The US and UK economies may have returned to growth but the fear of another meltdown remains close to the surface, in the minds of many, within the investment community. This wasn’t the case prior to 2007.
Engaging Prize winning economists proves no real help in that they are polarized in their opinion of the future. Many point to the fact that the assets and wealth in the “rich” nations of Western Europe and the US, vastly outweighs debt and that there is nothing much to worry about. Other similarly qualified fellows suggest strongly that the debt burden is unmanageable and that sooner or later a large default is due.
Never let a good potential crisis go to waste, is the motto of many of the sales emails for stock market news letters that somehow invade my inbox. The general theme here is that the “world is doomed” and so will you, if you don’t subscribe to my newsletter.
There is nothing I like better, than to discuss where the stock market is heading, with my peers. Given a second I will be labelling waves, constructing Gann boxes, Andrews Pitchforks and the like. This is a great fun, BUT, I was taught by my first mentor “to take off my opinions” at the same time as hanging up my jacket, when I arrive at the trading floor. The master is the market itself and the trick is to get yourself out of the way and just listen and observe. This is remarkably hard to do as many of you reading will attest.
My dear late friend Eddie Toppel has written a wonderful little book called “Zen in the markets”. The books objective is to melt away the ego and to simply listen to the market. I heartily recommend the book. It has helped my trading more than any of the hundreds of technical analysis books in my bookcase. Eddie was a floor trader in the Chicago pits and knew his stuff. His short book I assure you will help your P/L much more than the utterances of prize winning economists.
In the last week the Primary Wave on VectorVest has been whipped back and forward as the stock markets of the world struggle to make headway through the resistance offered by a 786 retracement of the widely followed SP500 index. Yellens dovish remarks during the week pushed the index through the level and today (Friday) the index pulled back to the level and found support there. The week ended with the Primary Wave on the VectorVest Composite UK being down.
Non-Farm- Payrolls came in with a good number of 215000 new jobs being created and the US Government also upgraded the February figure. Construction and services recorded good gains while manufacturing continues to struggle. Average hourly earnings in the US increased to an annualized figure of 2.3%. In the last 5 months over 2 million people have joined or returned to the workforce. Federal Funds futures traders show little prospect for an interest rate hike in April but a high probability of such in June 2016.
The longer term trends on VectorVest remain bullish with the underlying trend, the DEW and confirmed calls all UP. The DEW in particular has been calling this market very well over the volatility of the last year. The technique gave an early BUY signal in the middle of February and that signal is still in place at the end of trading on the 1st April. Simply following this technique is a form of “listening” to the market and that’s what I am hopefully doing.
I have added two positions during the week and have now 9 shares in my portfolio. I bought into Trifast during the week. The share has good fundamentals and looks likely to break from an ascending triangle formation. If it does so I will add to the position. I also bought into Keller due to a Wyckoff “spring” pattern on a weekly chart. The “spring” setup is similar to the Lost Motion entry point that I have spoken about many times here. Again a small position to which I will add if the trade goes my way.
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I am holding Dart, Victoria, Gleeson, JD Sports, Marshalls, Persimmons, Trifast and Keller. The list is sorted by VST. Please remember that I am often wrong but over the years I have been taught to protect capital by exiting quickly and without fuss. Charles Darwin’s famous quotation sums it up well. I have a stop loss in mind for each investment and will not hesitate to take action.
It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.
I explained the overbought levels on the MTI in last week’s report. At 1.47 the MTI is saying that the London market is much overbought and that I need to be careful with open profits. The Composite is showing bearish normal divergence with most momentum indicators including the DPO. The latter is an integral part of the DEW market timing system which is the system I am using to enter and exit the market. The divergence is shown in the chart of the VectorVest Composite below.
At the webcast last Monday I put forward the case for a pullback in commodity shares and specifically a pullback in Anglo to around 400. That hasn’t happened as yet but its early days. The 400 level is a 62% retracement of the rally in Anglo over the last few months. The Midas Touch has given a long tern BUY signal in this share (and in many commodity shares) and I am endeavoring to finesse a decent entry level. The danger is here is missing a big move. As a technical analysts it’s my belief that the larger the bear the larger the subsequent bull. The bear market in commodities was the longest in history. When the dust settles there will be lots of money to be made.
Steady as she goes.
1st April 2016
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