Baby steps towards an Up wave

After a sell off early in the week the support levels I spoke of last week have held. The falling wedge is one of my favourite trading patterns and I have specialized in its nuances over many years of trading.

On the Ft100 the pattern setup exactly as I was setting up for a VectorVest User Group in South Africa. It was fun to illustrate how well the pattern defines the turn and details an exact which gets the brave trader into the position at the cusp of the turn in real time. On Friday morning the London market gapped to the target from the falling wedge. This does not mean that the market will not go higher. It simply means that the falling wedge is now played out in terms of predicting any further price movement. The chart of the VectorVest composite is shown below and features the large reverse divergence that’s been building up between the price curve and the momentum of the price as defined by the Macd. This is positive and many refer to a divergence of this type as a “slingshot”.

david

It was quite a week with the Greek situation, China falling apart and of course the NYSE going MIA for most of a morning. Since the top on June 12th the Shanghai Composite has crashed by 34%. It bounced on Friday but the rally is suspect, as intense government intervention is putting steps in place to prop up the index. History shows that this intervention and efforts to bypass the free market will backfire. I have no doubt that the index has further to fall.

As you know I am keenly watching resource shares and feel that the trend down in resources in mature. However there is no sign or confirmation of a bottom in the large listed mining shares that feature prominently in the blue chip Ft100 index. The bear market in resources in the longest in recorded history and the falls have been severe. I am a believer that the bigger the bear the bigger the new bull will be. Don’t fret I will shout here when it’s time to consider getting onboard these shares and when they go it will be a life changing moment for the brave. Appling the Midas touch technique, which is a standard layout on the VectorVest program, would be a great way of confirming the turn on resource shares. As the name implies this technique was engineering by Dr DiLiddo to trade the US Gold index. In summary I am watching resource shares but it’s too early to consider getting on board and the Chinese market falling hard won’t help. The turn may be many months and even a year away.

Fed Chair Yellen made a clear intention of putting up US short term interest rates during 2015 in a talk last week. Her counterpart at the IMF is recommending that the FED not do this. It’s a very interesting decision as the academics have long felt that it was increasing rates too soon after the 1929 recession that precipitated the Great Depression.

I have long felt that the stock indices of the world require a 5th leg upwards to complete the wave that started in October 2014 and I am hoping that this started during the course of last week. This should take the VectorVest Composite up to and exceed the high made during April 2015. Any failure to make this high and a fall below the lows of last week (the resistance/support line that’s been in place for months) would be a very bearish event. MR Elliott would call it a truncation.

The facts are accurately described by the trends and market breath measurements on the VectorVest program. Last week I detailed the sequence of the turn from a down trend to a new uptrend. The first signal has fired and the Primary Wave has turned positive. This is a very aggressive signal and it’s not for me, save from some intraday short term spread betting activity.

If the market continues upward on Monday then the next signal should fire soon. This would be a Green Light in the price column of the Color Guard on the home page of VectorVest. This simply means that the price of the VectorVest Composite has risen day over day and week over week. It’s an aggressive signal but excellent for those who wish to get into positions early and build on that position as the more confirmed signals follow. Lesson 3 on the “Successful Investor Quick Start Course” which is located under the Training tab on the VectorVest program describes the technique in detail. Please take a few moments and study this lesson to prepare. Even if you just observe the signal the first time around it will be great experience.

If all goes well I would expect to have stuck my toes back into the market during the course of a very busy week ahead.

To trial the full VectorVest system for 5 weeks (including 5 disc 2 day seminar plus free investment book and UK & US databases) for only 5.95 GBP – please click here

I will be presenting my talk, “How to Locate and Trade the Fast Moves with VectorVest”, at this week´s Round-the-Clock-Trader webinar event on Thursday, 16th July at 2pm – to sign up free please click here

David Paul

July 11th 2015

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