Forget the Shorts, time to don the Lederhosen - A look at Indexes, Oil, Gold, the Quid and some Stocks
The bullishness of these Markets just seems relentless. If you read my Charts Blog last weekend you will have seen that June is often a very poor month but I seriously wonder if that will be the case this year. In light of the Seasonal Pattern and the S&P500 giving some signals of weakness at the end of last week, I put on a Short Position but the underlying strength has kicked in again and by the Close on Friday the S&P500 was way over my Stoploss Level so I will be closing that as soon as I can and taking the hit.
On the flipside, I got really lucky with a Long Position on the DAX where I finally managed to get into the Breakout Trade that I had been stalking for many weeks, as regular Readers might recall. I expect the DAX can go higher so I will be keeping my Long Position on and trying to run the quick gains I amassed on Friday - which was rather a pleasant surprise.
This week we have the General Election on Thursday and we should get the result on Friday, but despite all the hype about a Corbyn surge (and some extremely dodgy, rogue, polls I might add !!) it will be a big win for Theresa May - perhaps not as big a Majority as she wanted, but large nonetheless. This is simply because Corbyn is racking up Votes in areas where Labour already holds Seats and the collapse of UKIP is switching to the Conservatives and it might even be possible that Ruth Davidson will pinch a few Seats off of the SNP in Scotland - Labour will be lucky to retain any Seats up there.
It seems to me that the General Election result is priced in to the Markets although maybe we will see some sogginess towards the end of the week but if so expect a rally on the result on Friday. Maybe any action will be on the Pound.
I have really cocked up on this Short - and I am not sure why although I think I got distracted on Thursday Night when a mate came round and I clearly took my eye off the ball. The Chart below (as always, from the stormingly superb ShareScope software) has the Daily Candles for the S&P500 in recent Days and my Red Arrow is pointing to a Candle from Thursday 25th May where it Closed off the Highs of the Day at 2418.
My Yellow Circle is capturing a Red Candle with a long Tail downwards where I decided to put my Short Position on as it looked to me like the S&P500 was turning down off of the Candle from Thursday 25th May which I have pointed at with my Red Arrow. I set my Manual Stoploss at 2425 and my Black Arrow is pointing to a big White Up Candle from Thursday which closed over my Stoploss Level - I SHOULD HAVE CLOSED MY SHORT THAT NIGHT. I am a bit bemused about why I missed this - my only conclusion is that whilst putting a Long DAX position on and chatting to my mate I got totally sidetracked and hence the mistake.
On Friday we got another Big White Up Day and this has caused me more expense as my Short has gone more into Losses - it is infuriating and I am annoyed with myself but I will Close the Position as soon as I can - Markets for S&P500 Spreadbet don’t open until 10pm on Sunday Night so I will probably do it later tonight.
The only saving grace is that my DAX Long has done really well and this has ‘hedged’ the losses on this screwed up Short !!
The Chart below has the Daily Heiken Ashi Candles going back a few weeks for the S&P500. My Big Purple/Pink Box is capturing the HA Candles from Thursday and Friday and these look bullish which suggests more gains - but anyway, please ignore these 2 Candles and imagine they are not there. My Green Arrow is pointing to the HA Candle from Wednesday which was when I placed my Short Position on. See how the White Candles had gone up and then gone narrow - this is what partly made up my mind to put the Short on - with hindsight, maybe I should have waited for a Red Down Candle before acting but in reality my mistake was not putting the Short on but in failing to Trigger the Stoploss on Thursday night. Money Management is much more important than the actual Trades you take.
Another signal that caused me to go Short was how the Price had dropped off the Top Bollinger Band - I won’t show this but you can look at a Chart of the Daily S&P500 with Bollinger Bands and check if you are really bored.
DAX 30 (German)
The Chart below has the Daily Candles for the DAX going back a few weeks. As I mentioned in the Blog last weekend, the key thing here was how the DAX had Broken-out of the Long Term All Time High at 12390 and I missed an opportunity to put on a Long Trade when it first Broke-out but I waited for it to Pullback and do a bit of a ‘Confirmation’ before going higher again.
My Green Arrow points to a Hammer Candle from Thursday 18th May and this was the key to where the Pullback ended and the DAX started to reverse up again - it went a bit Sideways for several Days but then on Thursday 25th May it finally put in a nice Up Candle and this was a Trigger for me to go Long.
My Yellow Circle is capturing a nice Up Candle from Friday but note how it was unable to hold the Intraday High at 12878 - this is not ideal but I suspect it is just a matter of time before it Breaks over this level. My Black Arrow is pointing to the previous All Time High at 12841 which needs to be taken out again.
Remember, this constant smashing of Previous All Time Highs on many Index Charts (and on loads of Stock Charts) is really bullish behaviour.
In the bottom window on the ScreenShot below you should be able to see the MACD (Moving Average Convergence Divergence) for the DAX Daily. My Blue Arrow is pointing to where the Red ’Hump’ is turning round towards a Bullish MACD Cross (where the Hump will turn to Green) - if this happens, it will be positive and good for my Long Position !! Just above you can see the same thing in the ’Signal Lines’ format.
The Chart below has the Daily Candles for the DAX with the Red 13 Day Exponential Moving Average Line and the Green 21 Day EMA Line - note the Red Line is above the Green Line which is Bullish going forwards.
The Chart below has the Weekly Candles for the DAX - my Black Arrow is pointing to a nice Big White Up Candle from last week - this looks bullish.
The Chart below has the Daily HA Candles for the DAX - my Black Arrow is pointing to a Bullish White Up Candle from Friday and this suggests the DAX can go higher.
Shire Pharmaceuticals SHP
I don’t hold SHP but it is quite an interesting set of Charts (and fundamentally it has attractions). Starting off we have a Long Term one which goes back about 4 Years and the thing to notice here is the Huge Triangle with the Blue Support Line at the Bottom and the Red Resistance Line at the Top. It all now depends on how this Breaks-out - if the Price falls below the Blue Line then there will most likely be trouble but if the Price can Break-out above the Red Line then that would be Bullish.
I so love these Toblerone/Dairylea situations………
On the Chart below I have zoomed in to about 8 Months or something and over this time the Price seems to have been in a bit of a Range from my Green Line (with my Green Arrow) at the Bottom around 4400p and up to around 5000p (I haven’t put a line in here but you can imagine one I am sure !!).
My Yellow Circle is capturing how the Price has turned up over the Last 2 Days and it looks like this can continue.
The Chart below has the Daily Candle on a similar timeframe to the previous Chart with the Blue Wavy Bollinger Bands above and below. My Yellow Circle captures how the Price has moved up off the Bottom Band. Note the Upper Band is at about 4900p and maybe this will be the top of the Range.
What an amazing Uptrend !! The Chart below has Amazon going back about 2.5 Years and I have drawn in the Black Line at the Bottom and then done a sort of parallel Blue Line up above - note this Blue Line is not prefect because it only has one lot of ‘Touch Points’ but it is probably not far off. My Yellow Circle captures where the Price is now, up above $1000 and although it has cracked this extremely important Psychological Level, we are near the Blue Line and this might cap gains in the Short term.
The Chart below has the Daily Heiken Ashi Candles and my Blue Rectangle is capturing a string off Bullish looking White Up Candles - at the moment these suggest more gains in the Short Term.
In the bottom window of the Chart below we have the RSI Index (Relative Strength Index) for AMZN. On a reading of RSI 74 this is extremely high and note where my Green Line is (around RSI 80) that it hasn’t been higher than this over the last 4 years - so the upside in the very Short Term is probably quite limited.
AMZN is a weird Stock for a Long Term Investor. It is pretty much impossible to justify a Buy on Valuation Terms with reference to stuff like P/E Ratios, Dividend Yield, PEG Ratio etc. etc. - however, it seems very likely that AMZN will be significantly higher than the current Price in a few Years; although of course we cannot be 100% sure.
If I was to buy into this Stock, I would probably see it as something I would commit to for many many years and on that basis I would buy a Stake now and if the Price dropped a lot, then maybe I would just buy more and Average Down etc. People who like Stoplosses could buy it with a Stoploss and maybe that would work nicely. Horses for Courses and all that, but it is pretty clear that AMZN is going to dominate the Retail World for a long time to come.
I don’t hold AMZN although I think my Henderson Technology Unit Trust has exposure to it.
I know loads of people hold GSK as I do and it is quite an interesting Chart. Pictured below is GSK over about 3.5 years and first off note my Green Line and Green Arrow up at 1816p. I suspect this will be a tough Resistance Line and if it can break above that would be great. Note however that 1816p is not the All Time High and back around 2000 in the Dotcom excitement, GSK got up to nearly 2300p.
Before we get to 1816p, we need to see GSK breakout above 1735p which is where my Red Line with Red Arrow is. Note also the Blue Line with my Blue Arrow which is a nice Support Line that is moving up over time.
On the Chart below I have zoomed right in so we are looking at Daily Candles. My Black Arrow shows a ‘Shooting Star’ or ‘Inverted Hammer’ sort of Candle from Thursday 1st June and after the run up, this suggests it might be topping out. My Green Arrow is pointing to a sort of ‘Spinning Top’ Doji which again shows hesitation and note how on both those Days the High was at 1722p - clearly the Price needs to break over this level if it is going to go higher.
As always this is getting to be a very difficult Index to ‘read’ as it behaves more like a Forex Instrument than a Stock Index with its close correlation to movements in the Pound which we have seen recently. My Chart below has the Daily Candles going back for most of 2017 and my Green Rectangle is capturing an Inverted Hammer Candle from Friday which fell right back off the Intraday Peak at 7600 and clearly this is now a strong Resistance Level.
Note 2 Days before we had an Inverted Hammer as well - together these give an impression of an Index that is toppy in the very short term.
In the bottom window on the Chart below we have the MACD for FTSE100 Daily. My Blue Arrow is pointing to where the Green MACD ‘Hump’ is moving towards a Bearish Cross - it might avoid this and ‘skim-off’ but it looks very possible we will see weakness here. You can see the same thing in the ‘Signal Lines’ format just above.
Bearing in mind what I just said about the FTSE100 looking like it might struggle a bit short term, many of the Smaller Indexes are showing signs of topping out and I have chosen the SmallCaps to illustrate this.
The Chart below has the Daily Candles for the FTSE SmallCap and where my Yellow Circle is we have been treated to 4 small ‘Doji’ Candles which suggests the strength of the recent push up is waning.
The Chart below has the Heiken Ashi Candles for the SmallCaps and my Green Box is corralling 3 Narrow Candles which after the Push Up suggests we might turn down soon - although we need to wait for a Red Down Candle to be confident.
Pound Vs Dollar
There are mixed signals here. Where my Green Arrow is pointing to the Bottom Line of a Short Term Uptrend Channel we had, note how the Price fell below this Line and now it is acting as Resistance and the Pound needs to get above it again.
The big development here is the 50/200 Day Moving Averages ‘Golden Cross’ which is highlighted in my Yellow Circle - the 50 Day MA is the Darker Blue Wavy Line which is pointed at by my Blue Arrow and the Lighter Blue wavy Line is the 200 Day Moving Average. When an Asset does a Golden Cross like this it usually means gains to come for Weeks and Months ahead - although of course Currencies can be super choppy.
Looking at this there is clearly good Support at about 1.28 and I would hazard a guess that the Pound won’t do a huge amount for a while. Of course the result of the General Election on Friday might cause a big move but it seems very likely that it is priced in already. Chances are if that happens the Pound would strengthen a bit and that would most likely hurt the FTSE100.
Brent Oil (Spot)
In the very short term this looks like it might be able to bounce a bit off of the Hammer Candle in my Yellow Circle from Friday but looking further out we are nearing a Bearish ‘Death Cross’ between the 50 Day Moving Average and the 200 Day MA - this is pointed at where my Black Arrow is and the only way I think we can avoid this is if Brent Oil (Spot) suddenly has a very strong few Days but this is probably not going to happen. If there is some sort of move up, I suspect it will struggle to get over Resistance around $52, $53, $54.
With Oil looking pretty insipid, this could drag on the FTSE100 also.
First off let’s do a quick reminder of that Long Term Downtrend Line which is capping any moves up that Gold (Spot) has made lately - if it can breakout, then that would be a bullish event.
Obviously the Red Line with the Red Arrow is the Resistance Line I am talking about !!
Zooming in it should be clear as to why I showed you the Long Term Resistance Line again - we are so close to it now and surely we could breakout this week? My Yellow Circle is capturing a Big White Up Candle from Friday and I reckon we need to see the price up over $1300 in the next few Days to be pretty sure we are Breaking Out.
My Black Arrow is pointing to a Bullish ‘Golden Cross’ between the 50 and 200 Day Moving Averages - this suggests more Gains to come but obviously no Gains can come unless we crack that Red Downtrend Line.
The Chart below has the Daily HA Candles for Gold (Spot) - my Green Circle is enveloping some nice White Up Candles although they are still quite narrow - you want to see some Long White ones really.
That’s it for this Weekend, I hope everyone has a quality week ahead and doesn‘t make any Balls Ups like I did on the S&P500 !!
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