Over the last week things seem to have turned pretty bullish again with the Major Indexes, which is very surprising to me with the Brexit Vote not far away (about 3.5 weeks now) and with June being the 2nd worst Month of the Year. It is hard to be sure if this strength can continue especially with regard to the FTSE100 as the Oil charts are starting to show hints that a pullback may be in order - perhaps we will see some early bullishness turn to bearishness as we get nearer the Vote.
According to the UK Stockmarket Almanac 2016, June tends to be worse than May and is the 2nd Worst Month of the Year (May is the 3rd Worst and the Worst is September). June has been up for 38% of Years with an Average Return of MINUS 1.0%. In fact, it has got worse since 2000 with an Average Return of MINUS 2% and in 8 Years since 1982 the Market has fallen more than 3%. June tends to start strongly for a few days and then it all slides - this would coincide nicely with the Brexit Vote if it holds true this year.
This coming week (w/c 30th May 2016) tends to be up on average for 47% of Years and the Average Return is Up 0.3% - so history suggests nothing special.
Friday 3rd June 2016 has the US Non-Farm Payrolls Jobs Numbers - this might cause some excitement to end the week on.
I still have my chunky FTSE100 Short positions in place and they are a pain - however, with the Brexit Vote very soon I see no point in closing them as you can be pretty damn sure that as soon as I close them the Markets will tank !! Anyway, I have written a Draft Blog about ’Scenario Planning’ for my Shorts which looks at what action I should take depending on how the Market behaves in the run up to the Vote. I should issue this as a proper WheelieBlog in the next couple of days.
First off we have the Daily Candlesticks for the FTSE100 in a ScreenShot from ShareScope looking back about 9 months. First off note how the Blue Parallel Downtrend Channel Lines which were a feature here for several weeks were broken out of in the last couple of weeks - this is obviously a bullish development.
Next look at the Sideways Range which I had on the chart for several weeks marked by the Parallel Green Horizontal Lines between about 6036 and 6237, and note how the FTSE100 Price broke out of this Range to the upside in recent days - another bullish occurrence.
Note also the Horizontal Resistance up above - 6320 and 6427 will be tough levels to get through and 6487 and 6500 will probably be very difficult to get over. Throw in the Brexit Vote as well and it is gonna be a big challenge for the FTSE100 but things look quite bullish.
The Screen below zooms in a bit and looks at the Daily Candles for the FTSE100 over about 3 months. My Blue Circle envelopes 2 Doji Candles that we generated on Thursday and Friday last week - in the context of the run up over the 4 preceding days, these Dojis could act as Reversal Signals. Alternatively, they could just be a Sideways move prior to another move up. The way to tell is if the FTSE100 drops back below 6237 on an End of Day Close basis - this would indicate it probably is going to drop more and these Dojis are flagging a Reversal. Obviously if it Breaks over 6280 on an End of Day basis then the FTSE100 is likely to go higher.
My Big Black Arrow is pointing out where the 50 and 200 Day Moving Averages did a ‘Golden Cross’ a couple of weeks back - this is obviously Bullish and at this point in time looks to be playing out as the Golden Cross predicts.
In the bottom window below we have the RSI (Relative Strength Index) for the FTSE100 going back about a year and a half. The current reading is about RSI 55 and note how the RSI is nudging up against my Horizontal Blue Line where the FTSE100 has turned down for much of the last year. This Blue Line RSI level around RSI 57 is not particularly high in normal RSI terms, but in the context of the FTSE100 for quite some time it has been problematic. Also note that if the RSI gets over the Blue Line, then the Green Horizontal Line at RSI 64 ish is another difficult level for it to get above.
The Chart below in the bottom window has the ‘Overbought/Oversold’ Indicator which is an extremely short term tool. My Blue Arrow points to where it is now and it is easy to see that it is at a fairly elevated level, although it can go a bit higher before the FTSE100 tends to ease back a bit.
The Screen below has the Bollinger Bands for the FTSE100 going back about a year. The BBs are the blue wiggly lines above and below the Daily Candles. Note where my Black Arrow is pointing to how the FTSE100 Price is touching the Upper BB - this suggests that it might drop back a bit, although it is very possible for the Candles to ‘hug’ the Upper BB and for it to rise.
The Chart below has the FTSE100 Daily Candles going back for pretty much 2016 so far. My Black Arrow is pointing to where the 13 and 21 Day Exponential Moving Averages (EMAs) did a ‘Death Cross’ a couple of weeks ago but my Blue Arrow points to where we have just been treated to a ‘Golden Cross’ on the same EMAs. Usually these kind of Crosses can work well for a few weeks and in strongly trending markets (not what we have now) they can predict moves for a couple of months even.
The Chart below has the Weekly Candles for the FTSE100. My Blue Arrow is pointing to a Bullish looking White Up Candle that was produced last week - note how we had 3 Down Red Candles and then 2 White Bodied ‘Doji’ Candles and then we reversed up - this is pretty textbook behaviour.
I thought it would be useful to look at the ‘Big Picture’, so I have put in the Daily Candles for the S&P500 going back about 6 years - i.e. it is the Bull Market since the 2009 Lows.
This is a really interesting Chart because it looks like the ‘Bear Market’ that was all the rage at the start of 2016 really was just a blip in the Long Term Uptrend (by the standard definition we never really had a Bear Market back then, although such distinctions aren‘t all that helpful as I have discussed before). Having said that, we are getting near a pretty key area now - if the S&P500 can break over its All Time High (ATH) at 2135 then I think we can safely say the Bull Market is in full swing. However, if we cannot take out this ATH, then it is possible that the S&P500 could fall away again. This is something to watch in coming Weeks.
The Chart below zooms in to about the last 9 months and shows the ATH at 2135 that I discussed in the Chart above. Again these are Daily Candlesticks and my Blue Arrow points to the Candle that was created on Friday 27th May 2016. This looks pretty Bullish but note the Horizontal Resistance up above at 2100 and then 2111 - these look likely to be tough levels to get through. If these can be cracked, we then have 2120 and the ATH at 2135 to get over - these will be very difficult.
In the bottom window below we have the RSI for the S&P500. The current reading is about RSI 59 and although this is getting on the high side, the S&P500 regularly has gone up above this and quite often gets to RSI 70 - so this probably won’t hold the S&P500 back.
The Chart below has the Bollinger Bands for the S&P500 Daily - my Black Arrow points to where the Price has got right up to the Upper Bollinger Band - it is possible for the Price to ‘hug’ this Upper BB and move up but usually it turns down from touching this Upper BB.
The Chart below has the Weekly Candles for the S&P500 - my Black Arrow points to a Big White Up Candle which is a pretty bullish sign. Note also how it turned up off the ‘Long Tails Doji’ from the week before after a down move of 3 weeks - so this is again pretty textbook behaviour.
Brent Crude Oil
The chart below has the Daily Candles for Brent Crude Oil going back about 9 months. Not a lot has changed since last week really - we are still nicely within my Parallel Blue Lines Uptrend Channel and we are still trying to get over $50 convincingly. If you look closely you may see that the Price got over $50 Intraday back on Thursday 26th May but fell back at the Close. The way things look at the moment it strikes me that it is just a matter of time before the $50 level is cracked - however, once we are through this, there is a lot of Resistance up above and $54 will be a really tough level to get over.
On the ScreenShot below, there is something I spotted the start of last week but it was very early so I did not take too much notice of it. Anyway, if you look in the bottom window you should see the RSI for Brent Oil - look at my Blue Line and observe how it slopes downwards, Left to Right. Now look in the Window above at the Price Line and check out my Black Line which slopes upwards - in other words, there is possibly a ‘Bearish RSI Divergence’ - this is something to watch, it could be telling us the Brent Oil Price is weaker than we think.
There is another Warning Signal below - this is the Weekly Candles for Brent Oil - my Blue Circle is highlighting a ‘Long Tails Doji’ that was created last week - there are no guarantees, but it might be that this is a Reversal Signal and the Price could pullback in the context of the recent rises. Another thing to watch. If this is the case, I would expect any pullback to be quite limited, maybe just back to the $44 level at worst.
The Chart below has the Gold Daily Candles going back 4 months ish. My Blue Arrow is pointing to a Red Down Candle that was generated on Friday - this looks bearish but note there is a lot of strong Support just below at $1207 and $1200 in particular. If these fail, then $1190 and $1180 look like they might catch any falls.
If we do get a bounce, note that my Red Line which is marked with the Red Arrow may become Resistance (classic Charting Theory that former Support becomes Resistance once broken).
The bottom window below has the RSI for Gold - currently it is reading about RSI 40 as per my Blue Arrow - note this is quite low for an RSI reading on Gold but many times it has gone a lot lower - you can see this clearly on the chart. In other words, Gold could fall a bit more yet in the Short Term.
The chart below has the Weekly Candles for Gold - my Black Arrow is pointing to a Big Ugly Red Down Candle - this looks not too pretty.
Right, that’s it for this week, I hope you all have a successful and enjoyable week,
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