either a stop that’s far too wide or no stop whatsoever. Then when the trade goes against them, they initially still have a strong belief (based on their over-confidence) that it will come back for them (it always did previously!). But this time it doesn’t, it just keeps moving against their position. They become paralysed, just like that proverbial deer staring at the car headlights moving towards them. So they take no action, bury their head in the sand and hope….

Eventually, they either get a margin call from their broker which means they are closed out or they do close the position when they are down such a huge amount that they can’t take anymore. Trust me, this happens somewhere around the world every single day. So the next time you feel yourself getting over-confident after having had a great winning spell, take a few days off, congratulate yourself for your good work and allow yourself to calm down. Don’t allow yourself to become a statistic….

Cable is still a currency that has a huge amount of interest among traders presently. The trend remains down but if it closes above1.3950, we could see a bounce that see it wanting to test its prior January lows in the 1.41 area.

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Have a great week

Charlie Burton,

Ezeetrader

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The Ball is in, the game is on.

During course of the week the underlying trend changed to UP on VectorVest. The latter joined both the Primary Wave and the DEW Market Timing system, which if you remember, called the turn UP, last week.

As frequently occurs the underlying trend turned UP and we printed a Confirmed Call on the same day. The rules for the Confirmed Call are summarized below.

A Confirmed Up (C/Up) signal is given when both of the following occur:
1. Price
· The price of the VectorVest Composite UK (VVC/UK) has increased five-trading-day-period over five-trading-day-period, for two consecutive five-trading-day-periods.
· The price of the VVC/UK has increased from the prior day.
2. MTI
· The Market Timing Indicator (MTI) is greater than 1.00.
I have bought into the market using the Big Hitters watchlist and although I try and isolate myself from the negative comments in the papers and from my trading colleagues, the trades were not easy to take. It’s always the same at the turnaround. The airwaves are full of cast iron reasons why you should not get onboard.

The negatives are easy to find. A Chinese hard landing, banks broken because of low and negative interest rates and the aging of the US populace. The latter is significant and many feel that the US is in the same position now as Japan was, 20 years ago. This would mean a long period of low inflation and low growth as the “baby Boomers” consolidate their wealth and reduce spending in their golden years.

However, I have a signal and I must take the signal without fear or hesitation. This is what I have tried to do. I should have started to accumulate earlier than midweek as the DEW fired a signal last week but I was travelling and unfocused. The signal last week on the DEW was preceded by MTI bullish divergence, from an oversold level and was a high probability event. I have bought into undervalued stocks that are growing their earnings both aggressively and safely. That can’t be a surprise to anyone who reads this column regularly. Among the largest holdings are JD Sports, Dart and Persimmons.

Those reading who like more excitement in their lives should have a long look at Victoria. Last year it moved from 2 pounds to 14 pounds. The share stopped for breath and consolidated in a “flag” pattern which is considered by technical analysts as a bullish event. The share has broken from the “flag” and the technical target is 23 pounds. VectorVest values the share at 21 pounds. The downside is the safety of the earnings stream over the last few years. The RS (Relative Safety) on VectorVest of Victoria is less than 1 and that means there have been surprises in the past. Victoria is suitable for those that understand and have experience of risk management under fire.

McBride is a share that I spoke about at the Monday afternoon webcasts. The share doubled last year and like Victoria has consolidated and in the last few days broken out. A few weeks ago I spoke of my first trading technique. Look for shares that break out after a selloff, prior to the index breaking out. MCB certainly fits that bill. Those who know my work will have seen the text book “Lost Motion” trade from support. I like the share from a technical perspective but I note that VectorVest calculates that MCB is significantly over valued. I prefer undervalued shares but there is probably more upside here as long as the Composite keeps moving north.

FW Thorpe (TWF) is another share that’s threatening to breakout well before the index after rising some 65% in the last year. The share is trading at the VectorVest valuation with good fundamentals and very high CI of 1.65. The CI is a measure of the long term trend on a scale between 0 and 2. Again Composite permitting a breakout will lead to a very tradeable move.

Safestyle (SFE) is trading well below the VectorVest valuation and has excellent earnings potential with good earnings safety. The CI is strong and the share looks likely to break a new high soon. A good market can get the share from 2.70 pounds to 3.50 pounds fairly quickly.

I was taught early in my trading career about taking signals without worrying about the angst in the newspapers and on the TV channels. In 1982 I had just started in markets and the financial world came to a standstill when Mexico defaulted. The financial world was broken was the daily message. Japan was tanking. The event preempted the largest bull market in history.

I remember telling this story to a very senior banker and fund manager in the City after the Global Financial crisis in 2008. He looked at me and just shook his head and retorted “it’s different this time”. I remember getting my feet wet in 2009 in the stock market around June of that year. It was just like Tuesday this week.

Since the Primary Wave turned upward (the most aggressive signal on VectorVest) I have been holding a long position in the FT100 via a spread bet. I have found that taking Primary Wave signals from the VectorVest Composite and applying them to the Ft100 via a spread bet is highly profitable. The Primary Wave is calculated from the price, momentum and breadth of the Composite and provides excellent signals for swings over 2-10 days. When the Composite prints a Primary Wave BUY signal and also closes above an 8 ema then a strong move invariably occurs. Exits are always key to any trading plan and I am trying to hang in the position until I see a close, from the Composite, below the 8ema, in a long position. The Composite with the Primary Wave signals marked is shown below.davidpaul

I have added to the current position once and as I write the position is open, with 300 points of open profits. I will hold the position over weekend and have locked in 50% of the profits. There will be drawdown and losing trades with this approach but I am very excited about the potential of the Primary wave to pinpoint high reward to risk trades with little screen watching. I am indebted to a member of the Bristol User Group for researching and back testing the method.

My cycle’s analysis reckons that this UP move in stocks that should last into April or May. That’s the theory and I shall be trading the market and NOT the forecast. I have accepted the risk and will be leaving the building in each position if the share falls to the VectorVest stop loss.

David Paul
Friday 26th February 2016

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The FTSE is trading sideways for now, where to target when it breaks out

Over the course of the past week the FTSE 100 has seen a nice uptrend that led the index to the 6,000 points’ area. As I mentioned to you last week the pivotal 5,800 points’ support area was not breached and as such the London index attracted enough attention to drive it higher. However what we’ve seen after the FTSE reached the 6,000-50 area is a sideways formation.

The index has been consolidating around the 6,000 points for a few days, trading either side of this level as it’s looking for fresh momentum to pick up the pace. I think we need to approach this situation from a technical perspective and understand what our targets might be in case the FTSE picks a direction and which are our trigger levels.

Before we do that though it’s important to highlight the key fundamental themes that will dictate the price action. We do have a number of important reports pending for release this week, the UK GDP levels, the US Durable Goods Orders and a few more but the really important issue that everybody is discussing is no other than the upcoming referendum on the Brexit.

It goes without saying that this is an issue that will take a toll on the FTSE’s price action in the weeks to come, especially as we move closer to the voting date and the result is still undecided. Of course stock markets hate uncertainty and most of all political uncertainty. Thus every time a key opinion-maker will make word of why Britain should exit the EU the FTSE will feel the pressure. For the time being though let’s keep our heads cool and see things from a technical perspective as I mentioned above.

I think it’s clear that for the FTSE to correct to the downside the 5,900 points’ lows need to be breached and should that be the case then the 5,800 points’ area will once again be of interest to traders as it features as the first target area. To the upside the possible extension is far shorter and I think that any gains will meet the resistance of the 6,120 points’ highs at the beginning of the month. For any scenario towards higher levels the trigger area lies above the 6,060 highs of yesterday.

alpsh
If you want daily trade signals on the FTSE 100 and the Euro, the Pound, Gold and more Forex, Stock Indices and Commodities instruments I am recommending my Sentinel Signals report that has an impressive performance. You can find more information on Sentinel Signals by clicking on this link.

 

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Bear Market Rally or New trend?

I hope you have been following the Market Timing signals as they appeared on the Market Timing chart and on the front page of VectorVest. A lot has happened since last weekend.

After trading on Monday of this week the Primary Wave turned UP and that gave the most aggressive of traders the first signal to buy some stocks or the entire market via an ETF or a spread bet. I chose the latter.

After trading on the 17th (Wednesday) the second signal appeared. This is known as a Green Light BUY and it’s shown visually as a Green Light in the price column of the Color Guard on the front page of VectorVest. This means that the price of the VectorVest Composite is UP day over day and week over week and that adds weight and confirmation to the Primary Trend.

Also after trading on Wednesday the 17th the DEW Market Timing signal gave a BUY signal. This system has been very accurate over the past few months. I have been travelling and haven’t reacted to the signal as yet and will leave it to Monday at the earliest.

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The underlying trend as defined by the Market Timing Index is still down, so as I write the LSE Composite is technically in a UP/Down position. The breadth of overall market, although improved is still weak, with twice as many shares on a SELL recommendation as on a BUY. As discussed last week the combination of the much oversold MTI and the bullish divergence with price, predicted the rally that we have experienced this past week. The overbought and oversold levels on the MTI is money in the bank for aggressive traders. Oversold is a MTI level of 0.60-0.65 with overbought around 1.6 and higher.

Thursday and Fridays market action charted “Doji” or indecision candles on the VectorVest Composite. These candle patterns can be both a reversal or continuation pattern. A break above will mean that the trend will continue strongly. A break below and a pullback is highly likely. This pullback at my most positive would result in a rising bottom and at my most negative would be mean a continuation of the bear trend which has been a trade mark of 2016. I think that the probabilities favor a pullback at least during the week ahead. As with all things trading related, time will tell. If the Primary Wave on VectorVest changes back to Down than I will short the overall market with a spread bet.

My institutional trading chums, who tend to trade strongly on cross market relationships, believe that the strength in Gold and the strength in the Yen does not bode well for a turn up in equities soon. Both Gold and the Yen are flights to safety. Gold may not pay a dividend, interest or coupon but at least you don’t have to pay to park your cash there. These expensively suited fellows feel that Golds rise is being driven by investors who are losing faith in central bankers’ ability to deal with the challenges ahead.

On the Composite and on the Ft100 the high of the rally this week was defined by a trendline of the falling highs of the selloff. I think you will find it easy to draw this line from the high on the 29th December last year, to the high on the 29th of January 2016. This line projected forward defined the resistance met by both the VectorVest Composite and the Ft100 during the past week. On both indices the resistance also occurred at a FIB retracement with the Composite stopping at 78% of the last range. 0.78 is the square root of the Golden Section 0.618 and a very important number within creation. The chart of the Composite showing the FIB levels is below.

david

I will be much happier buying into stocks when the Composite has broken above last week’s highs and has shown the resistance spoken about above, a clean pair of heals. As the DEW has given a BUY signal I will wait until the market breaks higher and is showing Green Lights in the Color Guard before getting onboard. The advice on the front page of VectorVest will tell you what to do.

Conservative investors should wait until any move is signaled by a Confirmed Call.

David Paul

MD, VectorVest UK

February 19th 2016

David uses VectorVest.  You can try VectorVest for 5 weeks for just £5.95 ($9.95) – Click here to get started

 

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Bo Yoder S&P Update

The S&P 500 (ETF Proxy – AMEX:SPY) is rising after forming a double bottom.  Bullish power has surged this week, and so we are forecasting a rally up into the blue box shown here, with about a 35% chance to push up higher than $200 into the $205 area.  Once this bull cycles wears itself out, we will be looking for aggressive short exposure as that will be the confirmation of a deep timeframe reversal which will trigger a more serious and sustained bear market.

SPY 2-21-16

Gilead Sciences (NASDAQ:GILD) has hit an area of support which has the potential to create a sustainable bottom.  There is a small surge in bearish power that we are forecasting will take price down into the green zone, to form a higher low and thus confirm the bottom.  The first profit target would be at the 50 SMA (Orange line), then depending on the power readings at the time we can update our ultimate price target someplace near the $100-$105 per share area.

GILD 2-21-16

The false breakout we predicted in McDonalds (NYSE:MCD) is building power for its next leg down.  While the trend shift is building energy in the deeper timeframes, the daily power is waning.  This means that a range may form before a more serious breakdown can occur.  This indicates to us that it would be prudent to take partial profits as price reaches down into the area on the chart indicated in blue.MCD 2-21-16

 

Bo Yoder

RBJ Financial

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When sentiment is skewed….

Early last year, I was being interviewed on financial T.V about the Euro. The currency was hovering at around 1.06 versus the Dollar at the time and the interviewer was convinced it was about to go to parity. He was looking for my agreement with his view and although from a fundamental perspective, the Euro had every right to continue weakening against the dollar, that’s not actually what happened.

You see when the Euro/USD was down at those 1.06 levels, it seemed the whole market had a bearish view on it. Every major bank seemed to be short and sentiment indicators were massively skewed on the short side too.

Here lies the problem. When the majority of market participants are short, who is left to sell in order to keep pushing that market lower? Plus at this stage, it only takes a small amount of buyers to actually start turning it around. Once the Euro started bouncing, weaker hands start to cover their short exposure and that helps push the price higher once more until there becomes a stampede for the exits. The Euro flew to 1.14 in a very short time as a result of that short covering rally.

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So my point is that when you see an extreme of market participants on one side of the market, be wary that it may be close to a short term change of trend. It’s not an exact science but something that should be monitored. The Euro from a fundamental perspective, should have continued to fall, but sentiment put a halt to it. Remember, its buyers and sellers that really move the market….

charlie

Looking at the daily chart of cable, the news yesterday of Boris Johnson coming out in favour of Brexit created a 100 pip gap down over night. The pound looks like it wants to break to new lows for the year against the Dollar but just one word of caution, by some measures there’s extreme short positioning currently in this currency pair so at some stage we could see a squeeze in the next month…

Have a great week

Charlie Burton,.

Ezeetrader

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How to trade the FTSE – Plenty of important news and reports coming our way

Since the last time I wrote to you the FTSE 100 has been through quite a volatile period, dropping lower to test the 5,500 points’ support and this morning we’re looking at the index attempting to build a basis of support above the 5,800 points. I have mentioned many times since the beginning of the year that this is a volatile period for the global financial markets and the stock markets cannot avoid being affected by it.

My advice the last few times I wrote this note to you was to focus on the short-term outlook of the FTSE because with the way news events are coming in and traders are digesting them it’s risky to believe that there’s a stable medium-term outlook for the London index. This week I will advise the same and share with you my personal notes for the next few trading days.

From a technical perspective I pay much attention to the 5,800 points’ level which will act as my pivot level until the end of the week. The FTSE is trading above it at this time but there’s a host of news coming our way so it will be crucial for the outlook of the index to manage to remain afloat. So should the FTSE stay above the 5,800 points’ level then my target for the end of the week is lying around the 5,950 points’ and with an extension up to the 6,000 points’ area. On the other hand, a retreat below this pivotal area will drive us to hunt for the 5,700 points’ lows as the FTSE will be looking for support.

As I just said there are plenty of important reports this week, including the employment report from the UK, the inflation data from the US and also the Retail Sales figures from our domestic economy. All of the above have the potential and I personally believe that they will affect the outlook of the index in the coming days. So to add to my advice above, remain focused on the short-term opportunities that arise, keep your trades quick and targeted and remain on the sidelines when you have no clear view.

If you want daily trade signals on the FTSE 100 and the Euro, the Pound, Gold and more Forex, Stock Indices and Commodities instruments I am recommending my Sentinel Signals report that has an impressive performance. You can find more information on Sentinel Signals by clicking on this link.

alpesh

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She keeps her options open

Janet Yellen says she is keeping her options open on interest rates after a two day testimony that I will leave your weekend papers to analyze. She played down the concept of taking US rates into negative territory as headwinds grow in the global economy but it’s still on the table should future economic data stall. Futures traders have a different view and are currently betting on a high probability of a rate cut. I read that the FED has just released the details of its latest stress tests on US banks. In this they have asked the biggest banks to model how their balance sheets would stand up to a negative interest rate environment, where 3 month Treasury Bills would drop to minus 0.5% for a reasonable period. This has set tongues wagging.

This all follows from both the European central bank and the bank of Japan lowering rates into negative territory and Sweden’s decision to move deeper into negative territory. Last week the latter cut its repro rate by a further 15 basis points. Policy makers might not want to admit it but a flight to negative rates has the ability to devalue the currency of that country, although this concept has failed miserably in Japan.

During the week markets sold off hard as you will all have seen accompanied by a flight to the safety of Gilts and Gold. Banking shares in particular have had an awful time in this low interest rate environment. Markets seem to be saying strongly that central bankers have “lost the plot”. The questions to Mrs. Yellen during her testimony also showed a lack of respect for her office and hinted that politicians may feel the same way as market traders. She may be a well-qualified economist but she could do with a crash course on presenting and speaking to an audience.

All the trends on VectorVest are down at the end of trading on Friday 12th February as I write. Friday was an up on the back of the oil price day but not enough to change the Primary Wave to UP. The underlying trend on VectorVest has been on a down signal since the end of 2015 and if obeyed would have kept the trader/investor well out of the way in this selloff. This is, without doubt the worst period in the stock market since the bear market of 2007 and 8.

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The underlying trend on VectorVest is determined by a very clever indicator named the Market Timing Index (MTI). The MTI is a momentum based indicator but in its composition combines the momentum (speed) of the both the price and the breadth of the market. On VectorVest we assign a BUY or Sell or Hold recommendation to each share on the LSE each day. The program keeps a careful tally of the number of BUYS divided by the number of SELLS to compute the BUY/SELL Ratio. This is the VectorVest metric that measures the breath of the market. As a market technician I feel it’s impossible to complete too much work on market breadth and volume.

The MTI indicator is mathematically massaged to fit between 0 and 2 (as is everything else on VectorVest) and above 1 the underlying trend is UP. Simply, if the MTI is less than 1 then the underlying trend is DOWN. Reacting to this indicator would have saved a few grey hairs in the last few weeks.

The MTI indicator has also a predictive element. Over the years the education department at VectorVest have noticed very useful overbought/oversold levels on the MTI which can give traders like myself a heads up, when the trend is about to turn.

When the MTI gets down to 0.6/0.65 that’s a good place to expect the downtrend to change to UP. At a MTI of 1.6 then the UP trend looks mature and maybe it’s time for short term traders to take profits.

At present the UK VectorVest Composite has made a new low but I notice the MTI has made a slightly higher low. The MTI is sitting at a value of 0.66. This bullish divergence between the Composite and the MTI at a much oversold MTI reading makes me feel optimistic that there can be at least a rally soon.

Any such rally (which may have started today) needs to be confirmed before rushing into battle. I have spoken at length in this blog about the series of signals that occur at each turn and there is NO sign of these at present.

Although I am expecting a rally (which my cycles analyze reckons could last into May) the facts are saying strongly that the trends are down on all fronts. The support levels on the SP500 and the Ft100 are easy to see. If these obvious levels break then I fear a move down to the 2007 highs. At the 2007 high there is a confluence of this level and a FIB cluster of support. The chart of the SP500 is shown below.
david

I won’t do anything in stocks myself until I get a signal from my preferred Market Timing System which is known as the DEW and there is NO sign of that at the moment.

David Paul
February 12th 2016

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Accept being wrong in order to be right….

Many traders spend an inordinate amount of time trying to avoid being wrong (having losing trades). They’re obsessed about being right and having high win rate strategies or systems. You can hardly blame them with all the nonsense out on the web about having high win rates.

The problem is these people become fodder for the market because this type of thinking is very dangerous. Wanting to be right as often as possible leads traders into having ultra wide stops or not using stops at all. It also encourages revenge trading after having taken a few losers plus it breeds over gearing – the need to make back losses.

As floored humans, we all have it hard wired into our DNA that we should be right as much as possible. We are taught from infant that being wrong is bad and this follows us throughout our education and spills over into our careers as an adult. So when we first get into trading, it’s counter-intuitive for us to immediately accept that we are going to be wrong 40% or 50% of the time. No wonder so many new traders give up!

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So what’s a trader to do? Spend less time looking for the holy grail strategy or system and more time developing your trader mindset. I can tell you right now that I’ve been involved with traders of all types over the years; I’ve trained new traders; I’ve traded for funds; I have professional traders as friends and I’ve also seen every trick in the book that guru’s pull.

The very best traders out of all of them have never been those with the hottest strategy. Don’t get me wrong, I’ve seen traders pull off some amazing results over short periods, but the best traders were those not with the best strategy, but with the best mindset. They’re able to adapt to an ever evolving market and accept that they will have losing periods. I always remember an ex-market maker turned money manager say to me, ‘my job is not to purely chase performance, once I have made my targets, I spend the rest of the year defending the profits I’ve made’.

In order to develop as traders, we have to accept having losses. Once we can do that, we can transcend to the next level and realise that we can only control the controllables, the rest we needn’t exert to much effort worrying about….

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Today’s chart is that of EUR/GBP. It’s had a great run of late but I’m seeing a developing divergence looking at the MACD. So for now, it looks like it could take a breather and pull back. A break of the trend line drawn would help confirm this situation.

Have a great week

Charlie Burton, Ezeetrader

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