Monthly Archive for April, 2009

A (very) Tentative Stock Market Recovery – an illustration of both the profit potential and of the danger of loss

Published on April 27, 2009 in Market Reviews. 0 Comments

The major stock market indices continue to rally but are still within their Downtrends. The noteable exceptions are the FTSE 250 and FTSE SmCap markets both of which continue to display a determination to swing into Uptrend. They are not there yet, indeed they may not get into Uptrend for a long time yet, but both these indices have now virtually completed the swing into the preliminary phase of a ‘Stage 1′ Accumulation trend*.

This creates a difficult situation; on the one hand there are an increasing number of new ‘buy’ opportunities presenting themselves from the list of the 550 or so shares in these two indices but to offer ‘buy’ alerts would run counter to the ShareHunter risk management modus which is not to trade a share contrary to the main trend of the index. At the same time we do not want to deny ourselves the opportunity to grab some decent profits from these new ‘buy’ opportunities as they present themselves.

We therefore propose to provide new ‘buy’ alerts on FTSE 250 and SmCap stocks now that these indices are in course of swinging out of Downtrend into Accumulation (Basing) trend. However, there is increased risk of loss involved when buying a share when its holding index is not in a ‘Stage 2′ Uptrend*. Cognisance must be taken of this increased level of risk and so we strongly recommend a reduced exposure to any new ‘long’ trade, at least until (‘if’) the indices do manage a swing into Uptrend.

The point being that when investing at variance to the dominant trend of the index concerned there is always present a greater possibility of a sudden reversal in the share price. Here is an illustration of what we mean -

Debenhams Plc and McBride Plc (both FTSE 250 stocks) were recently both showing as ‘buys’ from our regular scan of all shares. At the time we did not give ‘buy’ alerts on these shares as our analysis showed the index as in Downtrend at the time; we currently have cause to regret this as Debenhams would have made handsome profits to date (up from 51p to 84p last Friday). On the other hand McBride would have caused a loss (down from 147p to 116p last Friday) as it suddenly took a nosedive. McBride’s sudden move down is a classic example of the sort of move that will happen from time to time in a sideways moving market and why we recommend keeping your investment in proportion to the extra risk involved.

These features are clearly shown on the charts -

debenhams1

mcbride1

So, whilst the FTSE 250 and SmCap indices continue to display Accumulation trend* tendencies we will be providing ‘buy’ opportunity alerts and we do recommend that any trades made should be carefully structured so as to reduce the amount of potential loss.

AGS
ShareHunter

* For a full explanation of the main ‘4-Stage’ Analysis go to http://www.sharehunter.com/weinstein-analysis

Has the Stock Market Bottomed?

Published on April 22, 2009 in Market Reviews. 0 Comments

When will share prices start to move up again?

These are the sort of questions that we are being asked, almost daily.

It is not surprising that people are anxious to see a start to a price recovery and a return to rising stock market values but it is of concern to us that so many are so ready to jump aboard what they perceive as – or want to believe is – the bottom of the market.

The ShareHunter track record of identifying the market trends and turns is second to none and (hopefully) all ShareHunter-Select members are well aware of the current dominant market trend and will not be caught unawares.

Rallies in share prices in a ‘bear’ market are largely driven by over-eager investors piling in, not wishing to miss “the bottom”. They are trying to grab that first bit of growth as prices lift off the most recent low. They do not properly appreciate that, by so doing, they are risking a large part of their capital.

The current ‘bear’ market in the FTSE 350 (for example) is littered with examples of share prices that have fallen heavily then bounced (as the bottom trawlers jump in and buy) only to be followed by another halving, or more, of the reduced share price.

Barclays is a case in point –barclays1

1. = @ 250p the bottom-trawlers are buying after the long fall from the 800p area

2. = @ 400p note the very wide bar coincident with the spike increase in volume. This is the “smart money” selling out to the bottom-trawlers who are now buying even more (after the price rises). The price then falls off!

3. = @ 200p the price has halved in 3 weeks! The bottom trawlers start selling out as the 50% fall starts to hurt. They continue to sell as the price keeps falling – eventually to 50p!!

4. = @ 50p. Just look at the increased volume again; this is the last sigh of the exhausted and demoralised bottom trawlers finally selling out (back to the “smart money”) – an 85% loss from 400p! And then, of course, the price rallies again.

5. = @ 200p again. Where is the price going from here? Up or Down?

The ShareHunter answer is – don’t bother; don’t take the risk by buying now. Wait for the confirmation that the ‘bear’ is dead and the ‘bull’ has taken new life. Yes, you will miss out on that first (admittedly exciting) growth spurt but then you will not have put your hard earned capital at the great risk involved; and there will, in a ‘bull’ market, be plenty more growth to be captured.

Leaving the example of Barclays behind let’s look at the main market indices. How do we know when the trend will have changed so that the risk is less and the opportunity for gain is greater?

Well, as ShareHunter members know, there are 8 trend indicators that we require to all be pointing in the same direction and there is one more – the cross-over of the 13 and 34 week exponential moving averages.

This has been a reliable guide in the past (but should never be viewed in isolation, no matter how good).

Here are the charts for the FTSE 100, the FTSE 250 and the S&P 500 showing this one indicator –

2-expos-ftse-100

2-expos-ftse-25022-expos-sp

You can quickly see how the crossover of these two MAs has signalled the start of a new trend.

Obviously we now wait for these two to cross again as that event will, when taken with the other 8 indicators, signal the time to start filling the portfolio with selected (‘best performing’) stocks again.

For the opportunity to make money from stock market investing without undue risk you might appreciate the power of the ShareHunter analysis.

With the addition of the ‘12-Stage’ trend analysis applied to each individual share identifying ‘wait’, ‘buy’, ‘hold’ and ’sell’ positions the opportunity to “get” the final bottom and to then start buying equities presents a very exciting prospect.

The ShareHunter Team

21 April 2009

Market Review Update as at 5th April

Published on April 15, 2009 in Market Reviews. 0 Comments

The markets are, quite frankly, in a bit of a mess – all over the place. It is a very interesting set of charts that confronts us. The FTSE 250 continues to be the strongest index and is edging closer to swinging out of its downtrend. But it is alone (amongst more than equals) in this regard and we wonder if we can seriously believe that the FTSE 250 is going to show the World the way to go (perhaps Gordon Brown is doing the buying to send it upwards so as to maintain his self believing world dominance!).

The ‘normal’ behaviour (if that term can ever be applied to stock markets) one would expect it to be the large companies – those with hefty reserves and with best prospects for surviving this vicious downturn in World values and trade that would attract the main buying interest; but it is these companies that seem to be losing out (in terms of share buying interest) to the smaller and even small-cap companies. Again, ‘normally’ one would expect the smaller companies to suffer share price reductions for longer.

But here we have the three ‘Big Sisters’ in the form of the FTSE 100, the DJIA and the S&P 500 all still showing largely negative tendencies and trends whereas the smaller FTSE 250 and even the FTSE SmCap markets are showing increasing signs of buying interest and strength. Should these trends continue into the coming week then we can expect to be alerting you to new ‘buy now’ alerts. And there are plenty of (possibly excellent) candidates just waiting for their index (the FTSE 250 particularly) to confirm its move out of the ‘Stage 4′ Downtrend that has held sway since late 2007 into a new ‘Stage 1′ Accumulation trend.

If (and we should repeat ‘if’ at this stage) this happens then we will be able to put out ‘buy’ alerts for shares in sectors that have themselves moved into a ‘Stage 1′ trend.

After 2 years of telling you not to buy shares, here we may be at last, on the cusp of a change – OR NOT – it may yet all revert to the current dominant (down) trend – so let’s not jump the gun.

We use 8 separate trend indicators when analysing the trends of the main indices; here is the current make-up of each. Note just how ‘out or sync’ is the FTSE 250 (and, to a slightly lesser extent, the FTSE SmCap) with the other indices:

-                        Positive (for Uptrend)                  Neutral (indecisive)                   Negative (for Downtrend)

FTSE 100                         0                                              4                                             4

FTSE250                         4                                              3                                             1

FTSE SmCap                  4                                              0                                             4

S&P 500                         2                                              0                                             6

DJIA                                2                                              1                                             5

NASD 100                     2                                              4                                             2 

Has the Stock Market Recovery started? -3rd April 2009

Published on April 15, 2009 in Uncategorized. 0 Comments

As we write the stock market continues with its current rally. 

From a fundamental point of view we cannot really fathom why the market has moved up so far and we have a sneaking suspicion that there is a degree of manipulation in being which is allowing a number of professional fund managers to sell into the rise (and, by so doing, get better prices for their stock sales and also to avoid the possibility of themselves being the cause of further price collapse).

 

We have, over the last few weeks suffered a (exceptional, it has to be said) run of losses after a long profitable period The cause has been two fold – firstly we have selected mainly FTSE 250 (midcap) stocks and secondly, it is those very stocks (and the FTSE 250 index) that have experienced the support of a long consolidation move rather than followed the downward path of the other major indices (including its big sister index the FTSE 100).

 

This can be easily seen from the charts below. Note how it is the FTSE 250 that has refused to follow the other indices down, even though it is, like the others, still in a strong technical downtrend -

 

 

 

 

 

 

 

 

 

The FTSE 250 is now hitting its head on an important technical resistance level (see the analysis below) and that could mean that it will turn over and go back down again, perhaps starting tomorrow.

 

This loss making period in which we have been trapped over the last few months will, of course, end at some point. The methodology of the investment strategy is to use medium/long term trend identification (ironically, so as not to get caught up in whipsawing price volatility) and the lesson of the value of this approach over the last 6 years is that there are periods, such as now, when the markets move in a minor trend contrary to the main trend, which can cause an increase in stop-outs but also that these periods are followed by re-assertion of the main trend or the start of a new trend wherefrom recovery and profits are made. We, like you no doubt, just wish that this is imminent and that this current dismal period would end. What can be certain of is that when the main trend re-asserts itself or if it changes, ShareHunter will be adapting the investment bias to accord with it.

 

In case you are interested, here is a précis of our current analysis of the FTSE 250 index -

 spec-250

 

Chart Analysis -

 

The FTSE 250 has now reached a decision point. The question is it going to lead all of the other world indices into an Uptrend or is it a big flash in the pan?

Firstly note how it has moved sideways for several months (since Nov’08) to the point where it is now meeting its 30wk moving average (the red line); when this happens it is nearly always a point of change for the direction of the index. You can see how the index fell away on the three previous occasions that it has met with its moving average during this downtrend.

 

Of course, it could be different this time (at some point the index will cross over and start a new uptrend) but we have to allow that it is likely to fall away for the fourth time, particularly as the other major indices are in steep downtrend.

Another reason why the index is more likely than not to fall away again is that it is also at the level of the three highs of the consolidation move and so it could now make a fourth high at this level. This resistance level is at the 6850 area. (As we write, the FTSE 250 is standing at 6870!!).

 

The volume levels increased during September ‘08 just before the big price falls in October showing that there was a preponderance of selling and the volume levels have fallen off since and there has been no marked price rises or falls. This indicates a balance of sellers and buyers. The future direction of this index will be dictated by how the volume is constructed over the coming weeks.

 

It is also worth noting that there was/is potential for this index to fall to the level of the 2003 low (at the 3800 area) which is exactly what the other major indices (the FTSE 100, the S&P 500 and the DJIA) have already done. In this regard and the length of this consolidation period the FTSE 250 has been a law unto itself and certainly something of a conundrum. But the answer to our title question is “No – not yet, but keep watching this space”.

 

AGS

ShareHunter

03.04.09

Is M&S a buy or isn’t it? – 2nd April 2009

Published on April 15, 2009 in ShareHunter News. 0 Comments

Is Marks & Spencers a buy or isn’t it?

At ShareHunter we have been very reluctant to offer any buy/sell alerts over the past few weeks. The reason being that we do not wish to accept for ourselves nor put our members in line for the increased risk that is present when buying or selling shares when the underlying market trends (the intermediate trends) are so volatile and at odds with each other.

The dominant trend of all of the major market indices is still down. The increases of the last few days are, so far, nothing more than a (strong) rally within the main downtrend. Of course that could change soon and the markets could swing into a ‘Stage 1′ Accumulation* phase but that has not happened yet and so we accord with our ‘safety first’ approach and refrain for giving ‘buy’ alerts until the market index has swung out of its ‘Stage 4′ Downtrend* mode into, at least, a ‘Stage 1′ Accumulation phase.

The point being that when the market is in downtrend any share that is showing uptrend tendencies can suffer quick reversals and so cause a loss or can just continue to move sideways and produce no price increase or profit.

Marks & Spencers’ shares provide an excellent example. The shares have just enjoyed a big price hike. Many have bought but we have not yet given it as a ‘buy’ alert even though the share price has now moved into an early ‘Stage 2 Uptrend’* phase. We will give it as a ‘buy’ only if/when the FTSE 100 moves from Downtrend to Accumulation trend.

Look at what has happened with M&S (FTSE 100 – mks) shares -

 mks23

 After the strong uptrend from Oct.’05 to Dec.’06 the share entered a Stage 3 Distribution* trend. This was then followed (as a Stage 3 usually is) by a Stage 4 Downtrend* which lasted from July ‘07 to July ‘08.

From July ‘08 the share price has meandered along sideways in a Stage 1 Accumulation trend with buyers and sellers in more or less equal proportion.

It is now, at point ‘C’ on the chart that the share can be considered as a possible buy. BUT, firstly it always involves extra risk if there is no meaningful increase in volume (and there isn’t) to support a sudden rise in price. Secondly, the main FTSE 100 index (of which MKS is a part) is still in a (mature) Downtrend so ShareHunter cannot give a ‘buy’ alert for MKS shares. The risk involved in buying now, before the main market trend has turned and is in ‘sync’ with MKS shares, can be seen from the chart:

At point ‘A’ in June ‘04 there was a similar large price hike coincident with an increase in the volume but it all came to nought – the price then just meandered sideways for 15 months (June ‘04 to Sept. ‘05). The reason – the dominant trend of the FTSE 100 at the time was a ‘Stage 3′ Distribution trend. So the main market was moving sideways and this trend did not support the start of a new uptrend for the share – just as it doesn’t now with the main market trend being a downtrend.

But then look at another similar price hike in M&S shares in Oct. ‘05 (at point ‘B’ on the chart). There was a less defined increase in volume but again the price rise took the share price up and through resistance. There the followed a glorious ‘Stage2 Uptrend which lasted until Jan.’07. The difference was that this time the dominant market trend (of the FTSE 100) was also a strong ‘Stage 2′ Uptrend so the share was in close synchronisation with the main market trend.

And just because we wait for the main market trend and the trend of MKS to move into line with each other does not mean that we miss out on “getting in early”. There is too much risk involved in getting in so early and very little gain to be missed if we wait until the main trends all move into uptrend. There will always be sufficient strength of a full blown Stage 2 Uptrend to provide serious profits with lower risk.

*For a detailed explanation of the 4 Stages please click on ‘Weinstein Analysis’ in the menu on the left hand side of the page

AGS

ShareHunter

02.04.09

Markets Review – as at 30th March

Published on April 15, 2009 in Market Reviews. 0 Comments

FTSE 100 – The rally has run for 3 weeks now and so could end this week. It certainly has not shown to be very strong and there has been no significant increase in trading volume. If the rally continues then it could take the index up towards a meeting with its 30-wk moving average, currently at the 4260 level, but that is not looking a very real prospect. The downtrend is still the main trend and a 3 week rally is a perfectly normal reaction within a strong downtrend; if it does extend to 4th week this week then it could continue for up to 7 weeks. Doesn’t look too likely though.

FTSE 250 – The congestion phase continues and has now been in place for a frustrating, whipsawing, loss making, 22 weeks (since start of November 2008). It has to end at some point and that point may be nigh; the price of the index and the current level of its 30-wk moving average are close to touching. This is usually a decision point and, as the downtrend is still the main trend of this index, this could be a ‘kiss of death’ causing the market to recommence its downward spiral. Hold tight until the signals become clearer.

S&P 500 – This really is a very interesting picture. It is the big increase in recent trading volume on this index and on the DJIA) that gives rise to a need to watch the market movement very carefully over the next two or three weeks. The S&P 500 has pulled up back above the important resistance/support level at 790 and has powered upwards. But then it needed to – it had fallen too far too fast away from its 30-wk moving average and needed to get back closer. That it is now doing and so we should soon see if the buyers are going to continue to pile in or if they are going to get cold feet and so let the sellers take the index back down again. This week should give a good indication.

Heidi’s Hiatus….27th March 2009

Published on April 15, 2009 in ShareHunter News. 0 Comments

We came across this article in an Australian magazine. It gives us a new slant on the Global Financial Crisis and we thought that you might be interested to read it (we suggest over a beer or glass of wine or two!!) -

The Global Financial Crisis explained in simple terms:
Heidi is the proprietor of a bar in Berlin. To increase sales she decides to allow her regular customers, most of whom are unemployed alcoholics, to drink now but to pay later.

She keeps track of the consumed drinks in a ledger (thereby granting loans to the customers). Word gets around and new customers flood Heidi’s bar. Taking advantage of her customers’ freedom from immediate payment constraints, Heidi increases her prices of wine and beer, the most consumed beverages.

Her sales volume increases massively. A young and dynamic customer service consultant at the local bank recognises these customers’ debts as valuable future assets and increases Heidi’s borrowing limit at the bank. He sees no reason for undue concern since he has the debts of the (alcoholic) customers as collateral.

At the bank’s corporate headquarters, expert bankers transform these customer assets into Drink Bonds, ALK Bonds and Puke Bonds. These securities are then traded on markets world-wide. No-one really understands what these abreviations mean or how the securities are guaranteed. Nevertheless, as their prices continuously climb, the securities become top-selling items.

One day, though the prices are still climbing, a risk manager at the bank (subsequently fired due to his negativity) decides the time has come to demand payment of the debts incurred by the drinkers at Heidi’s bar. However, they cannot pay them. Heidi cannot fulfill her loan obligations to the bank and claims bankruptcy.

Drink Bonds and ALK Bonds drop in price by 95%. Puke Bonds performs better, stabilising in price after dropping by 80%. The suppliers of Heidi’s bar, having granted her generous payment due dates and having invested in the securities themselves, are faced with a new situation. Her wine supplier claims bankruptcy, her beer supplier is taken over by a competitor.

The bank is saved by the goverment after dramatic round-the-clock consultations by leaders of the governing political parties. The funds required for this purpose are obtained by a tax levied against the non-drinkers.
Simple isn’t it!

22 March 2009 – Markets Review Update

Published on April 15, 2009 in Market Reviews. 0 Comments

FTSE 100 – The rises in the FTSE 100 over the past two weeks are nothing more than a short rally within the main downtrend. The index is likely to fall back down to the important 3475 level (but not necessarily during this coming week).

FTSE 250 – This market index remains in a congestion (sideways) trend; the main trend – which is a downtrend – being temporarily in abeyance. From the chart, you can see the recent decreases and increases in the trading volume; these suggest that, as buyers jump in (thinking, yet again, that the market has bottomed) there are others (more sanguine) who are taking advantage and selling out to them. Hence the price/index moves within a narrow, ‘congestion’ range. Our analysis suggests that the index might take a steep fall soon.

S&P 500 – As expected the market has rallied back up to the 790 level area (an important suport/resistance level). The lower close for this last week suggests that thsi rally may be very short lived. Again, look (on the chart) at the level of the volume and note how big ; was last week’s. It was just slightly less than the big volume spike last September that preceded the steep fall in the index. So, is this about to happen again? Well, it is an indicator of one of two scenarios – Either – the low of 667 three weeks ago is to be the final low and the market might now continue to climb gently and end its downtrend – Or – the professionals took advantage of hopeful buyers and sold more stock to them – in anticipation that the slide in prices is set to continue, probably taking the index down to the 600 level and, probably, then on to the 400 area. And that, dear reader, will have traumatic reflection on the FTSe’s and other European markets!

Markets Review – as at 9th March

Published on April 15, 2009 in Market Reviews. 0 Comments

The markets are continuing with their downtrends with the prospect (therefore) of more falls to come. However, there is now the possibility that the indices might enter a new congestion phase as index prices have fallen way below their moving averages and, as is (always) the way when this happens, the two will want to come closer together again at some point

The FTSE 100 has fallen to our test level and may (repeat, may) rally a little.

The FTSE 250 has, at last, started to fall away from the ‘glue’ provided by the important 6100 level. In truth this index has been something of a puzzlement to us as it just has refused to fall in concert with the other indices but it is now looking as though it might now conform and thrust downwards. The danger, as we have expressed previously, is that it might play ‘catch-up’ and fall steeply and fast (on the other hand it could just continue to confound us and our analysis!).

The DJIA has now fallen below support and is plumbing new depths.

The S&P 500 has followed our thought that it would fall hard and quickly once it broke below the important support area at 790.

We now have the following levels as likely to provide some temporary support and, possibly a small rally, before lower prices recommence (if the downtrend is still in play)..

Temporary support should be found at, or close to, -

FTSE 100 – 3280                               FTSE 250 – 5000

DJIA – 5000                                        S&P 500 – 600