Update....

It's been a couple of weeks since my update - mainly due to being uber busy at work! The market bounced following the recent drop following the break of the long term diagional support. This rally seems to be over now the recent support has broke. The graph below is showing a head and shoulders formation where the neckline has broke down. These are all bearish singnals. I cut my shorts at a pretty good time and I am going to look into load the book once more. I took another S&P Future short on the 16th Feb at 1,098. I could have picked a better entry if I waited a bit longer for the graph to touch the upper resistance once more.

Regardless, the 61.8% Fib level has not been sucessfully penetrated and the resistance at 1,114 looks strong. I see the 1,066 as the next support level, a break of which should see the price action return to the low at 1040.

Cutting shorts....

Quick note - I have cut my single name shorts as I have lost some of my conviction on the downswing as we have failed to make new lows. I am still bearish, but thought it best to lower my risk and wait for a clearer picture to emerge.

Interestingly, it looks like I should have kept the the long BP trade off the support that I cut yesterday - another case where I cut to early. I should have had more conviction in the trade given the strong technicals.

An indication that rates may rise....

Today, Ben Bernanke publically announced that the FED may raise the discount rate in the US "before long," but repeated the Federal Open Market Committee statement that low rates are warranted "for an extended period."

How ambiguous is that?! What ever the reason behind the announcement, the fact is that this is bad news for equities and furthermore adds more uncertainty to the current market climate. Higher rates are likely to encourage people to put money in savings which means less spending (lower consumption) and consequently, lower profits and less incentive to invest (why invest in risky stocks if you can get the same returns in a "safer" savings account). The S&P fell sharpy on the news.

This is good news for my net short portfolio. This morning the ESH0 (S&P March Future) rallied up to 1,072 on the back of news out of Germany and the EU suggesting that they would support a possible bail out. On the back of this, I added to my shorts at resistance, getting in at 1,070.5. This gave the portfolio heavy exposure to the downside (3 short S&P positions open), so I closed the short opened yesterday at a small 1pt profit on the diagonal support @ 1,065 (since been broken). I also took the opportunity to close the BP long position (short hedge) which is likely to be impacted by the possibility of falling oil prices should the fall in equities continue.

Sideways movement....but where next??

At the end of last week, I mentioned that I would be looking to re-enter shorts at 1,066 on the March Future - I have taken this position today. However, the market looks to be trading sideways, without any significant indication that the trend will be continuing in any one direction.

In light of this, using the spreadsheet tool I have built, I was looking for a technically strong long position as a short term hedge. BP Plc (BP/ LN Equity) is sitting on a good diagonal support formed since March last year and have taken a small long position with a tight stop.

On the S&P500, the price action has been contained within a downwards channel (daily graph) with the next key support at 1,040 (cash index).

I have attached my latest graphs below with a brief comment on each - feel free to contact me with any questns or comments.

AAL LN - diagonal support broken on downside. Price contained in down channel. Shorts good unless diagonal support is broken on the upside and/or resistance of channel broken on upside. 

BAC US - diagonal support broken on downside. Break out from converging triangle validates shorts. Looking for horizontal support to break for continuation on downward price action. 

BP/ LN - big support holding thus far. Favour long positions as long as this is the case. Resistance (previous high) to be broken to further validate long positions.

DXY - down channel broken on up side. Trading within an upwards channel off low. Inversley correlated to the S&P.

S&P500 - 2hr graph (March future): noise at the previous low. Price action contained by downwards channel. Continuous lower lows achieved validating bearish view.

Daily cash index graph: diagonal support broken on down side and trading within a channel. Trading just above a key support zone.

PRU LN - diagonal support broken on downside. Shorts good unless diagonal support is broken on the upside and/or resistance of channel broken on upside. Next support zone joins recent low and a previous resistance.

End of another sucessful week...

The markets continued to fall as I expected this week - unfortunately I was a bit conservative in closing my single name shorts early, especially Lloyds which could have banked me another 140 points!

Nevertheless, the portfolio is performing well with the current value over £12k.

I closed the most recent S&P short opened @ 1,097 when it looked like we hit a support @ 1,067. Again, this was premature as the S&P dismissed this technical level and powered through, reaching a low of 1,050.5. I still have my long term short from 1,127 open with the 'double dip' in mind hoping that the high may be in for the time being.

From a shorter term prospective, I am looking for a retrace back towards 1,066 to sell short once more.

Levels to watch:
Support: 1,059 and 1,050 (March Fut); 1,039 (cash index)
Resistance: 1,065 and 1,078 (March Fut)

On the cash index, the 1,070 level looks key to me - it has acted as both a support and resistance level in the past. A breach above this level will mean re-evaluating my bearish view.

The long dollar trade is looking better everyday as it continues to power through the diagonal resistance. From a fundamental and macro point of view the trade is looking like a good long term bet.

I also cut half of the gold position - I was very bullish gold coming into this year, however the sentiment I am getting from the market is that the rally may have been a mini bubble which is always liable to burst. Since I lost some of my conviction, I closed half at a small but significant loss, keeping open a small position while keeping a close eye on my stop at 1,024.

Have a good weekend all!

Good GDP news out of the US

GDP data out of the US today was better than expected with QoQ annualised return hitting 5.7%. Personal consumption was also slightly better than expected. The S&P reacted as would be expected,  ralling from today's low of 1,070 (March Fut) back up to 1,090. I took the opportunity to close out the rest if the Lloyds position (+253 points) and the Exxon short (+101 points) and also added to my short S&P position at 1,088.

I am still bearish - the index is making lower lows while failing to breach the upper level of the range.
Key levels to keep an eye on (March Fut):
- Resistance: 1,090 ; 1,103 - a break above 1,103 would lead to re-evaluating shorts
- Support: 1,080 ; 1,071 (today's low) ; 1,066

Cameco Corp looking weak

Cameco Corp is dropping towards it's stop at 30 - I have decided to move my stop 29, just below the medium term support. The reason for this is because I view the position as a long term trade. What I don't want to happen is to get stopped out when the long term support is broken then seeing the medium term support hold and the price bounces back up past the long term support.

Also, see the latest performance of my portfolio below. The average was as high as 4.5% during this week, but today's drop in the equity markets has wiped off some of those gains. The retail and jobless claims data out of the US was pretty bad. The S&P is back testing it's long term support - again I am expecting the level to hold. However the end to this week and the beginning of next should give a clearer indication to the short term direction of the market. Keep an open mind!!

S&P Support Holds - portfolio update

The S&P bounced off it's support in style yesterday which is good news for all the bulls out there. From a technical perspective, this weeks candle formation is all important - at the moment it is showing a 'doji' which conveys a sense of indecision between buyers and sellers. It could be that the the buying pressure is starting to weaken. Obviously, we have to wait until the candle is fully formed to infer anything, but it is worth noting that the candle may signal the start of a reversal.

The latest performance of my portfolio is below - I have included hypothetical 'bets' for those looking at the leveraged spreadbetting option. As you can see, using leverage significantly increases the percentage returns as determined by the margin required to put the positions on.

Note - the £100/pt shown for equities is the same as £1/pt where the tick size is x100 (as offered by most spread betting brokers). For example, Shaw Group trading @ 3240 (32.40 x 100), long £1/pt.

S&P - Big break??

For those who are interested, the S&P is hovering around it's long term diagonal support on the weekly and daily chart (formed since the March 2009 low). A break of this line may be a key signal so I am keeping a very close eye. As you can see, I am currently long the S&P in my virtual portfolio. Tomorrow's retail sales data and inflation data on Thursday could be key. See below for graphs...

A New Beginning....

As you may have noticed, it's coming up to a year since I last updated my blog! March 2009 was a very busy time for me career wise, so I ended up sacrificing my blogging duties so I could have a life. Now thing's have calmed down a bit and I have had some good news!

I am going to be writing monthly articles for GX Magazine on my views on the economy and investment ideas. The articles are going to be supplemented by entries on my blog - readers can follow my latest thoughts, check my graphs and follow the performance of my virtual portfolio.

My first article is appearing in February's edition so I cannot go into too much information on here before it is published.

I thought I'd share my virtual portfolio in the meantime - I have selected the following positions based on my views on how I believe the economy is going to perform in the year ahead and beyond. Short(ish) term I am bullish the equity markets (US and emerging markets), medium to long term I am bullish the nuclear sector and gold. I have also gone for a defensive play with a water fund. Should my views change, I will update on here. You can see the performance below - I will be monitoring the positions daily and once the article is published, I will upload the charts. Click on the below table to open in a new window.

The opening prices are from the 4th January when I started writing the article. They are securities that I have been watching for months and ones I believe are worth looking at for good growth potential.
The average performance can be used as an indicator for the performance of a portfolio made up of an equally value weighted portfolio of the securities on the table.

Please feel free to contact me if you have any questions or comments!