I am so running behind today it is ridiculous - I have been helping a mate who smashed up her car look for a replacement and tonight she is around because I am lending her my BMW z3 while she sorts the new one out. It’s a nightmare because normally I have peace and quiet with no distractions to work on my etchings, but tonight that is utterly different !! I have sent her off in my z3 to get a Chinese so hopefully I can pinch 20 minutes to crack on and make some proper progress……….
I do enjoy hunting out for Cars though - doing it for a mate means I get all the fun bits of the chase but without the downside of me having to part with my own hard fought for Cash.
Overall Markets keep generally rising, especially in the US with those Markets looking extremely ‘overbought’ and it does make me nervous that some sort of ‘reckoning’ is gonna hit us - I am not saying we will necessarily have a meltdown or anything but surely we need to see a bit of softness (or at best some Sideways) to unwind these overbought conditions. On the positive side there is a lot of Support down below which should be natural Levels where Buyers come in to stop things getting out of hand.
I had a frustrating week last week with my Portfolio dropping by about 1% overall - I can only put it down to some of my larger Holdings getting hit - in particular Tristel TSTL sold off on decent Results - nothing for me to get angsty about especially with the US Launch looming.
As always there are plenty of Macro worries with the Catalan thing in the Headlines - I can’t see this having much effect - maybe it will create some excitement for the Traders but for a Long Term Investor like myself it isn’t much of a concern. Brexit seemed to move forwards a bit last week and the merry dance is bound to go on for a long time yet - however, as I will show in a minute, the Pound has been in a steady Uptrend against the Dollar since the big Sell-off and I see no reason why this won’t continue. As I have said many times before, the only scenario that would get me stressed regarding Brexit is if the Talks are terminated suddenly without warning and the UK ’crashes’ out of the EU - this would cause a big Sell-off I suspect but as always things will recover. Hell, we survived the Credit Crunch after all !!
Apparently there should be various bits of Economic Data in the coming week and some should show that GDP Growth in the UK is picking up slightly and that the Eurozone is doing really well. US data should be impacted by the Hurricanes apparently but it is likely The Fed will do a small Rate Rise later in the Year. All this supports a view that the Global Economy is chugging along quite nicely and this should be generally supportive of Stock Markets. Historically Interest Rate Rises have not actually harmed Stocks in the way that people think - in fact, Stocks tend to rise up to around the 6% Interest Rate Level when the higher cost of borrowing starts to slow things down - this is because the same positive Economic conditions which enable Rates to be raised is seen as more beneficial to Companies who are able to exploit a positive environment.
As has been my stance for a while, I am not particularly keen to Buy anything but equally not in a great hurry to Sell anything. Ideally I would trim my Spreadbet Exposure down a tad but again I see no real need to rush. I got caught on an S&P500 Short last week with it initially going my way but then turning and my Stoploss got triggered - I took a miniscule Loss (see ‘Trades’ page) so I can’t get excited about it. There is an important lesson here but I will save that for another Blog or whatever when I have more time. With Markets so stretched, I will be looking to Short again in the coming Week just to give some Downside Protection.
With October nearly finished and the usually worst month of the Year of September long gone, we are moving into the best time of the Year for Stockmarkets - with the Winter period being substantially better on average (until we get to May).
November is historically an ok month and according to my slightly out of date UK Stockmarket Almanac, since 1984 the FTSE100 has risen on average for 58% of Years with an Average Return of 0.7% - this might not sound particularly amazing but it means November is the 6th Best month. On a less positive note, since 2006 November has only seen rises for 3 times out of 9 years - so that is not so good (note my Almanac is out of date though so this does not include the performance from 2016). Looking back on a Monthly Chart of the FTSE100, I see there was a Doji Candle which seems to show that November 2016 was quite a choppy month but the difference between the Start and the End of November was perhaps a slight fall.
Looks like November tends to be a bit Up and Down - the main thing that stands out is that a typical November tends to rise quite strongly over the final 7 Trading Days of the month.
Pound vs. Dollar
There is so much in the Media about a ‘Weak Pound’ and it is sort of folklore that this is the case but in reality the rebound is going rather nicely - as this Chart should show. If anything, the strange thing is how the Pound has been rising at the same time as the FTSE100 - this doesn’t fit with the view that a Falling Pound helps the FTSE100. From what I can tell, this seems to be the case on an Intraday and Daily kind of basis but over a longer timeframe it clearly doesn’t hold true. Bit weird really. I guess the Value of the Pound to the Euro is affecting things a bit - although that is unclear also.
The Chart below has the £/$ going back to about April 2016. As I mentioned above, the thing I want to show here is the Uptrend Channel which has been in place since the Collapse after the Brexit Vote and the Pound has been steadily recovering. My Black ‘Parallel’ Lines (who am I trying to kid?) show the Uptrend Channel with the upper and bottom lines marked by my Black Arrows.
The Red Line marked with the Red Arrow is a Long Term Downtrend Line which actually started back in July 2014 - so the Pound has been weakening for a long time. The importance of this Red Line is that it marks Resistance that the Pound needs to get through - this might be a challenge. On the subject of Resistance, my Pink Box in the Top Left Hand Corner shows a Zone of Resistance which might impede progress once the Pound can get back up to 1.40 ish.
My Yellow Circle is showing that the Pound is now sat on the Bottom Line of the Uptrend Channel - it could overshoot and go down a bit more but it seems likely it will turn up again soon. If the correlation with the FTSE100 is as the narrative goes, then a rising Pounds should make the FTSE100 fall - but on recent performance where they both tend to rise I see no reason for this to be something to worry about overly.
My Blue Arrow is pointing to a 50/200 Day Moving Average ‘Golden Cross’ between the 2 wiggly Blue Lines (see the ‘Graph Legend’ Box at the top to try to figure out which is which) - as is so often the case, this Golden Cross predicted the rise in the Pound that followed. Note that at present the Darker of the Blue Wiggly Lines which is the 50 Day MA is above the 200 and is sort of parallel and rising in unison - this is positive for the Pound and obviously we are some way off a ‘Death Cross’ (which is as bearish and unfortunate as it sounds !!).
On the graph below I have literally taken the Graph I showed a minute ago and I have simply moved the ‘Slider’ at the Bottom (On the utterly marvellous and outstanding ShareScope Software that I use it is the Grey Line thing at the bottom of the Screen and if you look closely enough you will see that the ‘Slider’ bit with tiny Black Arrows on it has sort of got a lot narrower than it was on the picture above. By the way, with Bobby Mugabe losing his role as a ‘Goodwill Ambassador’ with the WHO, ShareScope has been asked to take on the role - I told you it was impressive stuff !!).
As always you can click on these Graphics to make then much bigger in your Browser thing so you might have a miniscule chance of actually seeing them.
Anyway, the point is that on this particular Graph my Yellow Circle is now highlighting a sort of nice ‘Hammer Candle’ from Friday and what with this being near the Bottom Line of the Uptrend Channel from the previous Chart and in the ‘Context’ of a move down on the Pound for about 4 weeks or so, this looks like we could be getting near a Turning Point and we could see the Pound rise again soon.
So often I go on about ‘Context’ and for many Candlesticks like the Hammer and the Dragonfly and stuff, a Context where there has been substantial falls leading up to it tends to make the Predictive Power of the Candle a lot better.
In the bottom window on the Screen Below we have the RSI (Relative Strength Index) for the £/$ Daily. On a Current Reading of RSI 49 this is not particularly low and despite the move down the Pound has had in recent Weeks (as shown on my Charts above), the RSI is not what you would call ‘Oversold’ - this means that it could turn up from here but it might be a sweeter ‘Context’ if the RSI was far lower and we were properly due a Turn.
There is however something to note here. If you remember on my previous Charts (oh my lord, you can’t have forgotten already !! WAKE UP !!) that I showed the Black Lines Uptrend Channel, well, on the Chart below in the Small Upper Window this is represented by the Green Lines. Then if you look at the RSI again in the Bottom Window, note my Uptrend Channel marked by my Blue Lines - this is sweet because it shows the RSI is in a rising Trend at the same time that the Price of the Pound is in a rising Trend - in other words there are no ‘Divergences’ going on here which is good.
Imperial Brands IMB
This is the Tobacco one that is often bought as a nice boring ‘Defensive’ and very much as an Income Portfolio Stock as it tends to be seen as a reliable Divvy Payer but with the added spice of being a very likely Takeover Candidate on top. On the flipside there are the Regulatory concerns but since the huge Litigation Cases of a Decade ago or so, things on this front if anything seem to be supportive of the Big Tobacco players and in particular the high Tax Levels enable them to slip through Price Rises and increase their Profitability from addicted Customers. From a quick look at the ShareScope ‘Details’ screen, IMB is due to pay 5.6% Divvy next year so it is pretty juicy.
I know a lot of WD Readers hold IMB and I was chatting with @Catflap in the PUB about it on Friday afternoon - so I thought it would be an interesting one to cover and in particular because it has been falling a lot recently and I thought it might be nearing a Buy Opportunity. I don’t hold it myself.
As always, it is best to start with the ‘Big Picture’ and here is a Chart going back to the Year 2000 (oh no, Y2K all over again !!, I hope my sad old XP Netbook doesn’t crash !!) and the main thing I want to show here is the Long Term Uptrend Support Line which is marked by my Black Line with the Black Arrow. From what I can see here, the Price seems to be falling on a much Shorter timeframe but it is very likely that Support from the Black Line will kick in at around £27 if it doesn’t manage to turn up before then - so this is something to watch and get poised to pounce and capture your Chunky Divvy.
Needless to say this is not a Tip or Financial Advice…………
On the Chart below I have zoomed in to about the last 4 years ish. The thing to note here is that for a lot of this time the Price was in a nice Uptrend Channel as marked by my sort of Parallel Red Lines (marked by Red Arrows) but where my Green Circle is, the Price broke-down out of this Uptrend Channel and we started on a Downtrend Channel which is encapsulated by my Green Lines (Green Arrows). Down below we have the Long Term Support Line in a rather nice shade of Black madam with an equally alluring Pointer also in a rather tasty tinge of Ebony.
On the Screen below I have zoomed in a bit more (I have left many of the Green features of the Chart before !!) using the Grey Slider thing at the Bottom Right Hand Corner of the Screen - in fact, I have pointed at it with a chunky Yellow Arrow so you can see exactly what I mean. The Key thing here is that we now have a Downtrend Line as marked by my Blue Line and Blue Arrow - the Price needs to breakout of this Line if it is going to make any kind of Recovery in the Short Term.
On the Chart below I have zoomed in again. The Key thing here now is we have a Support Line which must hold at about 3112p - the Black Line with the Black Arrow - if this fails, then expect more falls towards the 2700p Level I showed on the earlier ‘Big Picture’ view.
I don’t hold this one myself and it has been a bit of a dog lately - this is one of Neil ‘Woody’ Woodford’s Stocks which has hurt him this year and dragged down his normally pretty strong Record of achievement. They are involved in Educational stuff and you would think this could be a very good area but they seem to find it hard work. It could be interesting at some point but as things stand I just don’t get the sense that Fundamentally the Business is really making solid progress. However, this is where things get interesting, despite my reservations about the Business, from a Technical Charting perspective, there could be a chink of light starting to show here.
The Chart below starts us off with a bit of Big Picture stuff. This goes back to around Credit Crunch days and the key thing here is that it was in a decent Uptrend Channel (as marked by my Red Lines and a formation of the Red Arrows - sorry, no coloured smoke today - austerity cutbacks you know) but where my Yellow Circle is the Price Broke-down and things started to then get really ugly. This was probably a nervous time for Woody…..
On the Chart below I have zoomed in and now we have some interesting lines. Starting off we have my Black Downtrend Line (marked by the Black Arrow) which seemed to be reining in the Price until about May 2017 when it was broken-out of. Since that my Green Downtrend Line (Green Arrow) seemed to be controlling the Price but note where my Yellow Circle is that this has been Broken-out of also. This suggests to me that the Chart is improving and at worst things are basing out and likely to go Sideways for a bit.
To the Downside we now have an important Support Line at about 552p which is marked by my Blue Line marked by the Blue Arrow - as long as this holds the Price should be able to make some sort of Recovery.
Diversified Oil and Gas DGOC
This is one of my fave Stocks at the moment and I have been waiting patiently for a chance to Top-up on it - although having said that after buying a chunk of FEVR last week I don’t really have much Cash spare to commit to it. We shall see.
Fundamentally it looks a belter and I think it could easily be worth well over 100p - perhaps even as much as 130p in time. In terms of the Chart what we are waiting for here is a Breakout of the All Time High (ATH) at about 79p (All Time High seems a bit of a misnomer because DGOC has only been around 9 months or so so it is not like it has years and years of Chart history behind it !!). According to ShareScope DGOC is expected to pay a Dividend of 5.6% next year.
The Chart below has the Daily Candles and all the fairly short Stockmarket History. The obvious thing here is the nice Parallel Green Uptrend Channel Lines and my Blue Arrows are pointing out how the 50 and 200 Day Wiggling Blue Moving Average Lines are both nicely rising - all good stuff and makes me think that ATH at 79p will get broken-out of very soon.
Flicking through my Chart Settings (if you look right at the bottom of any of my Chart Screens you will see a list of grey ‘Buttons’ like ‘Vol MA’, ‘RSI MA’, ‘MA’, ‘MACD‘, etc. etc. and these are different Graph Settings I have created in my ShareScope platform so I can click through them and see different pictures for each Stock or Index etc.) I came across the MACD and noticed we are very near a Bullish MACD Cross - this is pointed at in both the ‘Histogram Humps’ and ‘Signal Lines’ formats with my Black Arrows in the bottom window below.
My Chart below is my ‘Working Screen’ from ShareScope and my 2 recent attempts to Short the Index are shown here (sadly both failed miserably but my Stoplosses did the job they are supposed to do).
The thing here is that my Yellow Circle is capturing a nice Big White Up Candle from Friday - as a predictive device, this can only be seen as Bullish in itself and suggests a ‘Continuation’ of the Uptrend.
In the bottom window on the Screenshot below we have the RSI for the S&P500 Daily - on a Reading of RSI 74 this is a nuts level - it rarely gets so Overbought. This is one of the main reasons I am so keen to Short - although in truth such an Overbought condition could unwind by the Price going Sideways rather than falling - something must happen soon though.
In the bottom window on the Screen below we have the MACD for the S&P500 Daily (Moving Average Convergence Divergence) - this is very intriguing because we have a rare ‘Glance off’ or ‘Skim off’ situation. This is marked in the Signal Lines format using my Black Arrow which actually shows it best and then lower down we have my Blue Arrow showing the same phenomenon (do do do do do) in the Histogram Bar format where the Bars nearly went Red but the ‘Skim off’ meant that it just produced a Bigger Green Bar. This is bullish behaviour.
With the Signal Lines it looked like they were going to cross over and do a ‘Bearish MACD Cross’ but it didn’t do this and instead glanced off - lovely.
DOW (Dow Jones Industrials Index US)
I won’t spend hours on this one cos it is pretty much the same bizarre story as the S&P500. My Chart below in the bottom window has the RSI for the DOW Daily and on a Reading of RSI 83 it is ‘kin mental. It is just so insanely Overbought. Amazing really but something has to give soon.
There is a Bearish Signal here. The Chart below has the Daily Candles for the DAX showing the recent push upwards. My Green Arrow is marking an ‘Inverted Hammer’ from Wednesday last week which might mark a Turning Point. Note on Thursday the Market fell off this Inverted Hammer and then on Friday we got a ‘Bearish Engulfing’ Candle which looks pretty bad as well.
The Chart below has the MACD for the DAX Daily in the bottom window. My Blue Arrow is marking where we got a Bearish MACD Cross a couple of days ago in the Histogram Humps format. You can see the same thing on the Signal Lines above.
The Chart below has the Weekly Candles for the DAX. My Blue Arrow is pointing to a ‘Spinning Top’ Doji (my name, don’t bother looking it up in the Books !!) which follows a similar one for the week before (although that one had a White body - it doesn’t matter - the shape with the Narrow Body is what counts). These Dojis suggest the move up is waning.
The Screen below has the Daily Candles for the FTSE100. My Yellow Rectangle (ok, it’s small but if you look closely you might be able to find it) shows a Candle from Friday where it was unable to hold the High and fell back Intraday - it sort of looks weak although it is not decisive on its own. There is a Resistance Line just up at 7565 which is the next bit of Resistance that needs to be broken over. The Red Line (Red Arrow) is that Long Term Uptrend Line from the Credit Crunch Low Point and it would be good if it can stay up above this Line. The All Time High at 7600 is looking a tough nut to get out of its shell and scoff.
In the bottom window on the Chart below we have the RSI for the FTSE100 Daily. It is currently on a Reading of RSI 58 but the key thing here is that it is sloping down - as per my Sloping Blue Line. This marks a Bearish RSI Divergence where the RSI is falling at the same time as the Price Line rising or going Sideways - this could be a warning sign.
In the bottom window below we have the MACD for the FTSE100 Daily. My Blue Arrows are pointing out in both the Signal Lines and Histogram Formats how we are pretty near a Bearish MACD Cross - more supporting evidence to suggest a drop on the FTSE100 could be near.
Brent Oil (Spot)
The Chart below shows Brent going back about just over a year and a half. First off at the top we have a Horizontal Resistance Line in glorious Blue at $70 - this will probably be a tough level to crack through. Next my Black Lines and Arrows are marking a possible wide Uptrend Channel that has been in place for a while - I refer to it as ‘possible’ because there are not loads of ‘Touch Points’, particularly at the Bottom Line. If this Uptrend Channel is correct, it will point to more gains and Resistance up at around $70 which lines up with the obvious Horizontal Resistance we talked about just now.
The immediate Resistance Level is now at $59 and if it can get through this then my Pink Circle is showing a Zone of Resistance on the way up to $70 - lots of challenges above the current Price then.
On the Screen below I have zoomed in to about the last 5 months of Daily Candles. Now we have a new Uptrend Line in Green (marked by the Green Arrow) and this is creating a nice Triangle when compared with the Red Horizontal Line at $59 - the beauty is that the Green Line is ‘squeezing’ the Red Line and this is a nice ‘Flat Top Triangle’ which suggests more upside to come. My Blue Arrow is pointing to a Bullish Golden Cross between the Blue Wigglers which are the 50 Day and 200 Day Moving Averages.
That’s it for this week - clearly some of these Indexes look toppy so we could be in for some ‘fun’ - be careful out there !!
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