This is Part 3 in the Series - if you have not read the first 2 parts, I recommend you go right to the bottom of this Blog and you will find links to them - read those first or it probably won’t make a whole load of sense (ok, I will concede that it might not make much sense even after that !!)
The Psychology behind the TopChop
I am much more qualified to speak informatively about this bit because I am very much a proponent of TopChopping and I even demonstrated the technique recently when I sliced off about a third of my BooHoo BOO Exposure after a quite remarkable run up in recent weeks and I also TopChopped my Trifast TRI Position:
We are coming to the end of November and it is pretty clear the Xmas Bells are ringing loud and clear - my local radio station is beating out the painful Xmas ‘hits’, TV Ads are in full swing and the weather has certainly got that Xmas nippy feel to it. December is normally the strongest month of the year although the ‘Santa Rally’ tends to happen right at the end and often in the gap between Xmas and New Year - but the trend is very strong and I am happy to be going into this final month of 2016 with only a small Short Position on the FTSE100 which if we get a pullback in the early days of December I would be quite happy to close out.
Last week was pretty soggy which was no great surprise with the US Markets disrupted on Thursday and Friday by Thanksgiving. This week may also be shaped by events as we have an Opec meeting on the 30th Nov (I think that’s right), US Non-Farm Payrolls on Friday afternoon to give Day Traders some excitement and on Sunday we have the Italian Constitutional Referendum which could cause a stir in the first week of December.
I am pretty bored with this Hedging Disaster which befell me for most of 2016 and I am sure Readers will be equally deflated at the tedious prospect of yet more words from me on the subject; but I feel a pressing need to punch the keys and just give the whole sorry business some ‘closure’.
Regular Readers / Twitter Followers / Podcast Sufferers etc. will be fully aware that I have made some poorly executed Hedging Trades against the FTSE100 and Nasdaq 100 Indexes which have dogged my Portfolio Performance throughout 2016 and how I finally Closed Out most of them just before Trump got elected - taking advantage of a slight dip in the Markets. For a bit of clarity on this, if you look at the ‘Trades’ page on this Website and find the entries for early November 2016 regarding the FTSE100, Nasdaq 100 and XUKS (ETF), there is a reasonable explanation of the pain which caused me to bite hard on a chunk of wood to mollify. There are also copious Blogs I have written about Hedging and if you click on the appropriate ‘Category’ in the column on the Right Hand Side of the Blog Page, you should find plenty on the subject. You can also use the Search Box on the Homepage to track them down.
Looks like another disjointed and choppy week in the offing - first off we have Phil Hammond’s first Budget as Chancellor on Wednesday (will he Ham it up or make a Ham-Fisted job of it?……where’s that coat?) and then the US Markets are closed on Thursday for Thanksgiving and on Friday the US Markets are only open until 1pm (according to the Almanac).
The Budget could be an interesting one - to an extent it might be quite Business and Lower Tax friendly as an attempt (I doubt it will work) to head off any downwards pressure on Economic Growth with Brexit still assumed to be a drag on Activity. On that basis, it seems likely to me that the UK Markets could do ok leading up to Wednesday and on Budget Day itself perhaps there will be some Sector-Specific surprises that can cause some large Intraday moves - although many of the measures have probably been trailed already. Among those I have noticed are more Government Investment in Infrastructure (Roads, Tunnels, Bridges, Railway Lines, etc.) and there is a lot of talk about reducing Air Passenger Duty (APD) which might be popular for holders of Airline Stocks like EZJ, DTG, FLYB, IAG, RYA, etc. and perhaps even some Travel Companies (TCG, SMWH, TUI etc.). Housebuilding is ‘Political Football of the Decade’ and it seems highly likely there will be measures to help more Homes get built - this and the Infrastructure Boost are a big part of why I bought more GFRD recently as this covers both angles (and looks pretty decent Value anyway).
THIS IS NOT A TIP OR RECOMMENDATION. I AM NOT A TIPSTER. PLEASE DO YOUR OWN RESEARCH. PLEASE READ THE DISCLAIMER ON THE HOME PAGE OF MY WEBSITE. IF YOU COPY MY TRADES, YOU WILL PROBABLY LOSE MONEY.
If you’re keeping up with the tinkering I have been doing to the WD Portfolio, you may remember I bought a small stake in Devro DVO some weeks back after they had a Profit Warning and the Shares had dropped a lot. This was quite unusual for me as I tend not to buy into ‘Trouble’ if I can avoid it - however, in this case, DVO is a Stock I have dabbled with in the past and I know the Company reasonably well. My logic here was that this could be a decent chance to buy into them at a good price and I was particularly interested in the increased Capacity that the new factories have brought along and how this could give them space to grow in the future.
Well, that was a pretty crazy week with yet another totally unexpected event and yet again the Polling and ‘Experts’ failed to get it right. It’s been a very strange reaction to Trumpy so far - initial panic sell-off in the Futures Markets early on Wednesday Morning but then a huge rebound. Then as the Week came to a close things all went a bit soggy again - although it may not be anything disastrous - hopefully the Charts can give us some guides with regard to what is happening.
As an aside, part of the rise of The Donald is about how the Share of Profits/Wealth of Big Corporations etc. has grown whilst the Share of GDP Growth has mostly by-passed the majority of Western Populations for the last 30 years. It looks like this will be a major theme in coming years as the Masses fight back through Political alignments that are probably more to the Far Right and to the Far Left - this is something we need to be aware of and I suspect Corporate Profits could come under pressure which would put downwards pressure on Share Prices. Nothing to panic about today, but it is something we need to wise up on - having said that, it is very possible that Elections in Europe during 2017 could see some massive changes towards these more extreme Political Parties.
I am writing this on a Saturday night cos tomorrow I need to go down to Swindon to visit my Father who is in Hospital and at 87 with considerable Health Issues it looks like the clock is ticking. I expect to be travelling to see him quite a bit in coming weeks so my time for updating the Website will be under pressure - I will do what I can and concentrate on the Trading side of things rather than the Educational stuff. Don’t worry, I’m not disappearing or anything and as soon as things settle down I will resume normal scribblings.
Next week is all about the US Election obviously and my focus is very much on this. I won’t bother giving the Almanac figures for the coming week as I can’t see they have much relevance in the circumstances - however, it is worth noting that in the Bigger Picture we are now entering into the strongest period of the year and November tends to be a good month - so partly for these reasons I am keen to be as near as I can get to 100% Long Stocks as soon as I can.
I’m expecting this to be a short Blog - partly because it shouldn’t take much text to extol the theory but also because it is 10.40pm on a Saturday night that I am starting on the First Draft and I am running behind massively and I don’t want to be here into the small hours scribbling - although tonight there is the advantage of the Clocks changing so we gain an extra hour. I would prefer to spend that snoozing though…..
The topic here is that when an Asset makes a big move lower or higher (sometimes a move higher applies but I find it is far rarer - probably because the Media prefers bad news stories over what could be seen as a good piece of news), I tend to find that the Financial Media and then the Mainstream Media seem to latch onto the Story and give it huge publicity - but the real bit I want to focus our attention on here is that at the same time we often get some ridiculous Forecasts about how low or high the Asset will go.
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