Will the FTSE go much higher?

Published on March 8, 2010 in Education and Market Reviews. 0 Comments Tags: , , , , , , , .

The FTSE 100 moved ahead strongly last week, confirming an underlying strength.

The ‘change direction’ effect of meeting with its 30wk Moving Average continued to work for all the major indices last week and particularly for the FTSE 100.

With the S&P 500 in process of a (so far successful) test of its important support/resistance level at 1122 all looks to be well with the uptrends of the various markets.

But – and it is a worrying ‘but’ – whereas most of the technical signals for the S&P, the FTSE 100 and 250 and the Dow and Nasdaq 100 are nearly all positive we do have one worrying niggle; a signal that is just not producing the same positive vibes. It is our Momentum Indicator (“MI”).

In the past the MI has been a reliable early indicator of a looming market top and so we do take cognisance of it. Our concern is that this indicator is just not partying in anything like the same way as the indices. In fact, at present, it is travelling in a different direction when it should, if all was well, be moving in the same direction as the indices. The MI is suggesting to mus that the indices may well be putting in a top by reversing direction soon.

From the two charts below you can quickly see how both the FTSE and the S&P have moved upwards during the last week or two whereas the MI has continued to drift sideways or downwards.
FTSE + MIS&P + MI

If the markets are to continue upwards we would expect to see the MI also moving upwards. But it is refusing so to do. The indices and the MI are moving in different directions. Not a good sign.

Of course all of this could change anfd the MI join the ‘buying’ party but it could also be the case that the party is nearly over.

So, what to do?

Answer; Do not get carried away with the current level of enthusiasm and overcommit to this market. And, where you are committed, keep a close eye on your exit stop prices and keep them up to date.

Individual market commentary and illustrative charts are available at http://www.sharehunter.com/news/market-review/

Is RBS About to Rocket?

Published on March 4, 2010 in Uncategorized. 0 Comments Tags: , , , , , .

This is a headline that we have just seen. Our answer is “No it isn’t – not yet anyway”.

For anyone who buys RBS shares now, in the hope that they are about to rocket upwards, would be a high risk venture suitable only to those who welcome the adrenalin rush of trading ‘penny’ stocks.

RBS shares are, however, showing movement within a ‘Basing’ trend ( which started from the Jan’09 end of the steep Downtrend). The next stage, after the Basing stage, for this share should indeed be an Uptrend but this will not occur until the price has succeeded in rising above the resistance that will be presented at the 58p level. Only then should it be considered as a ‘buy’ for medium to long term investors.

RBS - wkly2(Click on the chart to enlarge).

For (shorter term) trdaers however there will be a ‘buy’ opportunity presented when the price rises above the resistance presented at the 43p level (this being the 50% retracement of the Aug-Dec’09 bear run (see the daily price chart below). Today the price is breaking above the 38p resistance and this could be the start of a short run up to the 43p level and, if the price should manage to get above 43p then there is a very good chance that it could move quickly up to the 58p level. So there could be a short term possible gain of some 10% if the price continues up to 43p (where it is likely to turn over again. But this hardly represents a “rocket increase” as some suggest!

RBS - dly2

For the moment, we would suggest that only those with deep pockets and not given to anxiety attacks should consider buying RBS shares.

RELY ON THE RELIABLE  -  TECHNICAL RESEARCH AND ANALYSIS FROM SHAREHUNTER.COM

The FTSE 100 – Is it going Up or Down?

Published on February 28, 2010 in Education and Market Reviews. 2 Comments Tags: , , , , , , , , , , , .

Last week’s efforts by the markets, and by the FTSE 100 in particular, leaves the impression that the index exhausted itself with its effort in bouncing up off of its 30wk Moving Average the week before. It is as though it felt it had done too much and used too much energy as last week’s efforts lacked any real signs of continuing strength.

An inconclusive week which, just to make life difficult, could be followed this coming week with either renewed energy and a rise up the scale or an absence of buying interest and a fall back towards another test of its (still rising) 30wk.MA.

So, it does look as though we are due for another inconclusive week of sideways movement and whipsawing tendencies as we have all experienced over the last few months (just look at the short term chart of the FTSE 250 index and note how long it has just meandered sideways).

But all of this will change, and probably soon. The market will not go sideways for ever. Our technical signals are far from fully positive, in fact there are several negative signals which hint at the growing potential for a sudden collapse of the markets.

But that will only happen if the FTSE 100 falls below the 5100 level (the equivalent for the FTSE 250 is the 8888 level) and whilst the indices stay above these level there remains the possibility of a return to upward moving share prices. But that will only become a real possibility if the S&P 500 index can get back up to, and stay above,above the 1122 level and that is not going to be easy for it to achieve as it too has a number of negative signals that suggest a sharp decline is still a danger.

So, the message remains one of ‘no change – but change coming soon’. It is a ‘Baden-Powell’ message – “Be Prepared”

Individual market commentary and illustrative charts are available at http://www.sharehunter.com/news/market-review/

Should you Buy Marks & Spencer Shares?

Published on February 23, 2010 in Education and Market Reviews. 0 Comments Tags: , , , .

The immediate answer is ‘No’ – not yet anyway.

M & S shares are struggling and failing to make any immediate progress. The technical analysis shows that the shares are on the verge of entering a downtrend (which means that lower prices would become almost certain). But a downtrend is not yet fully in place and thbere is considerable technical support just underneath the current price level. This support may be sufficient to push the share price back up the scale – but it is a matter of ‘may’ and, therefore, you would be well advised to stay out of M & S stock until the picture becomes clearer.

The important point about this is that if the support does not provide a base for the share price then it is odds-on that the price will fall – and it could fall rapidly once/if the support levels are broken.

Look at the chart of the daily price history over the last year -

marks - dly

You can immediately see that the price has broken below the trend line from the March’09 low. This signals weakness, as does the fact that the price never got back up to anywhere near the half-way point, at 475p, of the 2007-09 collapse – as you can see from the weekly price chart, here -

marks - wkly

Now, there are three support levels close together for the current position and, if they do their job then the price should stableise and could start to recover but – and it is a strong ‘but’ – if these levels should fail then the share price is likely to collapse. Certainly down to the 280p level and, probably, on down to the 230p area!

For those of a technical bent, the three levels are 1.  334p = the 25% retracement of the 2007-09 collapse.   2.  326p = the level of the Aug’09 and Feb’10 lows and   3.  321p = the 50% retracement level of the 2009 recovery rally.

So, an aggressive ’short-sell’ trader might go short of M & S stock now but it is safer to wait. The price to wait for is 320p. If that level is broken then the price is likely to  fall like a stone and a ’short’ trade will produce big profits. But if the 320p level should hold good and support the price it will not mean that the shares are a ‘buy’. It will need a lot more than that to create a safe and certain ‘buy’ opportunity. More of which later – or on request if you need immediate knowledge.

Stock Market Armaggedon Deferred Not Cancelled

Published on February 21, 2010 in Uncategorized. 0 Comments Tags: , , , , , , , .

It is satisfying that our analysis was correct in that the 30wk Moving Average of each of the main indices performed as we said it should and had the effect of changing the direction of the index. Each index fell and then reversed back up the scale from the meeting point with its MA and created new trend lows in so doing (but, significantly, not higher lows).

We would tempting fate to say that worst of the danger (of a collapse of share prices) has now passed; at best all we can say now is that it has been deferred! The markets are not out of the woods yet; there are still too many potentially negative signals for us to be able to feel confident that another test of the moving averages support levels will not be made soon.

For the FTSE 100 the situation is that it must climb to and break above the January high at 5600 before a climb to test 5770 becomes a real prospect. Whilst the FTSE remains below 5600 there remains the probability of a fall back to the 5100 area.

So, as the Uptrends are still in place – although weaker than in the July/December ’09 period – we are back to eschewing all but the very occasional ( and only very obvious) ‘short’ trade alert and will stay with identifying the ‘long’ side of potential trades.

Individual market commentary and illustrative charts are available at http://www.sharehunter.com/news/market-review/

Is Marks & Spencers a Buy?

Published on February 16, 2010 in Education and ShareHunter News. 0 Comments Tags: , , , , .

No! Is the direct answer. Well not yet anyway.

Technical Analysis shows that the dominant trend, which has been an Uptrend, is in process of change. It has not quite yet swung into a Downtrend but is very close to doing so. If, or when, it does then M&S will not only not be a buy but will become a good ’short-sell’ prospect.

Look at the weekly chart -

M&S - wkly(Click on chart to enlarge)

Note that the price has fallen below the 30wk Moving Average. This is a first signal of an impending change in trend. The price has also fallen below the main uptrend line that has supported the price during the 2009-2010 recovery rally, another signal of change.

But there is potential support for the price in the form of the 323p level – which is the 50% retracement of the March ‘09 to January 20′10 recovery rally. This 323p level may provide support and so prevent further price falls – but that does not mean that the stock can be considered as a ‘buy’ – simply that it will not become a ’short’ trade prospect (until the 323p level is broken).

Now look at the daily price chart -

m&S - dly

The 323p level of potential support is just below the current price. A fall below this level will prove weakness in the stock price and will encourage a cross-over of the two exponential MAs which will provide confirmation of a swing into a Downtrend and, thereby, indicate the potential for (much) lower prices. Note also how the recent higher volumes have co-incided with price falls – a sure sign that selling is outweighing buying!

The Direction of the Stock Market

Published on February 14, 2010 in Education and Market Reviews. 0 Comments Tags: , , .

The main UK and US market indices have fallen to the level of their individual 30wk moving averages. As we have outlined before, this is a normal event for any market correction and is usually a cause for the index to change direction ( and, in this case, to bounce).

And, indeed, this is exactly what happened last week. So we should relax a little and be content that the worst of the correction is now over and so provide you with a number of ‘hot’ buy prospects. But we cannot! The reason is that there are so many other signals that suggest that the markets possess an inherent weakness. Therefore last week’s slight and shallow recovery could be a natural but very limited bounce right on potential support levels and that the overall weakness may yet come to prevail and take matter the markets lower.

Our analysis does,then, continue to lead us to the view that these markets are ‘an accident that may be about to happen’!

We would like to be wrong (it always feels nicer when the markets go up rather than down because more people are happier) but, really, it will not matter at all once the (new?) trend becomes established as we will be able to call ‘shorts’ just as easily – and probably more profitably – than ‘buys’.

So, we just wish that we could be more definitive but, at this stage, it just in not possible; the support levels have held good for the last couple of weeks and we need to see if this will continue.

Patience has to remain the watchword.

Individual market commentary and illustrative charts are available at http://www.sharehunter.com/news/market-review/

Which Way is the Market Heading?

Published on February 11, 2010 in Uncategorized. 0 Comments Tags: , , , , , , .

The FTSE 350 stocks are a real mixed pot.

Some are in short term downtrends – but not definitive enough to trade short just yet.

Others are retracing back to the level of their 30wk MA where they should make a turn back upwards – but are not yet showing enough signs of strength for us to be able to put them forward as a buy.

Yet others, the majority, are just trading sideways; drifting with no definitive trend neither up nor down – so a trade here would be more ‘in hope’ than anything else and that certainly is no proper basis for a trade.

As an example of the influence of the market’s current volatility we had identified one ‘short’ trade this morning in the form of Dana Petroleum (dnx). It is in both short term and long term downtrend. It closed yesterday at 1008p but there it is this morning up by 3% at 1030p. That’s strength not weakness. This will probably only be short lived but this sort of volatility is not only a nuisance but also it will cause whipsawing losses if we succumb to the temptation of making the trade before we are really certain of it. We will be watching Dana.

What is both a source of confidence in the market and yet, at the same time, a source of worry that a collapse may be just around the corner, is how the indices are staying as high as they are with so much worry and concern abounding throughout the financial world. If it is not the sub-prime, it is the jobless figures; if it is not the size of UK’s sovereign debt it is a double dip recession or a downgraded credit rating; if it is not Greece it is the Euro, or Spain….and yet the FTSE index hangs in up there!!

Our FTSE Sector analysis confirms and illustrates the current underlying strength of the market. Of 35 sectors our long-term (weekly prices) trend analysis shows –

9 sectors in Stage 1 trends (Basing/accumulation trend)

22 sectors in Stage 2 trends (Uptrend)

4 sectors in Stage 3 trends (Topping trend)

And, significantly, No sector is in a Stage 4 (Downtrend).

Our major concern right now is that that “current underlying strength” may be masking an inherent and serious weakness. It is an aspect which we all need to be mindful of.

‘Quantative Easing’ – its Effect on the Stock Market

Published on February 10, 2010 in Education, Market Reviews and ShareHunter News. 2 Comments Tags: , , , , , .

Quantitative Easing’ is a euphemism for ‘fake money’. It is a high fallutin’ modern-day term given to the simple, ultimately very costly, old fashioned, last gasp of the culpable politician, resort of printing money.

In the longer term the billions of ‘monopoly’ £1 notes printed under this authoritative sounding term ‘Quantitative Easing’ will doubtless have a serious and deleterious effect on the value of Sterling and on interest rates.

The one thing that it hasn’t done is to reduce the potentially frightful impact of the multi-billion pound sovereign debt of UK Plc. piled up by the incompetents who were, and still are, in charge of our national economy and well being.

In the short term it has served to keep the wolf – in the form of a UK economic collapse – at bay. And that, we have to assume was its main purpose – ahead of an imminent general election!

The other achievement of QE is to delay the reckoning that has to come on the stock market. Our concern remains that now, with the withdrawal of the QE ‘funny’ money, that reckoning may be even harder. There can be little doubt that the stock market’s significant 2009-2010 rally is a direct result of the QE printed pounds. Equally then, there should be little doubt that the ending of QE will have a detrimental effect by removing the prop of so many new pounds.

It is also of concern that having ’shot the QE bolt’ there is nothing left in the politicos’ armoury to prevent the next collapse. But perhaps we display too much naivety as we should not be surprised at the audacious short term fixes that our politicians can magic up.

The concoction of QE has had the effect of encouraging the FTSE to rise to a level from which, if the historical stock pricing pattern continues to be followed, will see it crash down again. We have written several times over the last few weeks of the remarkable, and worrying, similarities that exist between the FTSE now and the Dow Jones index in 1929-32 ( see our Jan 28, 2010 blog below – “Is the Current Market Downturn About to Get Worse – Much Worse??”).

The buyers have slowed down on both the UK and US stock markets (our Momentum Indicator is still declining) and the FTSE 100 index is now, once again, on a cliff edge.

The FTSE has support at the 5100 level area and is clinging to this as we write. If that level fails (and we have to say that it is looking as thought it might) then the FTSE 100 will fall quickly to the 4700 area. And, if the historical price pattern continues in play then the FTSE 100 will be down to 3500 within months.

But whichever way that the market goes there is such huge potential for all of us. If share prices do collapse then we will make hay (profits!) on the downside by short-selling stocks. If the market rallies we will be back buying stocks. What we have to hope is that the current sideways whipsawing movement is overtaken by a definitive move, be it up or down.

Then there is the bonanza opportunity. This will be if/when the market crashes to a final low.

Back in 1932 the ‘Dow’ made a final low at 40.5 . This was down nearly 90% from the Oct. 1929 high and equities became a dirty word. No-one wanted to own equities. Bonds became the flavour of the month and subsequent years. Yet by 1937 the ‘Dow’ had risen to 195 – a rise of some 380% in average share prices. And, because of the ‘buy Bonds’ propaganda most missed that huge profit opportunity.

Dow 1929 - 2010Click on chart to enlarge

So, dear reader, if the FTSE 100 does crash down to the 3500 area later this year we are likely to hear much the same ‘buy Bonds avoid equities’ story but, this time, we – and hopefully you – will be ‘in there’ as soon as the trend change shows itself.

The FTSE 100 Index, weekly -

FTSE 2000- 2010

Click on chart to enlarge.