Posts Tagged ‘Dow’

Bitcoin target hit!

Sat, 14th Oct 2017 Leave a comment

Chart of bitcoin at 13th October 2017Bitcoin hit my $3,000 target for about three-quarters of an hour! And it got there a lot quicker than I expected so I didn’t catch the bottom, but, even so, I am currently running a nice profit on my investment due to the very strong rebound we have seen since then.

Chart of FTSE-100 index at 13th October 2017Turning to the FTSE, it seems that the low wasn’t quite in as there has been another dip, but I am optimistic that a break-out may be imminent. I wouldn’t be surprised to see a small decline back to 7,400 quite soon as the index may struggle to break out of its range straight away, but, hopefully after that, 8,000 should be on.

I remain hopeful of much greater gains to come as I am still looking for a final, blow-off phase to the current bull market. (And I am not alone in this; see the articles here and here). While some commentators are adamant that the US stock market is over-valued, I disagree; some indicators are high by historical standards, but if you look at the more fundamental ones such as the Trailing Twelve Months (TTM) Price/Earnings (P/E) ratio and dividend yield, there is still plenty of scope for advancement. Consulting an old edition of the Financial Times, I can see that the US dividend yield fell to around 1% at the peak of the boom, but it is currently around twice that level, so, even without further dividend increases, the market could double from here before we hit crash inducing levels. And the P/E ratio is also well below danger levels at about 20 for the Dow: I would say that 12-15 is typical, 6 very cheap and 30 very expensive. So again, even without any increase in company profits (earnings), the index could rise 50% before it hits danger levels. And with interest rates much lower than in 2000, it is perfectly possible that previous levels could be exceeded significantly before a crash occurs.


I think the FTSE has further to fall.

Sun, 13th Nov 2016 Leave a comment

Chart of the FTSE-100 at close on 11th November 2016So, it’s Trump then. I can’t say I’m entirely surprised, as people who want change are significantly more motivated to turn out and vote than those who believe in the status quo. The markets seem undecided as to how to react however: Dow futures were down 1,000 points as the result became apparent on election night, but the Dow actually closed up after trading on Wednesday! The FTSE-100 gyrated similarly as the stock market decided it might quite like Trump’s tax cut and infrastructure spending plans. The bond market liked them less so though – inflation is likely to rise and his plans are unfunded so government borrowing will probably rise significantly as well. Never mind, this will help bring about the realization of the West’s bankruptcy all the sooner!

Turning to the FTSE, I think there is likely to be further to fall after the peak pattern I noted in my previous post. If we are at the start of a bull run, then a 10% correction at this stage would be typical, which would take us down to 6,400. There is a little chart support at this level (the April peak) so I’ll make that my initial target, but I wouldn’t be surprised if the index went a little lower. There is strong support at 6,200 however, and I would expect that level to hold. If it didn’t, then I would start to question my belief in the bull market. The index won’t fall in a straight line though, and, in the short term, I suspect that there may be another bounce from just below the last 6,693 low to just below the 20 day moving average this week.

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FTSE didn’t go quite to plan, but I was close!

Thu, 14th Jul 2016 Leave a comment

Chart of FTSE-100 at close on 13th July 2016Well, I was right to call 6410 the peak for a couple of months, though the index showed more volatility than I expected. The low for the period was slightly below my call, at 5,923 versus 6,000 and the low for the first dip was also around 50 points lower than I predicted. I was also right to call a final dip bottoming out at about 6,000; who’d have thought that the FTSE would surge (after a couple of days of mild panic) in response to an unexpected Brexit vote? Brexit is far from a done deal though, and I wouldn’t be at all surprised if Teresa May, the new UK Prime Minister, finds a way of avoiding going through with it.

In the short term, I see the FTSE taking a breather after its recent run; I am looking for the index to pause at its current level, then drop back 240 points or so to below the 20 day-moving-average (the green line above). Thereafter, I see good progress being made, perhaps to around 7,400.

In the longer term, the US and UK stock markets don’t seem as overvalued to me as some commentators think: the Dow Price/Earnings Ratio is still below 20, which is above average, but well below danger levels. Given the ridiculous prices of western government bonds, with yields going negative, I think that stock markets still have a long way to go. A P/E of 30 is what I generally consider expensive and I suspect that this value will be exceeded significantly if share prices get as silly as bonds. So I still wouldn’t be surprised to see the Dow going well over 30,000 in the next few years and the FTSE reaching 14,000 before the financial system spectacularly falls apart.

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The FTSE has nearly reached my target

Sun, 3rd Apr 2016 Leave a comment

Chart of FTSE-100 index at 1st April 2016I suggested in my last post that I was looking for a bounce in the FTSE to its 200 day moving average and we are nearly there. The index has flattened off its rebound now and dipped a couple of times below the 20 dma which suggests to me that the rally is running out of steam. I wouldn’t be surprised therefore to see another dip soon to support around 5,800. The rebound in the oil price (which has been driving the stock market) has faltered in recent days with Saudi Arabia suggesting it is less likely to cut output than had been thought. The fact that the FTSE has climbed steadily over the last six weeks or so may suggest that the worst is over and we may not see the further lows I was expecting, but I suspect another small dip is in order before we make further progress. Should the index continue sideways for some time however, that could suggest a sharper fall in the offing.

Chart of Dow Jones IA at 1st April 2016

The Dow has bounced much more strongly than the FTSE and is looking overbought on its technical chart (relative strength over 80). It has been hugging its upper Bollinger band for some time now and looks ready for a dip to its 200 dma or lower Bollinger band.

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Further falls ahead?

Mon, 22nd Feb 2016 Leave a comment

Chart of FTSE-100 at close on 19th February 2016.The FTSE did bounce off the support level I called before Christmas, rising over 400 points in a modest rally. However it has more than erased those gains since, with sentiment over slowing Chinese growth, falling oil and rising concern over US interest rates becoming ever more negative. With sentiment so negative it was perhaps not surprising, as a contrarian, that we’ve seen another bounce over the last week or so. The FTSE is sitting well above its 20 day moving average at the moment, so the decline seems to have been arrested for now and it looks like we could hit the 200dma in the near future. After that though, I suspect we will see further slides as I cannot see sentiment improving significantly before the June 23rd EU referendum. There are likely to be plenty of scare stories from both sides to ramp up the uncertainty prior to that and there is nothing the markets like less than uncertainty. In addition, investment trust discounts were holding up very well before the FTSE broke below support just under 5,900, but have increased significantly since, suggesting that there could be further market weakness to come.

Chart of Dow Jones IA at close on 19th February 2016.The Dow has bounced off its August low, so hasn’t broken support yet, but the concern over China, oil and the Fed’s intention to continue interest rate rises is likely to mean that it will in my view, though probably not until after it has hit its 200dma. I don’t have any target in mind for a low yet, so will just have to play it by ear.

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Next stop 6000 for the FTSE?

Sat, 7th Feb 2015 Leave a comment

Chart of FTSE-100 at close on 6th February 2015Probably thanks to Eurozone quantitative easing (QE, or money printing) the pre-Christmas dip did prove to be a short-term panic as I suggested it might be in my last post. The FTSE regained some lost ground against the Dow, though in the last few days it has hit strong resistance again just below 6,900 while the Dow carried on rising. Some commentators seem the think that the FTSE is about to break through the 7,000 level, but I think this unlikely. The resistance at 6,900 seems very strong to me and I believe that a more likely scenario is a dip below 6,000 soon so the the index can take a run-up at the 7,000 mark, breaking through in the second half of this year. I think that Greece is unlikely to get agreement with the EU on its desired debt relief and the threat of default and subsequently being kicked out of the Eurozone will suppress stock markets. I am hoping for another of my peak signal patterns over the next few weeks, as conditions seem ripe for it, and looking back at previous long-term sideways movements such as we have had recently, it is quite common for the FTSE to dip significantly before making further progress. If the Greece question can be resolved one way or the other, then the ECB QE money could boost the FTSE, and, as this article suggests, a Greek default could further boost stock markets by transferring money from Eurozone periphery government bonds to the stock market due to fear of default contagion. Consequently, I still think that the prospects for the FTSE are pretty good in the medium term. The fact remains, however, that the Western world is bankrupt and there will be a reckoning at some point!

Chart of Dow Jones index at close on 6th February 2015ECB QE has not proved quite such a boon for the Dow as it has boosted the dollar relative to the euro and thereby made US companies less competitive. If a Greek default suggests that Europe is about to disintegrate though, I expect the Dow will recover by virtue of being seen as a safe haven.