Will we, won't we?

Just look at the charts. The Dow is struggling. Why? Greek debt, unemployment levels, inflation, quantitative easing? Perhaps? Or none of these things. The answer is that it has hit resistance. And that resistance goes back to the 2nd May 2011, nine months ago. There was a lower level of resistance that was established in July 2011. In theory it was a stronger level because the market had two goes at breaking it before it gave up and collapsed. But when the market recovered to that level (12750 on 23rd January) it took ten days to break through. We are now on day seven of the effort by the market to break through the higher level of resistance (12875) - established in May. There have been no days of exceptionally high volume. So I am holding faith. That does not mean I am right but I think the odds are on continued upward movement. I've put my money where my mouth is and have my fingers crossed. That's what this business is like. The next day or two will tell me whether I was right. My current portfolio distribution is gold and silver 9%, commodities 5%, equities 74%, cash 12%.

Last night we went to see a miserable play. It was called Neighbourhood Watch and is Alan Ayckbourn's not quite latest offering. I also saw Life of Riley, his previous play. All I can say is that he has lost his touch. Both plays were a waste of time and effort. This last had everything wrong with it and since Ayckbourn directed it, no one else can possibly be to blame. The plot did not hang together, the characters did not make sense, the period of the action was ambiguous, the set was dismal and the costumes were drab or, in one case unbearably Essex. The final moment of the play was laughable. The only positive thing I have to say is that the actors played their parts, dreary as they were, well. If it was an attempt to cock a snook at Cameron's Big Society it needed to be a lot better constructed to make its point convincingly.

We went with a friend who has been a very successful am dram producer and director and she thought its simplicity and range of characters would be very appealing to amateur companies. But please, Mr Ayckbourn spare people who pay full price for their theatre tickets from this dross.

Dump Silver

Dow Jones Index 13 September 2011 5pm (GMT+1)

Am I being too weak? I ask myself. Should I have heeded my instinct instead of waiting for silver's fall? I pulled out of a big part of my positions as the price recovered temporarily during the day, suffering a small loss. 

My finger hovered over the sell button for my index shorts before I relented. This is what this blog is meant to be about. The pain of trading. Many people have written reams on the subject of mechanical trading methods, particularly for very short term trading using margin. But I have never seen any one of them say what  they achieve by way of return on capital, year in year out. So I prefer to suffer the pain and make my judgements. My pain is caused because we are at tipping points. 

I am a bear on the indices and they have broken some support levels and bounced off others (see chart). This means that they are due for a bounce back into the channel or they have broken down and will fall massively. Don't want to miss that again.

Silver is approaching the apex of a triangle (see yesterday's chart) and could shoot out either way. Don't want to miss a rise, don't want to be clobbered by a fall. The risk here is too big so I have pulled back and hope I will be able to jump back in.

Saw stunning play last night at Theatre Royal in Bath. Three Days in May tells the story of how Churchill outmanoeuvred Lord Halifax and avoided capitulation to Hitler at the time of the surrender of France. The world would now be a very different place had he failed. Warren Clarke gave a faultless performance as Churchill which was powerful, yet restrained. Chamberlain was a broken man about to die and making a final effort to repair the damage  caused by his errors of judgement. Robert Demeger calmly conveyed his pain as Chamberlain decided to side with Churchill against Halifax, the appeaser performed by Jeremy Clyde.

This was a beautifully paced drama written by a very talented young writer Ben Brown, who was poorly acknowledged in an otherwise instructive and interesting programme. It was a play that told its story clearly and well and left the audience much better informed as well as satisfied at the end of the evening.

Choppy waters in the Channel

Today's chart (click to enlarge or right click and open in new window to see chart and text at the same time - back to return) showing the S&P 500 over the past 6 months, is useful since it illustrates how I attempt to read the market.

1. The thick red line is the 200 day moving average. I pulled out of the market as it flattened off and as the price action lost upward momentum. I also built short positions as the series of sharp drops occurred. (I foolishly closed these out as the really big drop began and did not return. (I listened to the news instead of watching the charts) I hope I have learned something from that.) Now that the market is well below that line there are two possibilities: either we have entered a new big down phase (the red line should start to point downwards to confirm that); or it will act as a magnate for price action and we will see a seasonal winter rally.
2. When prices shot up at the end of the sharp fall (brown arrow) I worked on the principal that we were in for a V shaped recovery I had a huge bottom fishing campaign in US, UK and HK. Initially I made a lot of money. But when it reached the top of its movement and retraced (blue arrow). I lost it all and then some. (another lesson learned. I hope).
3. Prices then started to move violently inside a channel (Yellow parallel lines). I have attempted to make money on the down movements inside that channel by taking out short ETFs and so far this has worked but it has required trading that was quick off the mark.
4. I have spotted an alternative interpretation of price action (grey lines forming a triangle) I now need to be aware that these lines may be the places to buy and sell.

When the US market opened today I bought more shorts and made some money. But it has been another roller coaster day. The indices have moved erratically as have precious metals. Silver in particular has been a frightening ride. The very high volumes show that a big shift in share ownership is occurring. It is not yet clear whether it is the bulls stocking up for a rally or the bears clearing out ready for the fall. Small investors are bound to suffer either way.
My Current portfolio position is precious metals 25%, short positions 11%, cash 64%. I am making slow progress in recovering the losses described above. But at least I am outperforming my benchmark, the FTSE, which is down 13.2% since April (the start of my trading year). I am down just 3.5%.

This post is late since I was at the theatre in Bath last night. Not a brilliant outing. The play was a Chichester Festival Theatre production of The Syndicate by Eduardo de Filipo It is a piece, from an earlier age and a different culture (Neapolitan commedia del arte). It has a huge cast, many of whom added little or nothing to the plot, and long wordy speeches. It is an amoral examination of a top Neapolitan Mafia family. 
Eduardo de Filipo was Italy's major dramatist for much of his life which covered three quarters of the twentieth century, and was a friend of greats like Frederico Fellini. He is extremely well regarded.
Ian McKellen did his best to hold the play together, though he did lack the menace one might expect of a Mafia boss. He was not helped by a dismal set. At its worst it seemed to use cardigans to hide the pictures on the wall. The same background obscured by long see-through curtains was supposed to move the action from one location to another. But the real disaster was Oliver Cotton who failed dismally in a pivotal two handed scene with McKellen. From that moment the play lost all credibility and interest. Michael Pennington soldiered on bravely as the second lead (as McKellen's hard done by doctor) but he could do little to rescue a sinking ship.