Yesterday I attended the Master Investor Show at the Business Design Centre in Islington. I felt the Show was pretty weak this year with very few Speakers of interest to me and the Company Stands were either trying to sell something (Brokers, Trading Platforms, etc.) or were AIM resources Stocks which are really of no appeal to me (I like making money and these things are very specialist and more for ‘Trading‘ than ‘Investing‘.)
I get the impression that Tom Winnifrith has poached all the best Speakers (Mark Slater, Evil Knievil etc.) for his UK Investor Show next week !!
Fortunately I met up with lots of great Investors who I have met over the last 18 months or so via Twitter etc. and it was extremely valuable simply because of this - I will do a Blog with more detail later this week.
According to the UK Stockmarket Alamanac 2016, the last week of April has been up for 53% of Years and given an Average Return of 0.1% - in other words, pretty darned flat.
Obviously we are leading into May and this tends to be the 3rd Weakest Month of the Year being up on 50% of Years with an Average Return of MINUS 0.2% - this is notable because since 1970 May is one of only 3 Months to give a Negative Return on the Month - the others are June and September. Note also that since 2000 the Average Return has got worse with MINUS 0.6%.
An Average May tends to be flat for the first 2 Weeks and then to slide for the last 2 Weeks. May is the Weakest Month for relative performance of the FTSE100 against the S&P500 - on average FTSE100 underperforms by 1.9%.
With the “Sell in May and forget about it until September” saying being pretty well established, it is no great shock that May is often a bit ropey. In addition, of course we have the Brexit Vote this year on June 23rd and I cannot see how the Market can make any headway against such a backdrop. Thinking about this in technical terms, it strikes me that there will be a distinct lack of Buying Pressure as most people will be waiting to see what the outcome of the Vote is - and at the same time, even if Selling Pressure is just the normal for this time of year, Markets are likely to drift downwards. If People decide to Sell even more, then Prices are likely to really fall a fair bit. I doubt Prices will recover until after the Brexit Vote has been held - whatever the outcome - Markets like certainty.
From looking at the Daily Candlesticks generated last week for the FTSE100 on my small Fone Screen, I got the impression that the Weekly Candles might be giving a Sell Signal - so I will look at this first. In addition, I think the US ones might be similar also and I will get onto those.
As I thought, there is potentially a Reversal Candle here. If you look at the chart below from the truly marvellous ShareScope Software, my Blue Arrow is pointing to the Candlestick that was generated last week. Note how it has a Long upward ‘Wick’ or ‘Tail’ and it is a bit of an Inverted Hammer really - not a beauty, but probably good enough to signal that the FTSE100 is keen to fall now.
If such a fall does happen (it might not of course, all this stuff is probabilistic) then I have marked in several Support Levels and it is fair to say there is quite a bit of decent Support below which might save us from a huge drop - we shall see of course. The simple fact is that as each Level of Support fails, then the next one comes into view when we have down moves.
Note the 50 Day Moving Average (the Darker of the wavy Blue Lines) is turning up and very close to doing a ‘Golden Cross’ (which would be a Bullish Event) with the lighter Blue 200 Day Moving Average Line. However, we have had Golden Crosses before where they have given the Bullish Signal but then failed not soon afterwards.
As I have mentioned in previous Blogs and certainly on Twitter, this Market Rally has lacked ‘Breadth’ - it has been limited to just a few Sectors and has largely been a ‘Dash for Trash’ where stuff that was beaten up in Early January has rebounded - I am not convinced this is sustainable.
The Chart below shows the Daily Candles going back to just before the start of 2016 - I have simply chosen this Time Period because the Chart and the points I wanted to show fitted in nicely - nothing more clever !!
My Black Arrow is pointing to a Big Down Candle that was generated on Friday 22nd April 2016 - note how this turned down off of the Red and White Doji Candles from the 2 days before - textbook stuff. I have highlighted with my Green Arrow a Hammer Candle that was created on Monday 18th April - this gives a good Support Level at 6261 - if this Level fails, then I think we could be going lower in perhaps a sizeable way but there is very good Support just below which might kick in, especially around 6200 and 6100.
On the Screenshot below, in the Top Window, look at the Black Arrow which points to how the Price has fallen away from the Upper Blue Wiggly Bollinger Band - this is bearish behaviour in the Short Term.
In the Bottom Window we have the MACD (Moving Average Convergence Divergence) - my Blue Arrow is pointing to how the Green MACD Hump looks like it is about to go Red - bearish.
In the bottom Window below we have the RSI (Relative Strength Index) - my Black Arrow points to the current Level of about RSI 57 - if you look to the left you can see where this sort of move off a Peak has happened before and where it headed.
As on the FTSE100, I want to look at the Weekly Candles first. The Chart below has a Black Arrow which is pointing to a pretty ‘clean’ Inverted Hammer which was banged in last week - this is usually a Reversal Signal in the context of a run up like we have had in recent weeks - so I expect the S&P500 to fall most likely.
I have drawn in some Support Levels at 2040 and 2020 which will be the first significant areas to test.
My Red Arrow points to where we nearly have a 50 / 200 Day Moving Average Golden Cross - however, look back at where my Black Circle is and you should see where a Golden Cross failed. We can’t tell now that this Golden Cross will fail, but the previous one indicates what can happen.
The Chart below focuses in on the Daily Candlesticks for the S&P500 (the main US Index in my view). My Green Arrow is pointing to a sort of Hammer / Dragonfly kind of Doji thing that was generated on Friday 22nd April 2016 - the Intraday Recovery here suggests to me that the S&P500 might attempt to move up early this coming week but chances are the Inverted Hammer Candle I have marked with my Blue Arrow will cap any gains - the Resistance Level here is 2111. It the Price can get over 2111, this would be very bullish.
Brent Crude Oil
For consistency, I will start with some Weekly Candles for Brent. My Black Arrow is pointing at a pretty decent White Up Candle from last week - this looks bullish and note how the Price ended up above the 200 Day Moving Average Line (the fainter of the Blue Wiggly Lines) - this is a bullish development.
My Blue Circle shows an Area of Strong Resistance that will need to be got through - the key Level here is $54.
The Chart below has the Daily Candles for Brent going back about 8 months ish. I only really stuck this in to show that my Blue Parallel Lines Uptrend Channel has been working rather well. You can see the various Support and Resistance Levels on this Chart.
For inconsistency, I won’t show the Weekly Candles here………
Not much real change on Gold since last week. Maybe we are stuck in a Sideways Range now between $1200 to $1284 or a bit tighter. My Black Arrow points to a Red Down Candle which was created on Friday 22nd April 2016 which is Bearish Short Term, especially as it follows a pretty sweet ‘Inverted Hammer’ from the Day Before (you should be able to see it, or it‘s SpecSavers for you my friend). If the Price does fall in the very short term, then I suspect Support will kick in just below with $1223 looking pretty strong.
I have left my 3 Red Circles on the Chart - as I suggested before, maybe these are a Bearish Head & Shoulders jobbie - I doubt it really, but just something to watch out for. I suspect the Sideways Range for a bit longer is more likely and Gold Bugs need the Breakout over $1284.
OK, that’s shallot for this week, best wishes for whatever is to come.
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