I am running late as usual - today I will blame the ridiculous amount of Bike Racing on TV and of course this had to be watched. As a result, I will mostly look at the Weekly and Monthly ‘Big Picture’ stuff but with the main focus probably shifting to the US Presidential Scrum it is most likely that this will be a dominating factor over the next couple of weeks. Funnily enough, the more detailed Daily Charts and short term Indicators are not really telling me much anyway - this has been the case for a couple of weeks now with things being very ‘neutral’.
As I understand it we are about 9 days from the Vote now - with the shock revelations on Friday night that Hillary Clinton is being investigated by the FBI again it seems highly likely that the already tight gap between the Candidates will close up and it is very possible that Trump can win. As I have mentioned many times, I think Clinton is the ‘Status Quo’ Candidate and the Markets would like this more than a Trump victory - we got a view of this with how the US Stockmarkets fell sharply after the News on Friday night and the US Dollar fell along side this. As I have mentioned elsewhere, I am very sceptical about the Polls mainly because they are based on absurdly low Sample Sizes - I suspect this is the real reason that Polls have failed to accurately predict Results in pretty much every Major Election that has been held in recent years.
The Psychology behind the ‘No Maximum Size’ approach
Right, now we are finally onto the nitty gritty of the Blog Series - sorry it has taken so long but I felt a strong need to set the scene in Part 1 and make sure Readers had a decent understanding of what the Techniques practically meant before we plough on with the Psychology and Thought Processes lying behind them. If you have not read Part 1 yet, I suggest you read that first as this one may not make a whole load of sense otherwise. You can find it here:
If feels like we are getting to the home stretch on the US Presidential Election marathon with slightly over 2 weeks to go - Markets seem to have been pretty subdued for most of October and sort of going Sideways so maybe we will see more of this although I would guess a slow drift downwards might be more likely. To an extent it might depend on what happens in the Polls - if Trump closes the gap a bit that might be all it takes to get Markets quite worried that he will get into the White House. If the Gap in the Polls stays like it is, then maybe Markets can stay quite stable as they anticipate a Clinton win which I reckon would be the ‘Status Quo’ candidate, however, if such a Victory is pretty much expected (and therefore largely priced in to the Markets) then perhaps Investors/Traders won’t be ‘Rockin’ All Over the World’ much.
Are the Markets Overvalued?
I had intended to issue Part 2 of the TopChop Psychology Blogs tonight but a couple of weeks ago I read an article from Chris Dillow (@CJFDillow on Twitter) from the Investors Chronicle dated 7 October - 13 October 2016 (the one with the front page title of ‘Supersize Returns: EUROPE’ and the stereotypical German funny hat and lederhosen……) and tonight I reread it and decided it was actually saying something quite important and worth us all thinking about. With the time critical nature of the Markets I felt it was more important to put this out at this juncture.
I am out all day tomorrow and will probably get home late so I won’t have time to look at the Charts - so I am going for the Saturday Night Chart Fever instead. Time is tight so I will go straight into things - although a couple of factors to watch are the rising Bond Yields on Sovereign Debt and everyone seems to think the Quid will fall more which is probably the best indication you will get that it is going to rise !!
It has been on my mind for yonks that I need to write more on the Psychological Aspects of Investing / Trading and I regularly get asked for material along these lines via Twitter etc. The catch is that I have found it difficult to really get started on the subject although I am not totally sure why that is. Partly I feel that I know a fair bit about the subject but perhaps not in enough depth to write about it really well - and this could be holding me back from getting the enthusiasm needed to put fingers to keyboard.
Fortunately I might have found a way through the logjam (oh no, is this a form of Writer’s block?) and recent discussions on Twitter about Position Sizing and TopChops (Topslicing, Trimming, Cutting, that sort of thing) have inspired me to write some stuff about Psychology with a very clear practical basis around these Portfolio Management techniques. As you may have gleaned by now, I dislike detached, academic, theoretical writing regarding Investment and I prefer things to have a more practical and ‘Real’ underpinning - I am sure it makes it easier for me to write and far easier for Readers to understand and to put into context with their own Investing activities.
The Guest Blog below comes from a good mate of mine who attended an Investors Chronicle event recently in London. Very kindly he offered it up for a wider Audience and now he is extremely famous, but in an Anonymous kind of manner !!
Anyway, a huge (and Bold) THANK YOU on behalf of all WD readers to ‘you know who you are’.
It’s very much appreciated, WD.
Quite an exciting Week just gone with the Pound ‘Flash Crash’ and a disappointingly low Non Farm Payrolls Jobs Number on Friday. If you read my Charts Blog from last week, you may remember comments about October having a reputation for volatility - with Gold and the Pound making some dramatic moves I wonder if such an affliction will hit Stock Indexes over the next few weeks. With the US Presidential Race ongoing, it is hard to see the US Indexes making much headway to the upside before the Result is known - although clearly Clinton looks pretty well placed after the shocking comments by Trump recorded 10 years ago when meeting a soap opera starlet.
The markets globally have started to feel instability.
Markets over recent weeks have been stable as there has been no action by central banks in Europe and US. Article 50 for the negotiations to start on Britain leaving the EU has been parked to March 2017.
UK Stocks in the majority reporting strong earnings and FTSE pushing up from 6300 to 6900+ area.
The markets this summer are contrary to previous summers where they needed constant intervention by central banks. Now they are a happier place if left alone. Amazing how things can move full circle.
Well, we are now embarking on the final Quarter of 2016 - I really have no idea where the year has evaporated to. It seems like just a few weeks ago we were in the panic around February and of course last week we had the Brexit Vote - it’s really nuts.
Markets still strike me as real toppy and the Macro Risks are just mounting up - latest one is Deutsche Bank (and consequent knock-on for Italian Banks), then we have Trumpy, US Rate Rise in December, Hungarian Refugee Vote today, Italian Referendum soon, Article 50 Trigger by end of March 2017 and of course some pretty fully valued Equities (oh, and a Bond Bubble). Markets are still pushing up against All Time Highs and have managed to survive the often difficult Month of September without a major wobble - but of course we are still in the iffy Autumn Period and October can be a tricky month to get through - will the nonchalant mood of the Markets continue?
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