Wednesday, 31 December 2014

Year end closings

As we approach the monthly closings for year-end I will share the charts and my views.

Firstly on the S&P500:

Despite the weakness of the S&P500 this week (likely year-end profit-taking) the monthly chart is setup for further gains. It's likely we will see gains in January through new position building. Greek elections on January 25th may take the wind out of the market but we may be setting up for a bubble move in stocks. Retail involvement is still low but may be limited after previous losses. The market looks set to go through 2100 though, after which a bull move may take us higher. With Japan pushing QE and the ECB looking likely to join them, we are certain to keep pushing higher until we have another structural break (think Tech bubble pop/sub-prime pop).


A very weak monthly and yearly close in the EUR/USD assumes a certain test of the 1.20 level. This will probably happen in January as a result of the Greek elections. The results of this election and possible QE from the ECB could see further losses through 1.20.


Crude prices are also electing a very bearish monthly/yearly closing, as WTI breaks through $53. Price should test the $40 level in 2015. We may see a counter-trend rally soon but the outlook for oil is bearish.

On the U.S. Dollar:

The U.S. dollar may put a top in soon for a pull-back, however the bullish trend will continue. The BOJ and ECB are going all out to devalue their currencies, whilst the oil price decline is threatening sovereign debt in oil-producing nations. Talk of the dollar's demise is still premature and there is too much risk out there that could see a run to the dollar.

Saturday, 27 December 2014

The smart investor's guide to gold

I have just finished writing a new ebook: "The Smart Investor's Guide To Gold".

The book is available in the Amazon Kindle store here:

"The Smart Investor's Guide to Gold" is a professional and unbiased look at the investment considerations of gold as an asset, alongside an analysis of the current monetary and financial regime to provide a smart investment strategy for gold.

The book is based on the the same research and analysis that I use throughout the blog. In my opinion, too many writings on gold are based on scare stories and get-rich-quick schemes, which has cost investors a lot of money over recent years. I fully support the use of gold in portfolios, and believe we are nearing a bottom in gold prices, yet we must still observe the cycles and trends in order to invest wisely.

Monday, 22 December 2014

When to use volume

I don't use volume as an indicator too often as it can distract from the trend at hand, or create a bias in your mind when you see an increase.

The following chart on QQQ though, is an example of when volume can be used to assist your decisions on a market's next direction.

The yellow lines I've marked on the chart are highlighting big volume builds in the stock. It's clear looking at these, that the 'smart money' buys heavily into the bottoms. 

If you look at the October bottom, the volume was well above the average: a good sign that large transactions were building and a continuation of the up-trend was likely. We also got a nice bounce off the 200 moving average here.

Anatomy of a low

The following chart highlights the creation of a medium-term low in oil. Price was falling into the end of 2013, where the low was made.

The break of the downward trendline is important and the market usually rallies before retesting the lows (or near to).

The rally in price through the first half of 2014 gave us two important trendlines to gauge the breakdown in price. Note also that the rectangle around the bottom is around two months in length before the final low.

The next chart shows where price went in the second half of 2014.

The key points here are the trendline failures at rectangle A & B. The failure at A was the final attempt to form a low at the year-to-date low around $92.

Friday, 19 December 2014

My thoughts on the 'Black Swan'

Sorry to disappoint any ballet fans out there, but the 'Black Swan' I talk of here, is the metaphor popularized by Nicholas Naseem Taleb, in his excellent book, "Fooled by Randomness", which was used to describe market risk.

The idea was based on early studies on nature, where only white swans had been discovered. When the discovery of black swans was made, it turned previous thought and analysis on its head.

Taleb used the metaphor to describe events that the market does not see coming. One example of a Black Swan would be the Russian default in 1998, whose effects caused a market crash and the collapse of a Wall St hedge fund; complete with bailouts. The sub-prime mortgage debacle of late 2007, is another situation where previous expectations were flipped upside down. Ratios and risk measures that had created a boom in mortgage lending were suddenly irrelevant and the effects were chaotic.

My thoughts in relation to the Black Swan are based on my experience in the market. In mid-2007, the stock markets and housing markets seemed too-good-to-be-true (they were) BUT, until the Black Swan became clear it was only safe to play the current trends, regardless of your thoughts on the market. I use this only to highlight that when the market is showing extreme exuberance, there is still profit to be made going long with tight downside protection. In 2007, the bullish belief was so great, that the market bounced higher following the collapse of Lehman Brothers: one of the largest Wall St banks with extreme contagion risk.

The present action in the stock markets are similar to the markets of 2007, but until we get our 'Lehman moment', it is not advisable to fight the trend. When the Black Swan comes it will be clear.

Weekly closings - Stocks, Oil, Gold


Another strong weekly close has been elected by the Dow bulls and we have approached some key overhead resistance.

The market has closed strongly through 17,800 and now eyes 18,000. Support above 18,000 and we would likely see clear-blue-skies for the equity markets again.

Love it, or hate it, I have written on the subject recently to give some ideas:

I still don't think we have seen the 'blow-off' style top that accompanies bull markets like this, although, as the NASDAQ approaches it's all-time high I may be proved wrong. There is still the option that if sovereign debt contagion was to happen through Russia, Venezuela, emerging markets, Japan, Europe (large list) then tech may be shunned for 'bellweather' industrial stocks. We watch and wait.

If you think this action is crazy on stocks, understand that markets have exhibited the same types of insanity for over a hundred years or more. Psychology takes over from fundamentals until the top. We will however look back one day and see where the inflection points were. Until then, you have to stay with the trend.

'Don't fight the Fed' but protect the downside on longs.


Crude Oil has put in a promising bullish close this week and may stabilize/rally from here. Obvious target is to clear $60 and test $70.

I'm still wary of the $40 level but in my previous posts you'll see I talk about price action. Rallies happen in the middle of a basing setup. Market feeling for its lows.


A disappointing close for gold, with a bearish candle on the week and failure at $1200. This can all change rapidly in such a risky global economy and as the Dow reaches strong overhead resistance, it wouldn't be a surprise to see a top in stocks, rally in gold and oil.

On a portfolio basis, I am looking at oil ETFs and strong balance sheet oil/energy plays that have been unfairly dragged down.

Exxon for example, can be bought around 11-times earnings against Facebook's 70-times. No contest.

I will continue to look for a bottom in gold to test the highs but may come mid-2015.

If I see support on S&P or Dow then I might play ETFs with futures exposure incase of blow-off top mentioned above.

Good luck trading and please buy my book, advertised on the left to build the investment skills that I try to share here.

Thursday, 18 December 2014

Oil charts look ominous

Despite a bounce on OPEC's statement that low oil was "temporary", the chart has fallen back to give a bearish signal. With the stock market rising strongly off the FED announcement and gold looking a little weak also, it's possible we will get another leg up in risk, with a leg down in commodities.

The weekly chart doesn't look any better on crude oil and the levels at $50, and more so $40, look like a potential magnet zone for crude. I wouldn't be surprised to see these levels targeted in the "risk off" move that I mentioned. 

***I went long oil at $60, with an extra position at 55, which allowed me to take the second portion at $60.

I will hold off any other buying now but the lows at $40 would be a strong entry for me. Further lows will ensure that oil stays depressed into 2015 but there are always bounces to take advantage of.

Remember also, that OPEC cut production by 75% in the 1980s and couldn't halt price so awaiting their actions here is also futile. As yesterday and today's rally showed, OPEC created a small opportunity to cut loss or take a small profit,

The 1980s chart is shown below for reference:

If the oil price was to stay depressed through 2015 - 2017 it would do considerable damage to economies and corporations as it did in the 1980s. 

Wednesday, 17 December 2014

Gold update for the week

Gold has stuttered around the $1200 level and has failed to see continuation into the preferred zone.

The Fed comments today gave a rally to stocks and could create a 'risk-off' situation into the weekend, following a turbulent week.

Continued weakness into the weekend could see another leg down towards $1000.

USD/CAD update

The plunging oil price has knocked the wind out of the Canadian dollar and price is approaching a key zone; highlighted by the gold rectangle.

The top dotted line near 1.1800 signifies 'The last low before the high', which is often a strong support or resistance level. A breach of that resistance would clear the way for a run at 1.3000.

Tuesday, 16 December 2014

Looking lower on S&P

The chart below highlights key areas on the S&P500 monthly:

The weekly chart highlights the more immediate concerns:

Levels are extremely stretched so I'd be looking to play strong fundamentals over momentum here. Unless you can manage a tight stop-loss.

Thursday, 11 December 2014

3 things Wall St doesn't want you to know

1. "Hold" often means "sell"
2. A lot of what we're saying is just noise
3. Half of us (and you) need to be wrong

Posted this for a bit of fun, however in point 2, the author highlights the dangers of technical analysis over fundamentals- as if the two can't be used together? Ridiculous.

The W formation

This USD/CAD weekly chart highlights a good 'W formation', which is a technical analysis term.

It shows some of the key price action that can help your decision-making- namely the retest or bottoming action. Price usually takes two or three pushes at a low level before a bottom is in. In this case, the break above the near-term bounce resistance opens up a move to 1.3000 on the pair over the coming weeks. 

This would be the initial idea, which can then be used to consider the best entry point.


I posted the following short piece of analysis on On Semiconductor Corp (NYSE:ONNN) recently on Stocktwits:

The basis of the post was the sharp momentum move in the stock and a quick look at levels.

My analysis was: "O/bt daily but room higher on weekly. 9-9.25 gap key (sits at 50ma also). Buy support there or above 10."

In long hand this was stating that the daily RSI was in overbought territory on the daily but the weekly had room to go higher. I was highlighting that the $9.00 - 9.25 gap was key. If it held, then a push through $10 was possible.

The real advice I was giving was to urge a little caution  at the current level. Many will see a strong move and dive in, but I wouldn't have bought at that level of $9.84. I would rather buy support around $9 or even higher, over $10, if the stock broke out.

The price between $9-10 is actually a bit of a no-man's-land so it is better to put it on a watch list and wait the better price, to adjust your risk more efficiently.

So how did the stock perform?

This is the daily chart of On, 5 days later. As you can see, it's slightly lower than the $9.83 price we could've had. The stock actually closed through $10, a short pullback led to a low volume follow-through which couldn't get above that level again. We now have a strong bearish close back into the 9s. The 50 and 200ma could provide support on bearish continuation so it was right to urge a little caution previously as the close above $10 is looking like a false breakout.

(You can see the overbought condition on the daily chart. I don't always use the RSI as it can be inaccurate for timing but it can add some context to a move).

Tuesday, 9 December 2014

Thoughts on Bitcoin

Bitcoin has received a lot of attention over the last few years and has been implemented into more and more companies and investment portfolio.

Bitcoin will only see substantial gain when the global economy faces a crisis and trust in currencies and government erodes: much like gold and silver.

For now I'd be looking to buy into dips.

Silicon Valley has started to take an interest in Bitcoin and Chris Dixon, a partner at venture firm Andreesen Horowitz, claimed that Bitcoin could hit $100,000.

This is still a highly speculative idea, but one with huge potential upside.

Shareholder dealings

An important event to follow, and a mover of stock prices, is the actions of shareholder dealings in a company.

As an example I will use this week's announcement this week that a member of the Glazer family, who own the majority of Manchester United Football Club.

The statement released read:  “Manchester United plc today announced the offering of 3,000,000 of its Class A Ordinary Shares by the Edward S. Glazer Irrevocable Exempt Trust (the ‘Selling Shareholder’)."

The move caused shares in the club, listed on the NYSE exchange, to drop over 8% on tuesday. Insider selling and buying has a negative or positive reaction in the stock price as it highlights the confidence of executives in short or medium-term price gains.

Friday, 5 December 2014

Technical/Fundamental combination in USD/JPY

The recent bullish price action in USD/JPY has been caused by the BOJ's announcement that they will continue their QE program indefinitely. This combined with the FED ending theirs, makes upside plays the only option in USD/JPY.

The monthly chart below highlights the break of a very important trend/channel line.
The 123 and 135 areas are the first initial targets. This is an example of how to put together fundamental and technical pictures. If you trade blind on charts alone, you only get half the story. Comparing the two economies, the U.S.A. is in a much stronger position and I would not be surprised if we tested the high of the late 90s over the next 2 years approximately.

(Note the gold line on the monthly. I've highlighted an instance where a short position is safer. Price was still in a downtrend and struggled at the 120 level. Once back under the 50 ma, it stayed there for 5 years on a monthly basis).

The fundamental and technical picture make this a long only play for now. I would only buy on pullbacks however, by reverting to the weekly chart for entry.

'Zooming in' to Gold

After looking at the levels on the gold monthly chart, we can zoom in to a shorter time frame to suit our strategy or risk requirements.

This is the weekly chart of the same price action and we get a better look at the near-term levels. 

We need to see a strong close on the weekly chart this week in order to head for the trendline.

Before making any play, it would be wise to look at upcoming event risk, starting with today's Non Farm Payrolls from the U.S.A.

Thursday, 4 December 2014

Gold monthly thoughts

In the book, I write a lot about news sources, information and timing.

Nowhere has this been more important in the last few years, than in gold. People with no previous interest in metals suddenly became experts on price action and history. They sold a convincing story to many, who have since lost their shirt as gold fell from 1900 to 1200. 

Those who pushed gold at 1900 refuse to admit they were wrong and have since come up with every story in the book about how gold is manipulated etc. Yes, there's been proof of small scale price fixing, but it is simply impossible to hold down the price of an asset if the world wanted it. If the smart money were interested in gold, trillions could have been buying but they weren't. As central banks propped up markets with QE programs, gold became a non-performing asset as the search for yield crossed into stocks, bonds, property etc. You can come up with a million excuses, yet the simple fact is that the gold-promoters have been wrong for three years. 

Gold will have its day when the market loses faith in government and currency, but all commodities will rise in that scenario. Until that day, we will not see panic-buying so choose your levels wisely.

So let's now look at the technical picture. Gold has recently broken another uptrend line. This level is now important. If gold can rally into the triangle it will test the line again.

The test may be a simple 'retest' that often happens when a trendline is broken, which would then see further losses towards 1000/730.

If gold can hold through the trendline (more likely) then it will push to retest the resistance line at 1400. Only a break and hold above 1400 will signal that 1900 is in play.

Until then: beware false breakouts and volatility. But most importantly, follow the price action and not sales tactics. 

Tuesday, 2 December 2014

Chevron monthly channel

Drew up a monthly chart for Chevron. Potential bottom on the daily but watching oil with some caution. If market turns away from oil, energy stocks would lag.

Would possibly take daily chart opportunity but monthly highlights danger of buy and hold.

Adjust risk to potential outcomes.

COT as a contrarian tool

The Commitment of traders (COT) report is released each week by CFTC for futures positioning and open interest.

The report can be used to determine exhausted trends and potential turns. The following chart of price also shows the positioning of commercial interests (blue line), large speculators (black) and small speculators (red).

The recent collapse in oil prices can be attributed to the record highs in speculative open positions going into July 14. This extreme amount of long positions meant there was nobody left to buy. When the market began to turn, a rush to the exit was set in motion at various levels. 

Many would have cut losses under 100, then 90, 80... This will continue until the last seller. At that point we will turn up again. 

Note that commercials have started buying again. Commercials represent hedgers etc. They tend to be on the ride side of the turn as a look back at previous highs and lows will show.

Thursday, 27 November 2014

Gap trading on AAPL

The main focus of my technical trading strategy is using previous support and resistance levels combined with the price action around these to indicate the next potential move.

One of the useful opportunities is gap trading. When the market opens higher or lower than the previous close, it offers an immediate support or resistance level.

The gap highlighted in the Apple daily chart -- and the first day close above -- is a good buying opportunity. The potential to buy the stock at $81 with a stop at 80 if required saw the market closing strongly through the previous highs and can then be held with a stop moved to $82 for a risk free trade.

Six weeks later and another good gap up leads to further strong gains.

The problem with indicators

I like to keep my charts clean and free of clutter and indicator bias. The only indicators I use in my trading are moving averages, which I use with candlestick or bar charts. I also don't use candlestick patterns as such; just read the bars to show how the market is behaving.

The reason I don't use indicators for my trading is highlighted in the charts below.

The chart above simply shows how indicators get traders into trouble. On a monthly basis the ES has been in oversold territory on the RSI for close to two years so the tendency to look downwards has caught many traders out by always trying to pick a top. 

For me, the bars tell a story and remove the need for volume indicators. Look closely at the longer green bars and you can see that there is usually always follow-through.

In the simplified monthly chart below, you can trade without this bias. The ES had a target of the previous highs at 1450. Once the market approached this level it is time to step back a little and let the market dictate the next direction. The rectangle area shows clearly that the market has broken out to new highs and failed to correct significantly, showing that the market is stable at these prices and further gains are likely.

The strong bullish bars through 1700 and 1800 in particular gave buying opportunities.

The infamous March 2009 low is marked also and you can clearly see that once significant buying occurred on consecutive months, the market had made its low. 

Not so random markets

Take what you wish from this S&P500 chart; it highlights that even during the October panic, there is order to be found. S&P is a very liquid product so this would explain the reaction of time and price. 

A closer look at moving averges.

I like to use moving averages as a 'line in the sand' indicator of recent price behaviour.

It is also well known that large institutions pay attention to the 50 and 200 period moving averages; in particular a crossover of these to highlight trading opportunities.

The charts below will show a few examples on different timeframes and securities to highlight that price action can be used across different investment products and duration.

The EUR/USD chart above displays some action on the weekly chart around the 200ma, with the follow through that can occur. The rectangle areas show small risk opportunities with large potential reward.

The monthly chart of Gilead Sciences is a great example of the 200 period moving average. Once price crossed through, it never looked back and was up +300%. I used the monthly chart to highlight how damaging over-trading can be.

The chart of Century Aluminum crossed the 200ma in January of this year and returned 100% on your investment. In the example of CENX you would be buying the ma cross at 11.50 approx and the potential to cut the investment if it fell under the ma.

Tuesday, 25 November 2014

Welcome to Investment FTS

Welcome to Investment FTS!

Our goal is to provide a blog full of quality investment content that cuts through ego, opinion, false information, complicated economic and financial data, and the information overload that is rife in modern financial media.

We will post regular analysis of present day financial market opportunities and other investment ideas in order to help our readers gain knowledge and control of their investments, and help them avoid the the psychological pitfalls that can ruin their portfolios or trades.