Monthly Archive for June, 2009

The state of the Stock Markets

Published on June 28, 2009 in Market Reviews. 0 Comments

Our Overall Market Ratings (‘OMRs’) for the FTSE 350 and the S&P 500 have hardly changed over the past few weeks. They continue to indicate a  progression towards a new ‘bull’ market. However the OMRs of both these major markets must, for the time being, still be considered as indicating only a potential ‘bull’ market trend rather than an actual ‘bull’ market because of the split between the Stage 1 and the Stage 2 proportions -  the majority of stocks being in Stage 1 trends.

Because of this split our concern remains the ever present possibility of a sharp retracement in prices; Stage 1 trends are always more volatile and susceptible to an increase of sellers over buyers on bad news. For the FTSE indices, for example, we dread to think what might happen if the UK’s credit rating is downgraded by Standard and Poors. This may be the catalyst that causes the index to fall back again and to develop a “W” (double bottom) pattern.

The major indices, on both sides of the Atlantic are best described as fragile, volatile and susceptible to shocks. Not the places then to be putting a lot of money or of hoping for an early and sustained recovery of previous losses.

FTSE – Sectors Analysis

Published on June 25, 2009 in Market Reviews. 0 Comments

Our ‘Stage’ analysis of 38 sectors of the FTSE 100 shows that a potential ‘bull’ market is in the offing.  Of the 4 major stages that we use to identify the current dominant trend of the stock market the majority (28 in number) are in Stage 1 – the Basing or Accumulation trend. Then there are another 7 showing as in a Stage 2 – Uptrend. This leaves just 3 sectors languishing in Downtrend (Stage 4).

The effect of the preponderence in Stage 1 suggests that a ‘bull’ market is in prospect but is not yet in being. Thus, any buying of stocks should be tempered with the knowledge that share prices could fall again (shares in a Stage 1 phase always suffer greater volatilty and uncertainty than in a Stage 2 Uptrend phase, for example).

Do we think that the bottom of the stock market is in?

Yes we do; there is a lot of technical evidence to suggest that the market will not go lower than the lows that were put in, on both sides of the Atlantic, in March this year. But that does not mean that those levels could not be revisted (and so make a classic “W” shaped bottom) if the current slow improvement is not maintained. Neither does it mean that share prices have to rise, they don’t, they could simply move sideways – and with considerable volatility.

But what of those  UK Market Sectors in Stage 1 Basing trend? Well, there are two of them that are showing early promise of a possible bull run? There is Personal Care and Household Goods -ftpc-sector(Click on chart to enlarge)

Having broken above the resistance at the (marked) level 1 at the 5100 level this index has pushed on upwards and also managed to poke its head above the next level of potential resistance at the 5800 level (marked No. 2) and has just recently fallen back to this level and managed to make a new, higher, low – a good ‘bull’ signal! If the level of support for this sector continues then it should now progress upwards to the next level of potential resistance at the 7200 level.

There will be a number of useful shares in this sector to look at with a view to buying for a useful profit.

The only other UK market sector worthy of note at the moment is the Information Technology Hardware sector -

ftth-sectorHere, though the sector is hitting its head on the latest level of resistance at the 340 level, it will be worth watching as, if it manages to break above this level, and to stay above it, then it should reasonably happily pull upwards towards a test of the next major resistance level at the 400 level area.

Wall Street – Market Sectors

Published on June 21, 2009 in Uncategorized. 0 Comments

The ShareHunter market analysis continues to suggest that the markets are slowly moving into a position from which they could make some fast upward moves. The UK’s FTSE 250 index has led the way for some weeks now and is almost ready to make a ‘breakout’ move.

The US markets have been slower off the mark but are moving ahaead, with the Nasdaq 100 leading its bigger sisters.

Both the S&P 500 and the DJIA indices have to move up to tackle the knotty problem of some overhead resistance levels. A test of these levels will see the indices either fall back for another few weeks or will see a break above the resistance and so present a ‘breakout’ opportunity.

In the event that this might happen we have scanned and analysed the US markets sectors to identify which areas might offer the fastest and best potential for some quick gains.

Of 69 sectors analysed it is heartening that the majority (59 in fact) fell into ‘positive’ territory – i.e. those having already started into early phase uptrend. In itself this suggests that the markets overall are gearing up for a new bull run (but it is, as yet, still too soon to be jumping into the market with both feet as the early phase is a delicate trend and the markets can confound any over optimism by making a swift reverse and dropping back to support levels).

But, taking the optimistic train which sectors are likely to produce some goodies? Well, of the 20 sectors in early-phase Uptrend there are four that we have identified as well worth watching for a break upwards:

Sector Industrial Gases – sector-industrial-gasesClick on chart to enlarge

sector-metals-miningsector-auto-compsector-iron-steel

With the state that the US car manufacturing is in it is surprising to see the Auto Components sector showing up so well. But, then, maybe not. We are technical analysts and know little of the fundamentals so perhaps there is something ‘out there’ that we know nothing about. What we do know is that the charts don’t lie.

More information and detailed analysis is available on request.

Stock Markets Review

Published on June 21, 2009 in Market Reviews. 0 Comments

Nothing worth commenting on after the last week’s inconclusive moves. The index demanding most attention remains the FTSE 250 and its liklihood of a test of resistance at the 8030/50 area. If it can break above this level then this index will present some very interestring opportunities for some fast moving gains. But, more likely at the moment, is that it will climb slowly towards a test of this level and so present no real excitement for a few weeks yet. But it would be nice to be wrong!

Stop and Limit Orders

Published on June 15, 2009 in Education. 0 Comments

One or two members unfortunately missed the fast move up by Heritage Oil (hoil) the other day and so were then stopped out (at evens, thankfully) when it fell back just as quickly again. Similarly with our suggestion to take profits on Talvivaara (talv) last week.

We have been asked if it sensible to enter a ‘Limit’ order at the level of our target price. Our answer is to say ‘Yes’ it is. Our reason for suggesting this is that whilst the market is in course of a trend change and before a more defined trend sets in share prices are more volatile and susceptible to fast counter moves (a la Heritage oil). This means that it is not so sensible for us to use our normal ’steady-trend’ basis of waiting for the share to ’stop itself out’.

In this more volatile market scene that is a luxury that we cannot afford; it is, therefore, much more sensible, if not necessary in volatile markets, to take profits quickly and to be grateful for them.

Our suggestion then is that at the same time you enter your trade and your stop order (never, ever, forget to put in your stop!) you might also put in a Limit order to close your trade at our suggested target price. We leave you to decide if that should be the lower or higher where we provide two target figures.

IT IS VERY IMPORTANT that when entering both your Stop and Limit prices orders you make them ‘OCO’ (‘One Cancels the Other’). Please DO NOT FAIL to do this as, otherwise, you may find that your remaining order (either the Stop or the Limit, whichever has not been traded) might continue in force and be traded later when you will suddenly find that you have an open trade that you have no recollection of making!

We will revert to our normal procedure of mainly closing on Stop-outs when the markets have returned to a more stable trend basis

The UK Stock Market – Watch for the ‘Breakout’

Published on June 14, 2009 in Market Reviews. 0 Comments

Our ‘Overall Market Ratings’ for the FTSE 350 and the S&P 500 continue to mark the  progression towards a new ‘bull’ market. The OMRs of both these major markets must, for the time being, still be considered as indicating a potential ‘bull’ market trend rather than an actual ‘bull’ market because of the split of stocks between the Stage 1 and the Stage 2 proportions.

Once again though it is the UK market that is leading the charge; the FTSE 350 now has a majority percentage of all its shares in a ‘Stage 2′ Uptrend (for the first time since September 2007). The S&P 500 is following though and could, this coming week, see a greater number of stocks move from their Stage 1 Basing trends to a Stage 2 Uptrends.

It is notable how the picture presented by the charts of these major indices has moved steadily – and convincingly – over the past few weeks towards the start of a potentially exciting new bull market. It is not quite fully in place so volatility is likely to continue and to cause some damage but it is all beginning to look reasonably positive.

For the Uk market; The FTSE 250 continues with resistance overhead at the 8030/50 area. The index is ready to ‘breakout’ as, if it manages to break above the 8050 level, it is likely to climb quickly to the 8880 area. This index continues to display signals of strength and a confirmed break above 8050 will present a strong ‘buy’ signal.

8th June 2009

Published on June 8, 2009 in Market Reviews. 0 Comments

Measured by our ‘Overall Market Ratings’ (‘OMRs’) the FTSE 350 and the S&P 500 have both moved quite strongly again indicating a continued progression towards a new ‘bull’ market. They both are now reading at 71 (out of a potential 100). However, the OMRs of both these major markets must, for the time being, still be considered as indicating a potential ‘bull’ market trend rather than an actual ‘bull’ market as the majority of stocks are still in a ‘Stage 1′ Basing trend. Not until the number of stocks in a Stage 1 trend have swung into a Stage 2 trend and the number in each phase is better balanced can we be confident that a full blown new ‘bull’ market is in progress.

But, for the moment, the signals are reasonably positive although the FTSE 100 and S&P 500 are both under resistance levels and this could lead to a stall in prices this week. Selective, and slight, buying of stocks in these markets remains the wisdom as, although we are pretty certain that the final lows of the markets occurred in January, ther still remains the possibility of a ‘double-dip’ low. But the liklihood of this becomes less and less as the market indices continue their upward trends.

The FTSE 250 and the Nasdaq 100 remain the most upwardly aggressive markets. Our ‘MA’s kiss’ (the upward signalling cross-over of the 13 wk and 34wk Exponential Moving Averages) has already happened on the FTSE 250 and is in process this week for the Nasdaq 100 index. The ‘kiss’ for the S&P 500, the DJIA and the FTSE 100 is still a few weeks off.

Suggest you stay wary, stay selective and stay small(ish).

Barclays shares and the Sheiks of Abu Dhabi

Published on June 4, 2009 in ShareHunter News. 0 Comments

You could be forgiven for thinking that the sale, this week, of over 1.3billion Barclays shares heralds the demise of the current rally. And you might be right. Then again, it may make no more difference than just a blip in the general run up.

How to tell whether to sell or buy? Well let’s look at the action as shown by the chart (the chart always gives the full picture and indicates what is going on).

Here is a 5 year chart of the Barclays share price ; the bottom chart shows the volume; the small middle chart shows the relative strength of the share price movements to the FTSE 100 index – which, in this case, shows the share moving better than the index average.

barclays-bank1Click on chart to enlarge

The 3 spikes in the volume tell the story when related to the price bar of the same week. The first, w/e 19 Sept 2008,  was obviously mainly selling volume (as the price fell hard the following week).

The second volume spike, w/e 23 Jan 2009,  coincided with (created!) the final low and was, very obviously, buying volume. This is where we can confidently assume that our Abu Dhabi friends did their buying. The volume then dropped off (little selling) and then, as a result, the price started to rise.

Then we can see the latest volume increase (the last bar) which corresponds with the Sheik’s selling of over 1.3 bn shares and, of course, the price correspondingly falls. But not far and not dramatically as might have been expected. Although much will now depend on what happens over the next week or two. Further selling will take the price lower but, if there is no heavy selling, then the current inherent strength of the share price should see it start to rise again.

So, to buy or sell Barclays’ shares? How do you make your decision?

Well, we suggest you refer to our chart (above) as we have marked the two current levels of support and resistance. As a holder of Barclays’ shares you might consider to sell or reduce your position if the price falls below the support level at 240p. as, if this level is broken, the price could go a lot lower.

If you are looking to buy Barclays’ shares then you might want to wait until the price has broken above the resistance at the 320p level. This would indicate continuing strength in the price run up and a lack of (any more) selling.

When moving averages kiss…

Published on June 3, 2009 in Education. 0 Comments

Will Wall Street move into Uptrend and give us a new ‘bull’ market? Has it aready done so?  We have commented previously that the UK’s FTSE 250 has, surprisingly, tended to lead the way – upwards – for the major UK and US market indices. We have also suggested that investors should not get too ‘carried away’ with the prospect of a full recovery and a new ‘bull’ market on either side of the Atlantic; accordingly that  any new involvement into the markets should be restrained and take cognisance of the possibilty of a sudden and sharp reversal.

One of the interesting signals of a major change in trend has been a cross over of the 13 and 34 week exponential moving averages (‘MAs’). The US markets, epitomised here by the S&P 500, have not yet provided this trend change-over signal -

kiss-500

(Click on Chart to enlarge)

So, although the major Downtrend may be over (at least for the time being) a ‘bull’ market Uptrend is not yet in play.

And the same scene applies to the UK’s  FTSE 100 index -

kiss-100

(Click on chart to enlarge)

But the wider UK index, the FTSE 250 has, in comparative terms, been roaring away and its two MAs are now at ‘kiss’ point as they cross over and provide the signal for a possible change in trend and the prospect of higher stock prices to come. And hinting that the US and other UK indices should follow suit and move further upwards from their tentative lift off their extreme lows.

But wait, not only do we need much heavier technical signal evidence of a change in trend than just the crossover of these two MAs but also the crossover of the MAs itself can be questionable and provide a false signal:

Repeating the FTSE 250 chart above we have now added the ‘false’ crossover that occurred in March 2002 after the market had hit bottom in Sept. 2001 at 4650  and which encouraged investors to pile into the market only for them to get nastily burned by the subsequent reversal and collapse down to the final low at 3780 in March 2003- after the subsequent the ‘bear’ crossover in June 2002 (marked with the red arrow)

kiss-250-2nd

(Click on chart to enlarge)

And therein lies the danger. All the market indices have been moving up and, in so doing, hav created a ‘V’ bottom formation. But, as 2002/03 shows this may not yet be the final low. Even if the 666 low on the S&P 500 in March 2009 does turn out to be the final low there is always the (quite strong) possibilty that this level may be tested for a second time. It is not uncommon for a seriously fragile market to put in a ‘W’ shaped bottom formation. So far we have the first ‘V’, we may yet see the second. If the S&P’s two MAs do not manage to kiss and crossover then a ‘W’ bottom formation becomes a real possibilty.

So, take care and keep your market involvement low and manageable until the MAs have kissed and a definite trend change is confirmed by all our technical signals.

1st June 2009

Published on June 2, 2009 in Market Reviews. 0 Comments

There is no doubt that the FTSE 250 has pulled out of its Downtrend nosedive quicker and more positively than any of the UK or US Stock Markets. It’s bigger sister, the FTSE 100 index, and particularly the Wall Street indices, the DJIA and the S&P 500 are, as yet, nowhere near as positive looking. The smaller Nasdaq 100 is though now ahead of the game and is displaying quite positive signals that it wants to push on upward.

In terms of a return to a proper ‘bull’ market (i.e. to a ‘Stage 2′ Uptrend) there is though still someway to go and there could be a deal of heartache yet to be suffered by those who jump in too big and too soon. We say this because the present phase of the markets (a ‘Stage 1′ Basing phase) usually involves some uncertainty and wide swings up and down. These swings are caused by a lack of buying continuity as buyers look to take short term profits and sellers become predominant as they take advantage of the occasional improvement in prices to get out of long held positions.

So what should you do; what investments should you make? Well, we would suggest that you look at an anotomical answer – calculate the capital equivalent of your big toe and invest no more than that to begin with and then build your position slowly such that it only goes to knee high, at most hip high, until such time as we are able to confirm that a ‘Stage 2′ Uptrend has swung into life.