On: June 14, 2015 In: Blog, Columns, Feature, Most Popular Comments: 0

Written By: Dawn Bolton-Smith 

 

BUBBLES ALWAYS RUN TO TROUBLES

It’s all about charts! In the previous issue of Your Trading Edge, I was looking for a run to 6000 on our ASX 200 Index, which just fell short with a high 5996.4 on April 13th with the daily chart and an inverted hammer candlestick. There is now the case for a potential “Triple Top”, which represents strong overhead resistance that could bring in a significant correction.

Banks and Health Care now suggests a profit taking. An overview of a possible correction back into the 5500 area of support: Will it again be the case of “Sell in May”? Volatility is still the name of the game. There are some amazing charts in this issue, especially on the Half Hourly to test your chart reading skills. What other people are saying is especially interesting and thought provoking given the current position of the bull market. The need to keep one eye on Wall Street!

ON EDUCATION

On a personal note, I have just spent nearly three weeks in the Lady Davidson Private Hospital in a rehabilitation program due to mobility problems as a result of a motor car accident many years go. Rehabilitation is the process of restoring you to the very best physical condition after an illness, injury or operation.

Rehabilitation is a different approach to normal medical care with a team of physiotherapists, O.C. nurses, social workers etc. The hospital is set in beautiful surroundings, which could well be likened to a “mini resort”. I am pleased to say I am going home feeling so much better than when I arrived. I would give it a ‘FIVE STAR RATING”.

It has been a frustrating time for me to be away from the markets at this particular juncture but fortunately I was able to keep in touch with the half hourly figures supplied by a good colleague and a little Apple device.

Michael S. Jenkins continues to state that the hourly chart is very important and without it, you will never really understand the markets. I therefore urge you to keep a half hourly chart, which is the best for our ASX 200 Index. It provides a lot of information for technical traders, especially Gann and Fibonacci followers.

My stay in the hospital allowed me to further study Mr. Jenkins’ earlier books:

THE GEOMETRY OF STOCK MARKET PROFITS –

A guide for professional trading for a living and SQUARING THE RANGE. I can confidently say that his Geometry Book IS THE BEST I have ever read and is one to be re-read. It should be on the bookshelf of all traders and investors. Subscribers to his newsletter also get the benefit of his nightly New York Hotline with predictions on the Emini S&P 500 Index every three weeks. Mr. Jenkins is on record for having called the 2009 Bear Market low. He also drew his own charts for 24 years, but time does not allow him to do this at present. However, he hopes to go back to drawing them again.

Re-reading his Geometry book has inspired me to include some of his Trading Tips to wet your appetite hopefully in the next issue of YTE.

In reality, the PRICE CHART is the most important and the plethora of Technical Indicators that are really lagging. Moreover, using too many of them can get confusing. For newcomers in the market, I suggest you buy a good piece of software, a compass ($3.27 at IGA stores, a roller ruler, some chart paper A4 and A3 sizes, 1 mm and 2 mm and subscribe to a good data service. I recommend ALMAX for my end of data and have used them for many years.

(almaxinf@almax.com.au.) If you intend to day trade go for a one minute chart with 8 period Directional Movement and 3/5/15/30 ema moving averages, a combination that will give you many profitable trades. As a Point & Figure enthusiast, a 2 point 1 box hand chart is well worth the effort and is especially useful on opening trades to 11.am and 3 pm to close. It is advisable to get the final 4.11 pm close as a “predictor” for the next day’s trading. Wall Street has continued to make the waves!

WHAT OTHER PEOPLE ARE SAYING

Jeff Greenblatt – FIBONACCI FORECASTER

If markets are going to turn, it will only happen at certain times of the year and the seasonal change points is one of them. Since it didn’t happen, it now points us to the 7 year cycle, which expires in September/October. The complacency going on is mind boggling as more people keep their heads buried in the sand and it’s the market mood of the crowd as well, which spills into other areas of life with very dangerous implications. We’ve seen how bubbles pop in 2000 and you can make a case for 2007-2008. It won’t be pretty. Without a major correction since 2011, this one is now reaching a danger zone because all traders stay focused on is interest rates and bond purchases.

ELLIOTT WAVE THEORIST – 1303/2015 – Toil and Trouble

On March 2, the day of the all-time closing highs in the major indexes to date, a swift acting subscriber snapped a photo of this headline on financial news television “NASDAQ 10 K NEXT?” The subhead read “Back from the bubble.”

I think it should have read “Back in the bubble.” Few people would agree with that idea. The article was published on March 3, which means the interview took place on March 2, the day of the Nasdaq’s high so far and included a revealing quote. The reporter asked a gentleman who started a tech fund in late 1999 (a few months before tech stocks topped and crashed), “Will investors ever see a bubble like the dot-com boom again?” The answer: It’s unlikely.” This Q&A is more evidence that people forget their prior moods and rationalize present extremes into normality no matter what is happening. Will we see another bubble? We are in one now, by some measures, and then I guess it makes sense to say that those living will not see one again.

Most articles focusing on the Nasdaq Composite index’s return to 5000 quote professionals saying that this time it’s different: The last time was a “dream,” but this time there are “real profits”. Investors were often non-rational in the past, but never now. It is true that the 2000 top in the tech sector capped a bigger mania than we have today. However, today’s condition is still a mania.

Last year saw just shy of $50 billion worth of venture capital invested in start-up businesses, most of which are technology companies. The only years of higher investment are 1999 and 2000, as the stock market reached its greatest overvaluation ever, by multiples. So, 2014 is “only” the third bubbliest year in U.S. stock market history. Yet most bubble talk today excuses the situation. It generally comes in three types:

  1. “There is no bubble: (that’s from the Fed and most economists);
  2. “It’s early in a bubble with much more to go” (that’s from the average money manager); and…
  3. “It’s definitely a bubble, but it’s not as extreme as the last one, so stayInvested” (that’s from most other people who’ve commented).

DBS Comment: Notice the HEMLINES gradually coming down!

FULLER TREACY MONEY – David Fuller – 14/03/2015

I would not be surprised to see U.S. job creation also slow as layoffs in the oil industry increase. Additionally, the strong Dollar will not help employment. Disappointments relative to economic forecasts are a recipe for stock market turbulence, although the overall environment for equities remains benign.

MICHAEL S. JENKINS : Why Technical Analysis?

All losses in the market are entirely attributable to not investing with the primary trend. The secret to stock market investing was once stated by Will Roger when he said, “One should buy good stocks that go up and if they don’t go up, don’t buy them”.

DAVID HUNT – PROFIT HUNTERS GROUP

David is now on my list of the top four analysts on the globe. His ability to analyze so many markets with his daily webinars is simply amazing and so is his grasp for giving guidance for short, intermediate and long term positions. Over the past year members of his PGH have made some big gains on some of the big winners, especially the U.S. DOLLAR INDEX at the very start of that major uptrend. He knows when to take some profits and always has a suitable stop loss on his recommendations.

More recently, he went to Perth for special presentations, which were well received. I recall doing a similar thing in 1978 for the Perth Stock Exchange when I was still basking with my successful call for the 1974 share crash – still the largest in our Stock Exchange History. PHG has three types of membership, Gold, Silver and Bronze covering the needs of various investors and their particular market of interest. David’s morning webinars are a great start to your trading day. david@profithunters.com.au