I was looking at this week’s Investors Chronicle and they have 10 pages on the Bear Market etc. and in amongst this they had 7 Charts showing recent Bear Markets for the FTSE All Share - and what struck me was that in every single case they had a ‘V’ Shape between 2 distinct Price Channels - first one a Downtrend followed by an Uptrend.
I have also pointed out 2 other significant events on this Chart - firstly my Blue Arrow points to where the Price broke-out of the Upper Line of the Red Downtrend Channel (this would have been a magnificent time to buy with hindsight - although perhaps harder in practice for the usual psychological worry reasons - but at least it would have been a good time to start feeding some Cash into the Markets), and my Green Arrow points to a 50 / 200 Day Moving Averages ‘Golden Cross’ - interestingly this was a great Buy Signal also.
This is the normal pattern of events - you normally get Downtrends, then Sideways, then Uptrends on Stocks - so it is really worth noting that on the FTSE All Share FOR THE LAST 7 BEAR MARKETS, we have had a ‘V’ Shape.
The Chart below has the Downtrend Channel that is currently in place on the FTSE All Share - Note my Red Line - I think we need to breach this cleanly for it to mean it is Buy Time. Obviously any Trendline like this is a tad subjective and different people will draw then slightly differently - this is why it is important to give it a bit of time once the Red Line is breached - a bit of ‘wiggle room’. You should be able to see that the Price is currently a little bit below this Upper Line.
My Black Arrows are pointing to the 50 and 200 day Moving Averages and stressing the gap between them - there is quite a lot of good upwards work that needs to be done by the 50 Day MA to get it into a Golden Cross situation - it may take a little while yet. Note both Moving Averages are falling which is not a great sign. So the implication is that we might have to wait a little longer for Buy Signals of the type I have discussed, but we are getting there.
Interesting stuff huh? OK, let’s check out some of the major Charts.
The Chart below has the FTSE100 for the last year ish. It has not changed hugely from what I have shown in recent weeks - as before the Dominant factor here is that Red Downtrend Line - marked with my Red Arrow. We need a Breach of that for things to be getting better (just like the FTSE All Share above - it is notable how closely these 2 Indexes seem to track - FTSE100 is clearly a heavy weighting in the FTSE All Share.)
That 6115 Horizontal Resistance Level is important now - the FTSE100 needs to get over this - if it does, then that is a pretty good sign as it will mean the Downtrend Line has been breached. If it can achieve that, the next difficult Resistance Area will be the 200 Day Moving Average around 6300 - my Green Arrow. Note the 50 Day Moving Average (marked with my Black Arrow) is some way off the 200 Day.
The Chart below has the S&P500 (the Main US Index) over the last couple of years. I have put this in just to set some context - note the Mauve/Pink/Purple/Cerise Line and Arrow - this is a Key Resistance Line that needs to be broken through by the Bulls.
My Black Arrow points to a FALLING 200 day Moving Average - not good.
Below we have Brent Crude Oil for about 7 Months ish. This Chart has been dominated by my Red Downtrend Line and is it notable that the Price has moved up above the Line - where my Black Arrow is. However, before we get too excited, as I mentioned above, the drawing of such Trendlines is by no means a precise science and we really need to see it properly move away from the Line with some aplomb. At the moment is has only just crawled over the Line - it doesn’t have a whole load of panache - yet……
Note the 200 day Moving Average marked by my Blue Arrow will most likely be Resistance for the Price - this is around $46 ish.
The Chart below has Gold over the last few months - note all the Support and Resistance Levels I have marked. The key thing here is that my Black Arrow is marking a 50 / 200 day Moving Average Golden Cross - good news that - however, the Price could still drop a little short term and this seems very possible to me.
Well, that didn’t take long - better proof read it and shove it into the system - hope you all have a good week and no stress !!
See ya, WD