Friday, 28 February 2014

Onward and upward

The US market, as measured by the S&P500, is now comfortably into all time high territory. In the past year it has risen 23%. There is no way to say how high it will go. We just have to wait and see.

The Dow has yet to break through the high achieved at the start of 2014. Today it is breaking through the 78% retracement level of the last fall. Potentially this could represent resistance. If it succeeds in making good today's break through it could continue to its all time high at 16600. There was a volume spike four days ago, and as loyal readers know, I regard volume spikes as significant indicators of direction change. But it is interesting that Monday's volume spike was not reflected in the S&P. Trading was higher than average but not by very much.

Action on the FTSE is not so strong and that quadruple top I mentioned a few days ago seems to be holding.

My portfolio continues to make progress in eating into my losses. For once my UK shares are moving ahead more strongly than my US ones. The batch I bought, mostly on February 11th, are up 7.5% after costs. Not bad in two and a half weeks.  They are SAFE (up 19%), III, PTEC (up 14%), CAML (the only laggard), AMER and RNWH (up10%). I keep saying to myself 'you see, you can do it when you try.'

The US portfolio is struggling in the face of a powerful fall in the $ vs the £.

Despite this it has made 4.3% after costs since 12th February. Again not bad for two and a half weeks. The mining shares are disappointing. They have only made 0.6%, in response to a weakening in the gold price I guess. The portfolio is GPL BRD URG PLM MDW RBY PZG MUX AUMN. I knew when I bought them that I could be in for a bumpy ride.

China shares have sparkled with an 8.3% gain after currency woes. They are BIDU VIPS NQ YY STV RCON. That gain was despite taking a loss of 19% on SMI.

The miscellaneous batch glowed after I sold SYMX for a 70% profit after just two days. I also sold TPI for a 15% loss. Nevertheless that group made me 4.7%. The shares I still hold are GIGM MU NFLX PTN GILD ESRX GMCR CVM

Onwards and upwards, I hope.

Tuesday, 25 February 2014

Trouble looms and Review of The Goldfinch by Donna Tartt

I have had some useful feedback on the presentation of my graphs from a loyal reader. I am implementing two of his suggestions. I have cooled the background colour and I have increased the default time periods. I now show 12 months. Green for up days does not work well on the new lighter background so I have switched to blue. So here we go with the new regime.

Today's interesting chart is the S&P 500. Yesterday it made a new all time high, though it closed slightly below recent high closes. The chart has three support lines to help assess whether the uptrend is still holding during future pull backs. The orange diagonal is a support line which goes back exactly a year having begun on 27 February 2013. Price action has touched this line 5 times so it is a very strong support line. The blue diagonal has its origin in March 2009 at the end of the 2007/8 crash resulting from the financial crisis. This line has had three touches. The blue horizontal marks the S&P high of October 2007 which was the end of 2003 to 2007 bull market. It created resistance in April last year and support in June. The red line is the 200 day moving average which has remained comfortably below the price action since November 2012 indicating the strength of the current rally.

To make things crystal clear here is a longer time frame which shows the origins of all those lines. Significant new highs like yesterday's are usually followed by a pull back. The 15 January high was followed by a vicious 6.5% fall so we can expect trouble quite soon.

The UK market is also up at its highs. It has attacked and pierced the 6800 level four times now. It looks like a for times top so there may be trouble ahead here too. It's not guaranteed but we really need to be on our guard.

The Goldfinch by Donna Tartt

I have just finished reading The Goldfinch by Donna Tartt. Its 700 odd pages have provided me with immense pleasure and much food for thought.

Theodore Decker’s saga begins when he is caught in an explosion at a New York art gallery as a 13-year-old boy. There are many fatalities, including his mother and an old man who is dying in the rubble of the room where Theo is trapped. The man advises that Theo should rescue the eponymous painting of the Goldfinch by Fabritius when he escapes the gallery. The man gives him the address of a house with a green doorbell which
becomes a focus of the rest of Theo’s life.

The boy loves his mother and is haunted by an imagined guilt that her death is his fault. They were in the gallery on their way to a school interview following yet another of his misdemeanours. 

Theo’s father had abandoned his family, so with his mother’s death, Theo has no-one to care for him.

Donna Tartt’s vibrant story is told in Theo’s voice. The vivid colours and expert brushstrokes she uses to paint his emotional development as he grows to manhood, echo the quality of the painting which, recovered from the gallery, accompanies Theo wherever he goes. Its beauty is never far from his mind. The depictions of his companions on life’s journey are equally potent, so we are presented with an assembly of characters to enrich and enliven the story’s dramatic progress.

Equally intense is Theo’s range of experiences. He learns the intricacies of furniture restoration, he lives with drugs and alcohol, he mingles with the elite, and he fends off gangsters. Donna Tartt's descriptions ensure that we know what it is to breathe the air in each of these settings.

As the story ended, I was reminded of Oscar Wilde’s definition of fiction: “The good ended happily, and the bad unhappily.” Donna Tartt is too clever to fall into that trap, for no-one in her story is either good or bad. Life deals them sundry fates.

But at the heart of Tartt’s story is the role of art: the unique connection made between the artist and the viewer. The artist calls out and each viewer receives his own message through time and through space. The message received is never the same. Each viewer captures something to which his mind is uniquely attuned. Theo’s connection with the little bird, chained to its perch and to an artist who died four centuries before in another explosion, is unlike any other. 

Wednesday, 19 February 2014

Gold glisters

That rally has done well. The S&P 500 is almost all the way back to its all time high. My pull out on the 24th January was reasonably timely. I lost money on the way down but it could have been worse. My return on the 12th February was a bit late and I would have been better off staying in for the ride.

Three shares would have carried me through: CCM VIPS and DHRM. All three weathered the storm brilliantly. But how was I to know? You can't play this game using hindsight. You can ONLY make your decisions based on what's in front of you at the time. What I saw was a risk that all my recent profits could vanish and I played the 'better safe than sorry' card. It turned out to be the wrong one but it could have been otherwise. It's like paying your insurance premium, all that money down the drain year after year but one day the floods, or the big freeze may come.

Now I'm climbing back on board the train to riches (Ha-ha. If only. I am still shovelling manure, but I continue to make progress and my losses are diminishing). Now the balance of my portfolio is much changed. Working my way through selection criteria to find the ones which currently generate the best profits (Uniserches in Vector Vest terminology) brought that change in emphasis about. I find the best performing selectors are throwing up mining, and especially gold shares and that is where my new buys are concentrated.

Mining shares are doing very well for me. They are up 9.1%  in three trading days. In contrast I bought some China shares at the same time which have risen by 1.6% (that includes losses on SMI which came in with bad results, tanked, and which I have ditched). The mixed bag of shares in other sectors has also treated me kindly even though I had to throw out TBI which dropped 15%. The star of this group was SYMX which made 70% in two days!!! That was a profit which I took straight away.

China's economic miracle 

Last night I watched a TV program about economic growth in China. The thrust of the analysis was that China had survived the 2008 world financial crisis by spending massively on infrastructure. And the costs are funded by unsustainable bank borrowing. (Sounds like Keynes to me)  The program predicted it would all end in tears. But the presenter, Robert Peston, did not make clear whether China's massive build up in debt was any worse than that generated by unprecedented money printing which has held Western economies together since the financial crash.  Nor did it comment on the fact that infrastructure is forever while money printing generates no future gains. Just think of how we still enjoy the fruits of Victorian infrastructure spending.

I keep an open mind on the subject and watch sentiment by observing where money is moving. The revival in the gold price suggests that the flirtation with politically created currencies may be over. The lustre has come off Chinese shares so I am moving my cash elsewhere too, but I expect I will be back.

Currency woes

One final point to mention. The Pound Sterling continues to strengthen against the US $ so my profits on the US market are being made against a prevailing wind. And still those US profits come (6.1% in three days), while my UK portfolio struggles (<1%).

Thursday, 13 February 2014

Rally. Really?

I've been slow coming out with this post. Pressure of fun. Lots of activity and more to come. So the next few posts could be slow in coming.

Where have we got to on the markets? Well you have all seen that the pull back seems to have stalled. The market creamed through the 38% Fibonacci and has now recovered 50% of its fall.

As ever I have been a little slow in catching up. I bought back into the UK market on Tuesday and into the US market yesterday.

The UK batch of shares are already yielding results They have paid their trading costs (spread, fees and stamp duty) and are showing a modest profit. I have used a different selection system from last time since it has shown a better performance of the last few months. It focuses more on price performance but still looks for good fundamentals. The shares I have bought are: SAFE III PTEC CAML AMER RNWH. Only CAML has disappointed so far.

In the US the best Unisearches have yielded a very different batch of shares. There is a strong bias towards mining shares. I am under no illusion that this market carries a huge risk. It is a a very volatile market and it relies on continued recovery in the gold and metals markets. Both are doing reasonably well at present. Gold is rising from what appears to be a decent support level. Time will tell whether I have taken too much of a gamble.

I have not entirely left my China shares behind but they no longer make up 100% of my holdings in the US. My US holdings are:  GPL BRD GIGM URG PTN PLM MDW RBY GMCR MU NFLX ESRX GILD BIDU SMI VIPS NQ SYMX RBY PZG

I've a massive regret among my China holdings. I sold DHRM with a 25% profit. Since then it has more than doubled in price. Holding on would have made a huge contribution to my position for the year. Hindsight is wonderful.

Thursday, 6 February 2014

As I thought

It's too early to to tell whether it really is going to work as a support, but for the time being the 200 day moving average is holding back the downward movement of the DOW. We'll just have to wait and see.

The FTSE has enjoyed a big bounce from its 7% slide. The FTSE is up 121 points from its low. With the Fibonacci retracement drawn on the fall we can see that there is still a way to go before it makes  38% . The price also has to make it back through the 200 day moving average and the failed  long term support line which may now become a resistance level. So, at best we can give two cheers to today's market recovery.

It could still morph into a resumption of the bull market or it may prove to be a false dawn. I'm not going to guess. But for now I continue to sit on the sidelines.

Tuesday, 4 February 2014

How low can we go?

I have mixed feelings about this fall in the market. On the one hand, I'm sitting on the sidelines, capital safe from further harm. On the the other I need the money that further rises would bring.

It's hard to know, when the market falls for days on end, whether we are in the beginning of a major decline or whether this is just a pull back. The jury is still out. The Dow is falling hard and fast. It has broken the 200 day moving average and several potential support levels. So it is well on its way down. Where will it stop?

  • The 200 day moving average may still provide a barrier round about here. 
  • Then there is a new 38% Fibonacci at 15000 (I had to redraw using a lower low since the first one I drew is pretty much swept away.) This 38%  has the advantage of sitting near a round number. 
  • Then there is horizontal support at 14750 which has held the market up three times. 
  • And finally there is 14500, or there abouts. This is the most significant potential level. It is half way back from the peak we have recently passed to the last time the market touched the long term support diagonal that has held the market up on earlier pull backs.
If the market were to break that last support we could say that we were no longer in a pull back, no longer in the bull run, but that the market was on its way down. 

I have shown several time period graphs to illustrate the point. 

The six month graph show 
  • the break of two potential support levels 
  • the piercing of the 200 day moving average 
  • and the 15000 and 38% Fibonacci coincidence.

The one year view which shows:
  • how well the 200 day moving average has provided support
  • the 38% Fibonacci and the 50% support with another potential horizontal support at 14750
  • and the diagonal which represents the final level of support in this bull run

Finally we go back to the beginning of 2009 and the start of this latest bull run. We can see 
  • the origin of that big support line I have drawn 
  • its two touches in October 2011 and November 2012. 
  • Will it hold this Autumn too? If we have to wait that long to find out we are in for a dismal 2014.