Monthly Archive for January, 2010

Share Prices – Going Up or Down?

Published on January 31, 2010 in Education and Market Reviews. 0 Comments

If you have been reading our recent reviews you will know that we are concerned that the markets are at a critical juncture. And our view has not changed. Last week was the 3rd week down and that, of itself, is a slight worsening of the history of the current recovery uptrend in that there have generally only been corrections lasting 2 weeks since the uptrend started back in July last year.

But, more significantly, the S&P 500 index, in closing at 1074, remains below our important support/resistance area of 1111/1122. This signifies weakness of demand and is a danger in that it would not take much of an increase in selling to push the index down hard. If that happens then the FTSE, the Dow and the Nasdaq will follow suit.

Of course, there is a liklihood that the current downturn is nothing more than a natural correction in a major uptrend and the recovery in share prices may regain its upward course within the next week or two. We say this because, for the moment, the dominant trend is still the Uptrend. But there are an increasing number of signals that suggest that the markets may be on the turn of a possible major downward correction. The individual market commentaries include the split (between positive, negative and neutral) of the 8 trend indicators that we use when assessing the dominant trend and, in almost every case, the number of positve signasl is now in the minority; for the first time since July last year.

We also have to be mindful, in the background so to speak, of the historical picture and for the possiblity of a continuance of the similarities between the current market scene and that of the 1929-32 markets collapse. We blogged this on the 28th January if you have already seen it.

So, in our view the markets are knife edged between reestablishing the recovery uptrend and the start of a possible collapse.

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

Is the Current Market Downturn About to Get Worse – Much Worse??

Published on January 28, 2010 in Uncategorized. 2 Comments Tags: , , , , , .

History suggests that it might!

We are becoming increasingly concerned that the 2009-2010 recovery in the FTSE might be ending. There are several signs that suggest this could be starting to happen although, we must add at this point, so far the current correction has to be viewed as nothing more than an overdue reaction to the extent and pace of the 2009-2010 recovery after the 2008-2009 collapse.

We were right when, back in June 2008, we warned of an impending stock market collapse (although we did suggest a 70% fall was on the cards but it actually fell by only (!!) 49% and we are now growing increasingly aware of the possible fragility of the recent recovery and of the potential for another, major, stock market crash.

Please do not think that we are forecasting another crash, we are not, but we are suggesting that it is well to be aware of the potential and so be able to avoid getting caught on the wrong side, should it happen.

Our present concern centres on two aspects; the first we have written about several times and that is the important support/resistance level for the S&P 500 Index which is at 1122. Having pushed its nose above this level the S&P 500 has fallen back to it and is struggling. If it cannot regain the upper ground above 1122 then it is likely to run out of support and fall off, possibly rapidly.

And, as the S&P 500 is the main driver for the London as well as for Wall Street a fall would quickly be replicated on the FTSE (as well as others).

The second centre of concern is the distinct similarities that exist between our current markets and what happened during and after the 1929 Wall Street Crash. This concern is growing and should not be dismissed as fanciful as significant historical trends do repeat from time to time. The similarities that exist look more substantial than the comparisons made over recent months by various economists as to the Great Depression and the West’s current financial tribulations.

We base our analysis purely on technical features of the price actions of the markets and we pay no regard to macro economics.

The chart below shows the S&P 500 Index over the last 2 years (we will come to the FTSE 100 shortly) -

S&P Simple

(Click on any chart to enlarge it)

Note how the index fell by over 50% and then started recovered by 50% of the collapse and then just poked its head above the 1122 and immediately fell back.

Now let’s look at the Dow Jones Industrial Index for the same period. Note how it has done the exactly the same; big rise, big collapse and a recovery of 50% of the collapse and then poking its head above the 10345 resistance level and now has fallen back below it.

Dow - Simple

And the FTSE -

FTSE Simple

Now, we have seen this same pattern – a long rise (over years) followed by a price collapse and then a 50% recovery of the collapse…and that happened with dramatic and long lasting effect in 1929-30. Here is the chart of the Dow for that period.

1929 Wall Street Crash

And you can immediately see what is starting to worry us a little now – that the recovery only just poked its head above the half-way level of the collapse before it crashed back down again. And then it just kept on going down eventually taking out 90% of the value from the 1929 top.

Now, we are not suggesting that there is likely to be anything of that proportion involved in the coming possible correction of the market but we are suggesting that it is entirely possible for the market to follow a similar pattern at least as far as a retest of the March 2009 lows.

The 3 charts below show the potential danger to the S&P 500, the Dow and to the FTSE 100 index if they do continue to follow the same pattern:

S&P - 2010 Collapse

Dow - 2010 pos collapse

FTSE 2010 Collapse

Note in the case of the FTSE, it is still a little above the half-way support/resistance level. This could stand it in good stead, particularly as the current dominant trend is still the Uptrend, but it is a cause of concern that the current correction is gaining impetus and is likely to be greater than any previous correction made during the recovery uptrend since March 2009.

Conclusion:

No definitive change from Uptrend yet but the number of warning signs is slowly increasing. The worry is that, with the markets having thus far followed a very similar path to that established in the 1929-30 period, any continuation of that path will be the cause of major price falls in the coming months.

There is, of course, always the possibility that the markets will break with the historical pattern and make further progress after the current correction has run a short course but it would be wise to do two things -

  1. Be prepared for another crash
  2. Brush up on your Shorting skills

Just in case!

Alan Saunders

Chief Analyst

@ ShareHunter

29th January 2010

The Stock Market Has Gone Critical

Published on January 24, 2010 in Education and Market Reviews. 0 Comments Tags: , , , .

As we forecast the market suffered a second consecutive week of falling prices. In fact, the price falls were greater than we had anticipated might be the case with the result that the markets have now entered a critical phase.

What has happened is that the S&P 500 ( I know that we keep wittering on about the S&P but it is the main ‘engine’ for share price rises and falls for both sides of the Atlantic) fell back to the 1111 level which is the lower edge of our established critical support/resistance area for the S&P at 1111/1122.

Why is this critical? Well the 1111/1122 area represents firstly the important level of potential support or resistance which is the 50% retracement of the steep Oct’07 to Mar’09 price collapse and, secondly, the 66.67% level up form the Mar ’09 low of the S&P at 667.

And with the index having previously broken above this area (after, it has to be said, a 3 month struggle) these levels should, after the last two down weeks, now provide support and allow the index to make a new low from which to then recover its upward progress.

The critical aspect becomes a live issue if support is not forthcoming and the S&P 500 index closes below 1111 for more than a week. The index is then likely to crash through 1000 and fall to the 940 area. In turn this will take the FTSE 100 down to the 5000 level and, in the worst case scenario, to the 4700 level area.

However, for the moment the dominant trend of all of these major indices is the Uptrend and there is a bias for higher prices whilst this remains in force. Therefore, after another week or two of uncertainty and sideways moving markets, the indices are likely to start moving upwards again.

But ‘critical’ is an aposite word just now as one interpretation of the last two weeks is that we could be witnessing the start of a change in trend. Our Momentum Indicator (thus far, a good indicator of market tops) is not indicating that there is much active buying of stocks so the support that the indices desperately need in order to reverse the down moves is going to be problematic.

Conclusion ; go carefully during the next wek or two. ‘Tip-toe’ through the market and keep your stops close and up to date.

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

British Airways – Buy, Sell or Hold?

Published on January 22, 2010 in Education and Market Reviews. 0 Comments Tags: , , .

The sharp rise up from the triple-bottom formation (seen on the weekly chart below) was a short lived uptrend after which the BA share price moved into a congestion range from 243p in Sept ‘09 to date.

In fact the price reacted by falling half way of the uptrend at the 180p level (easily visible on the daily chart below). From there it has moved sideways within a decreasing pennant triagle between support (at 180p) and resistance (the tops downtrend line).

The price should soon breakout of the pennant formation, one way or the other and it will be the direction of that breakout that will indicate the likely future direction of the share price over the succeeding weeks.

So, is British Airways a ‘buy’  -

No, not until it can break upwards out of the pennant formation. Even then the share price will be in a weak position (and liable to sharp corrections) until it can break above the 243p level of the Sept ‘09 high.

Is it a ‘Short sell’ -

No, not until it falls, and closes, below 180p level should a short sell be considered. A close below 180p is likely to be followed by a fall to the 140p area.

Is it a ‘Hold’ -

Yes, just so long as it stays above 180p.

(click on chart to enlarge)

Weekly Chart

Brit Airways - WklyDaily Chart

Brit Airways - Dly

As a member of ShareHunter you are entitled to free technical analysis of all of your share holdings as well as able to benefit from our regular share buy and sell Alerts.

Is Barclays a Buy?

Published on January 21, 2010 in Education, Market Reviews and ShareHunter News. 0 Comments Tags: , , , .

Is Barclays a buy? The answer is…No, at least Not Yet.

Is Barclays a Hold? Well, Yes  - but only if you can stand the strain.

This is what the technical analysis is showing us –

Weekly Chart – Barclays - Wkly

(Click on the charts to enlarge)

There is the triple-top resistance at the 390p level which is acting as the top of a developing trading range between 390p and a low of 260p (from which level the price has just recently bounced).

The stock is still in Uptrend – but only just – and only because of the steep rise from March to May ’09 so the potential for higher prices is very muted. The price is now back at the same level as at the May’09 end of the bull run at c.300p.

At the moment the price looks to be falling back for another test of support at the 260p level area.

Daily Chart –

Barclays - Dly

So, Barclays is not a buy just now but could be a potentially profitable buy in one of two events –

1. If it falls to, and makes a bottom on or above, the 260p level. A rise back up to the 390p top of the trading range is then likely. Or

2. If it breaks out above 328p because it is then likely to run up in order to test the resistance at the 390p level.

As a ‘hold’ there is cause for hope (of limited recovery) if a new low is created on or above the 260p level but if the price breaks down below this level then the price will be likely to fall to the 180p area and it will be a question of whether or not you could stand the strain that would engender.

GlaxoSmithKline – Buy or Hold?

Published on January 20, 2010 in Uncategorized. 0 Comments Tags: , , .

The technical analysis of GSK right now says that it is not a buy. As a hold, yes, but only if a new exit stop at 1235p is put into the market.

The point is that its dynamics have changed. Not only has it now reacted to a greater extent that any previous correction since the low in March’09 but also it has broken down through the lower edge of the uptrend price channel that has held sway since April ’09.

From the weekly chart you can see the strength of the resistance of the 1350p level. And, looking at the positive side of the coin, the Uptrend is still in place so the price should recover (even if the trend is in the very early ‘warning’ stage of possible change) and is likely to want to take another test of the 1350p resistance. It is that test that is likely to give a good indication of whether or not the trend is going to change.

So, conclusion – OK hang on in there but with a definite stop at 1235p as it may want to have another bash at the 1350p level.

GSK - Wkly - 970

gsk - dly-970

Never Chase a Rising Share Price

Published on January 19, 2010 in Education and ShareHunter News. 0 Comments Tags: , , .

Although we ascribe to the view that a share price is ‘never too high to buy’ (providing all of the signals are positive) one of our trading ‘rules’ is not to ‘chase’ a share price. By that we mean that even though we may have identified a potentially profitable trade we will forgo that trade if the share price rises quickly and substantially above our intended entry price.

And, yesterday, International Power (ipr) provided a classic example of why we have this rule.

We had identified the stock as a potential ‘buy’ at 328p with an initial stop-loss at 311p and a target of 370p. Here is the chart –

Intnl Pow - dly - Trader

We checked the current price just before we sent the email as an ‘Alert’ buy (on Monday morning) but saw the price rising hard and already at 342p – way above our normal 2% slippage allowance. We immediately cancelled the email alert in accordance with our rule procedure of not ‘chasing’ a fast moving share price. Here is what then happened later that day –

IPR

The merger talks had been cancelled and so the price just fell off the cliff. Had we proceeded with this trade we, and you, would have been stopped out the same day and would have had to nurse a nasty loss. As it is, our ‘rule’ (which results from many years of experience of this sort of behaviour) kept us out and stood us in good stead.

And today (Tuesday) the price has been as low as 303p and the stock is looking a bit sorry for itself.

There is always another (good) trade round the corner!

What is Happening on the Stock Market?

Published on January 17, 2010 in Education, Market Reviews and ShareHunter News. 0 Comments Tags: , , , , , , , , .

Last week the FTSE 100 closed 78 points (-1.4%) down. Hardly dramatic. Our trend analysis shows that the Uptrend is still in place and so higher prices are likely to re-assert themselves soon. It may not be during this coming week though as our Momentum Indicator is suggesting that there may be insufficient buying activity to lift the markets in the short term.

From the date (March 2009) that the stock market bottomed out the pattern of the FTSE 100 index has been a ‘wave flow’ of 1 to 4 weeks of higher closes followed by 1 to 2 weeks of lower closes. So last week’s small correction is just part of that pattern and this week we may see a perfectly normal extension of that correction before the index turns upward again – which we, calculate, should be the following week.

But, if that doesn’t happen then the wave-flow pattern will have changed and that could signify an imminent change in the dominant trend and be something to be very wary about. But that is a week or two away yet and, of course, may not happen at all. For the time being it is a matter of being prudent and not over committing to the market but also of being ready to take full advantage if, as expected, the market rallies later this coming week or during the following week.

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

My Thoughts on the Stock Market – Alan Saunders, Chief Analyst, ShareHunter

Published on January 13, 2010 in Education and Market Reviews. 0 Comments Tags: , , , , , , .

Today is the second consecutive day of a price correction. Is this the start of a more general decline that so many commentators have been expecting? I don’t think so. In fact, at the moment, all of our analytical signals point to a further market rise being likely.

The dominant trend of the market is an Uptrend. This Uptrend started back in August’09 after a 10 month Basing trend (which followed the big 2007-08 Downtrend). Since last August there have been several small corrections but none has lasted more than 2 weeks. I see no reason (yet, anyway), why this one should be any different. It really is a case of whether this correction will involve just 1 week or 2.

Our proprietary Momentum Indicator has turned from positive to ‘undecided’ and this could indicate that the current downturn may run into a second week. Of itself that need not present any serious threat to the Uptrend (it being likely to resume in week 3) except that the 1111/1122 area of the S&P 500 index is critiacl for Wall Street and for the FTSE in London.

If the 1111 level on the S&P 500 is broken to the downside then the danger of a fast and more composite downmove in share prices becomes very real.

If, as we currently suspect, this is just a 1 or 2 week gentle correction then, as we have previously reported, we expect the FTSE 100 to retrace back to 5370 or, possibly in a second week, to the 5200 level and then to resume its climb up to the 5770 level and, possibly, nearer to 6000.

On the other hand, if the S&P breaks down below 1111, we can anticipate the FTSE 100 giving up its current Uptrend and being in danger of a steep fall possibly as far back down the scale as the 4660 level.

So, it is very much the case of “watch this space” or, rather, “watch the S&P 500″.

A Genuine Share Tips Service

Published on January 11, 2010 in Education and ShareHunter News. 0 Comments Tags: , , , , , , , , , , , , , , , , , , , , , .

Many financial newsletter and share tipping publishers have a business model of selling a very cheap service (promising, for example, ‘a red-hot tip a day’) in order to attract masses of customers and would be traders and they then offer a very expensive service as an ‘up-sell’. This expensive service will take the form of a “can’t lose” method of trading stocks or Forex or of a ‘trading university’ course. In both cases there is usually a 3 or 4 tier program each costing several hundreds of pounds or dollars, sometimes thousands.

One common denominator is that the purchaser is left with a great wadge of information much of which is pretty useless in guiding him or her towards what to invest into, when and how. The stock market is so complex and so changeable and capable of huge short term changes in volatility that many of the ‘can’t lose’ systems are pretty worthless as no allowance is made for the changes in the tempo and sentiment of the market.

Also, most of the systems which are sold at high price do not actually help the investor-trader to discover what he or she should be investing into; which shares are ‘best buys’ today and tomorrow? When should you take profits? How should you set and maintain your stop-loss and profit-protection prices for each trade allowing for the different price tempos of each share? How can you decide if you should buy a share or sell it short? What is the dominant trend of the relevant stock market index?Why is Money-Management so fundamentally important to earning money fro the stock market?

At ShareHunter we provide answers to all these questions and on a constant daily basis. No other share tipping service provides such an in-depth and detailed ‘hand-holding’ share trading service. We don’t just show you which shares are today’s likely best buys – and why, but we also give daily updates of suggested stop and target prices so that you remain on top of your trading position at all times and know exactly what to expect from it.

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