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I have been meaning to get on with writing this Blog for quite some time now but for various reasons (mostly good old-fashioned procrastination and farting about), I have been putting it off but at last I have to bite the bullet and get it done.
My interest here is to look at the Charting (Technical Analysis) factors which surrounded the eventual Bottom when the Markets floored out in 2009 before that monster Rally of 11 years or whatever it was. Of course we will struggle to find Signals and Indicators that point to precisely where the Bottom is (I may use the term ‘Proper Bottom’ for this because I am sure we will have lots of little Bottoms on the way to actually reaching the final one), but I think many Readers will be surprised by what I dig up here and the implication is that we can use some pretty basic Technical Indicators and Tools to help us ascertain the Proper Bottom.
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If you haven’t read Part 1 yet it is probably a good idea to do so and you can find it here:
https://wheeliedealer.weebly.com/educational-blogs/bubble-bubble-toil-and-trouble-part-1-of-2 When that Part finished I was going through the reasons why I am thinking that a proper full-on Bubble has become more likely, and here are a load more: Technical ‘Breakouts’ on Major Indexes If you keep up with my Weekly ‘Stocks & Markets’ Blogs which usually come out late on a Sunday Night, then you will probably have seen me mentioning the strength in the Indexes and how many have either recently ‘Broken-out’ to new All Time Highs (the US Markets) or they are very near such Break-outs and I expect to see them soon (German DAX, CAC40, FTSE100) and such Price Action is extremely Bullish and supportive of the start of a Bubble if that is how things are going to play out. It is pretty remarkable that after 11 years of the Longest Bull Market ever, we still have such strength and demand for Stocks.
In a recent TPI Podcast we talked at length about a potential Stockmarket Bubble and I also wrote a bit in a Weekend Charts Blog. Both times I think I promised to write a more detailed Blog specifically on the subject and in theory as I start writing, this Blog is intended to fulfil that commitment. You can find the Podcast here by the way:
https://soundcloud.com/user-479955511/conkers3-wheeliedealer-152-market-bubbles-high-pe-stocks-gaw-fevr-amzn-googl-mpac-1 First off I must make it very clear that I am not saying a Bubble is definitely going to happen; nobody can foresee the future (least of all me !!) and all we can realistically do is to assign probabilities to possible future outcomes. Using such an approach, I would guesstimate that perhaps a year or more ago, I would have said that a Bubble was a very low likelihood, perhaps something like 5 to 10%. The fact is that Stockmarket Bubbles are very rare and hence a low probability is appropriate, but with the various factors that I will get onto shortly, I would now say that the probability has risen to perhaps 15 to 20%.
This Interview was previously published on Michael’s excellent ShiftingShares website and he has kindly agreed that it can sit on both our sites. He has many quality interviews on his website and make sure you pick up a copy of his FREE ebook – there is a link at the top of my ‘Weekly Performance’ page. You can find Michael’s website here:
www.shiftingshares.com I have had a link to this Interview sat on my Homepage for ages but I am quite confident a lot of Readers won’t have noticed it and that is probably even more true for people who are new to this whole WD silliness. So it seemed a good idea to create this as a Blog so it sits in the Archive and people can go back to it if they fancy another dose at any point in the future. Enjoy….WD
This subject is quite complicated so if you have not read the first Part then it is probably best to look at that first - you can find it here:
http://wheeliedealer.weebly.com/educational-blogs/the-mechanics-of-a-trade-part-1-of-3 Example 2 - You want to buy 3 Shares in Company XYZ but this time you use a ‘Limit Order’ The basic Assumptions are as I listed at the start of Example 1. This time you still want your 3 Shares in XYZ but because it got kicked back at you in Example 1, you have decided to use a Limit Order through your Broker, where you indicate a maximum Price you are prepared to pay for the Shares. For this one, here are the steps as your Order flows through the various Processes:
Some months back I met up for lunch with Kerry Balenthiran (@17_6YrStockCyc on Tweets) because by a strange quirk he happens to work in Windsor where I live. Over Pie and Chips and Ale we got to discuss his book about a regular 17.6 year Cycle in Stocks which he has shown repeats itself over and over. Part of me has some scepticism with regards to this kind of VooDoo stuff (maybe it should be called the Balenthiran Black Magic Cycle) but over the years and having learnt more and more about stuff like Technical Analysis, Economics and Psychology, I am actually quite ready to explore such claims and see how it all stacks up.
I have been poised to read Kerry’s book for many months but with all the usual demands of life on me (like Sleeping in the morning, elongated Coffee Breaks, trips to the PUB, watching Countdown - you know the sort of hectic schedule a Retired Bloke has…..oh, and writing stuff for the WD Website…) I had not got around to reading it until just a few days ago and I have finally got on with it. When I first picked up the Book I thought “oooh, this is a bit slim” but as I have got into it I realise that it is not the Quantity of pages etc. that counts but the Quality and the messages held within this Book are potentially of very high value - as I will no doubt explain as we go along.
Readers who are actually awake might have spotted that I recently stacked the shelves in Wheelie’s Bookshop with countless copies of Kerry Balenthiran’s book - ‘The 17.6 Year Stock Market Cycle - Connecting the Panics of 1929, 1987, 2000 and 2007’.
As I cryptically commented in the text I put with the Book, here is a Guest Blog that Kerry has kindly put together for us which gives a lot more detail and explanation about the subject matter of his Book and it certainly gives something to think about. The last part is particularly worth concentrating on because Kerry shows how his Cycle ties in with many recent events and more crucially he gives a Road Map to a likely future. Kerry is on Twitter as @17_6YrStockCyc and I am sure he will be happy to discuss any connected matters and you can leave a Comment below if need be. Enjoy, WD.
I see the magical words “Santa Rally” bandied around all the time and I thought it might be useful for Readers to summarise the info on this from the 'UK Stockmarket Almanac 2016’ so we get a clearer understanding of what it really means (you can buy the Almanac for 2017 from Wheelie‘s Bookshop but I note it is quite expensive at the moment - I am delaying buying a copy until into 2017 when the price usually drops. Once a Value Investor, always a Value Investor…..). I am sure majority opinion thinks of it as a December Rally but this is really not true at all. I had intended to include a bit on this in my Blog from last night regarding the Charts but by the time I had watched the Apprentice Final I had pretty much timed out.
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