Obviously the Brexit Vote is getting close now and is just under 3 weeks away - as I mentioned in my last Blog, I think some sort of drop in the FTSE100 is most likely prior to the Vote (it may not happen, but that is what I think is most probable) and there are some signs that the recent moves up are weakening, and this is also the case in the US. This is even more noticeable with the Gold Chart which looks to be turning up - I think this will act inverse to the Indexes and we will see Gold rise if the Indexes fall and vice versa.
As per my Blogs from previous weeks, according to the UK Stockmarket Almanac 2016, June is the 2nd Weakest Month of the Year (2nd only to September) and it tends to start well for a few days and then drop away for all of the Month.
Historically, the coming Week (w/c 6th June 2016) is Up for 56% of Years with an Average Return of 0.1% - i.e. it tends to be pretty flat. Skipping ahead, I note that the next 2 Weeks tend to be very poor - but of course this Year we have the added bonus of a Brexit to worry about.
As we got towards the end of last week I noticed that the Weekly Candlesticks on most of the Major Indexes were looking quite Bearish and only an amazingly strong Up day on Friday 3rd June 2016 would have avoided this scenario. As it turns out when the Candles completed, we did get the Bearish setups that I expected.
The Screen below from the superb ShareScope software that I use shows the Weekly Candles for the S&P500 over about a Year and a bit. My Black Arrow is pointing to a sort of ‘Hammer Doji’ kind of thing that was created last week - in the context of the strong gains of the week before, this could turn out to be a Reversal Signal meaning we could drop in the coming week. However, this is not cast iron guaranteed and such a Candle might simply be telling us that the force of the move Up has softened and any more upwards progress might be slow.
Having said that, there is another critical factor on this chart - that is the matter of very Strong Resistance up above. The Key Level of Resistance that needs to be broken through is the 2135 Level which is the All Time High (ATH) for the S&P500 - it will be a big ask to break this level, but if it can, then it should make a strong move up afterwards.
Before it can crack 2135 though, there are a couple of other very difficult Levels of Resistance to get through - firstly 2105 which was the high point last week and then 2111 and 2120 especially. As you can see, there are a lot of Levels where Selling Pressure is likely to be very forceful - are we really going to find enough extremely committed Bulls to keep paying ever higher Prices and drive it up? Seems unlikely with a Brexit Vote looming and with the Trumpster about to become Leader of the Western World……
On the Support side of things, if we do Reverse down now, then there is Support around 2080, 2040, 2020 and 2000 which is a bit below the 200 Day Moving Average (the Light Blue Wavy Line).
However, this is not a great Bearish Indicator and might just signal that the up move has waned pretty quickly and we might just go sideways or slowly move up - probably the best Signal we will get is if the FTSE100 starts falling straightaway this week and sort of confirms the bearish possibilities fo the Pattern. The biggest issue with calling this a Bearish Reversal Pattern is the context - we only really had 1 big Up Week before with a couple of small Up Weeks before that - so it was hardly a sustained ‘wave’ upwards.
On the flipside, like with the S&P500, there is Strong Resistance not far up above - in this case we are looking at 6290, 6300, 6374, 6427 and particularly at 6487 which will be a difficult Level to crack.
Of course the issue here is Resistance - first of all we need to crack $51 and the $54 Level looks really hard to get above. You may have seen me mention this on a Tweet, but this week Nicole Elliott ‘The Trader’ in Investors Chronicle, mentioned that she thinks the recent strong move Up by Brent Oil from the Lows right at the start of 2016 might just be a 50% Fibonacci Retracement of the bigger Down Move from the Highs in 2015 around $70 - and if she is right, it might mean we see Brent Oil back down near $40 or even $25 later in 2016 (if you want to read this, it is on Page 18 of this Week’s Printed Investors Chronicle Magazine).
And if you look at my Black Circle, we have a pretty clear Bullish Harami 2 Week Candle Pattern - this is the Bullish Pregnant Lady thing. In the context of 4 Down Weeks, this looks a pretty good Reversal Signal and I expect Gold to rally now. Note the Key Support Level at $1200 and the Key Resistance Level at $1304 which we need to break to the upside.
Ok, enough of that Weekly business, the FTSE100 is the one that interests me the most (could it be possibly because I have a huge Short Position on it ?????), so I fancy more of a dig on that.
On the Screen below, I have switched to the Daily Candles and this shows about the last 8 Months. On Friday we had a Bullish looking Up Candle but its failure to hold its Highs and dropping back is not all that positive. To a large extent this is a game of Support and Resistance - whichever way it resolves will point to the likely direction. My Yellow Arrow is pointing to Support around 6152 which happens to be just about on the 200 Day Moving Average (the Light Blue Wavy Line) and the Resistance seems to be at about a little under 6300. In other words, if it breaks down below 6152 then it will probably fall more and if it can break over 6300, then it should go higher.
My Small Black Arrow is pointing to the 50 / 200 Day Moving Average ‘Golden Cross’ which was created about a Month ago - this is still a Bullish feature.
I have looked at several other Indicators like the RSI, MACD, Bollinger Bands, Overbought/Oversold Indicator etc. and everything just looks rather ‘Neutral’ - not really signalling anything much - so I will spare us all the inconvenience of looking at those !!
After scaring everyone with my repeat of comments from Nicole Elliott, I thought it would be good to put in this Chart just to remind us all how Bullish the Brent Oil Daily Candles Chart looks - as in previous Weeks, my Blue Uptrend Channel is clearly still being obeyed and it would need to fall out of this Channel to suggest that there is more Bearishness to come. We might get a pullback to the bottom Uptrend Line, but that might be all any Bearishness amounts to.
“Don’t panic Mr Oil Baron !!”
The Chart below shows the Daily Candles on Gold for most of 2016 so far. My Blue Arrow is pointing to a belter of an Up Candle which was produced on Friday 3rd June and looks really Bullish after turning up off the 4 tight-range Candles which preceded it - this is very Textbook stuff and looks great for further gains on Gold (remember how I mentioned that Gold can move opposite to the Major Indexes - this could be telling us something).
My Black Downtrend Line (marked with the Black Arrow) is a Line of Resistance that needs to be broken for Gold to go higher - and of course the $1304 Horizontal Level is vital to get over.
That will cover it for this week, I hope everyone stays safe - with the Brexit Vote imminent I see no need for heroics and I will be nice and lazy with my Trades as I have been for all of 2016 so far - I just don’t see any need to be doing much. However, I would love a decent drop around the Brexit Vote so I can close out the FTSE100 Shorts and get buying some Stocks I want to topup on.