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How Watching Market Psychology Can Help You Time the Market

Elliott wave patterns in price charts reflect the struggle between the bulls and bears
By Elliott Wave International

 

Two economic reports hit the newswires Thursday morning (March 6). Both were important, yet each one had the opposite implication for the trend. The market chose one report over the other, and the question is, why — and what can we learn from that? Read more.

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Blind Man’s Bluff

Blind Man’s Bluff is a child’s game, a variety of tag where a player is blindfolded until he or she manages to tag another player who then takes on the blindfold. One version of the game was played in ancient Greece, where it was called “copper mosquito,” but the stakes being played ahead of this Sunday’s Greek referendum are neither a game nor likely to result in a mere mosquito bite, assuming of course that the bite is non-malarial.

There is much speculation and confusion over what is actually being voted on this weekend but a helpful schematic produced by the good folks at Bloomberg makes it a little clearer:

3 July 2015 Blog 1

That said, investors and the electorate remain partially or totally blinded from the full facts, due to the spin emanating from the bureaucratic power houses of the Troika, consisting of the European Commission, the ECB and the IMF, who, having missed the opportunity to resolve this crisis at a far lower cost by restructuring Greece’s debt back in 2010, are now employing bully-boy and girl ( Angela and Christine) tactics by humiliating the Greek people in some half-baked attempt to make an example of Greece to other Euro-Zone members. Furthermore, whereas in 2010 some 80% of Greek’s €252 billion then debt was on the balance sheet of many multi-national banks, the debt has now grown to €313BN, thanks to the devastating austerity measures imposed on the Greek people, and is now held by foreign tax-payers, predominantly European, who will pick-up the tab for the inevitable write-downs to come, regardless of a yes or no vote.

Just as the realisation is slowly dawning that a common currency could never fully work without its members giving up sovereignty to the unelected centre, a fact hidden and denied by the federalists until the markets started tipping their hand, this approaching show-down is also confirming that whilst it has been relatively easy to sign up to the euro, there are no exit procedures in place.

So how will the referendum go, Yes or No?

Frankly, I have no idea, but with the latest GPO poll suggesting 47% leaning towards a “yes” vote and 43% in the “no” camp, a consensus is building that the yes vote will prevail, driven by fear of a life outside of the euro by an electorate truly feeling the strain.

Aside of being an natural sceptic of consensus, a Socionomist will look at the country’s stock-index for guidance, as it’s the best barometer of a Nation’s collective social mood, just as was shown ahead of the recent UK general election in a post called “Election Echo.”

3 July 2015 Blog 2

In both nominal and real terms the Athens ASE index peaked in late 1999, ushering in a “secular bear market,” of which 2000/03 and 2007/09 are parts of it. This explains a host of Socionomic observations, such as the increased polarisation within society, politics included, not forgetting the increased pessimism and fear ushered in by financial stress.

Whilst the shorter term may see a stock-market bounce, regardless of the vote result, the yarning gap that remains between real and nominal prices for both Greece and the Euro, suggests far more pain still to come,despite any continued bluffs by blind commentators.

 

 

 

 

Tesco Revisited

Tesco’s Q115 results were released this morning, which in the main were far better than most analysts’ forecast. This should be of no surprise as the majority of analysts and economists tend to “herd” in respect of “looking through the rear view mirror” and of “extrapolating” forward the most recent past.

A Socionomist, however, will study the share price pattern and from it anticipate the ebbs and flows of positive and negative social mood, which will assist in predicting a share price trend.

It was in September 2014 that Tesco PLC, a major retail giant of the UK’s blue-chip FTSE 100 index, announced it had overstated its half-year profits by £250m and saw its share price collapse by 12%. Our blog post,  “Ever Little Helps, but £250m,” analysed the share price from a technical view, concluding that “an opportunity appears to be shaping up for a decent bounce in its share-price, perhaps back towards the 265 to 300 pence range.

A caveat was added, however, that I would prefer to await a change in the panel indicator to green, or at least to neutral before buying.

So how has it panned out?

26 June 15 Blog 1.

As can be seen from the chart above, it’s been pretty much as forecast:

The indicator panel changed to Neutral a month or so after the post, turning to Buy towards the year-end, since when the share price rallied to 254p in early April of this year, despite the ongoing concerns about the management’s ability to turn-around this juggernaut of the retail sector.

So where do we go from here?

Predictably, the analysts’ will be falling over themselves to extrapolate forward a higher share price and they may be correct, not because of the better news released with today’s results, but more to do with a re-test of the 50% Fibonacci retracement level shown on the monthly data chart below, which is at 250p. It may even recover to the 61.8% retracement target at 273p per share.

26 June 15 Blog 2.

However, the longer term monthly chart appears to be a massive “head and shoulder” pattern, which has ominous considerations, which will target my longer term target set out in last September’s post.

It is worth a re-read.

 

 

 

 

 

 

Investment Markets Overview — W/E 19th June 2015

The impasse between the Greek Government and its major creditors became increasingly acrimonious this week, with insults lobbed between the Greeks and the IMF and an apparent intransience between the Greeks and the EU Finance Ministers. Adding to the mix were ongoing calls for more emergency funding from the ECB, who duly provided sufficient to meet the increased rate of bank withdrawals from domestic Greek residents. With Greek bank deposits stated to be at a 10-year low, the ECB has warned that its banks may not open on Monday, hence the call for an emergency summit of European leaders on Monday as matters are fast coming to a head. Despite the relative inexperience of the newly elected Greek leadership, they have put up a sterling defence against the opaque and somewhat bullying tactics employed by the EU and IMF professionals, which has included a thought-provoking analysis of the “gap to be bridged” by the Greek Finance Minister, Yanis Varoufakis, which can be found here. It paints a different picture than the one trotted out by the EU spin machine and the so called “quality press.”

19 June 15 .

Subscribe to the Full Investment Markets Overview Newsletter which contains the following:-

Additional Commentaries:
•US economic data . . .
•Euro-Zone . . .
•The UK . . .
•Out East . . .
•The $US index . . .
•Within the commodities complex . . .
•Economic data due next week includes . . .

Whilst all eyes are focussed on the Greek debt problem, China’s stock-market bubble fuelled by an even larger debt bubble, may,  ……

Charts:
1.  Indices Weekly
2. US Bloomberg Consumer Comfort V US GDP
3. UK Average Earnings V UK CPI
4. Japan Trade Balance V Japan Imports and Exports
5. Commodity YTD  Moves

Table:

13 Indices, 11 columns of detailed information, for accurate analysis

“If Debt Was the Prerequisite to Economic Prosperity, Zimbabwe would be the richest country on earth…. and it Isn’t.

Click Here to view Details of the full version of this Newsletter which includes full text and detailed

Putting Greek Debt to Bed

After months of increasingly acrimonious “dialogue” between the Greek Government and its major creditors, matters appear to be coming to a head with the call for an emergency summit of European leaders on Monday.

 The European Central Bank told a meeting of euro-zone finance ministers on Thursday that it was not clear whether Greek banks would be open on Monday, expressing concern about the accelerating pace at which Greeks are removing Euros from Greek banks, put at €2 billion of deposits this week alone and triggering fears that a breakdown in talks would spark a further flight of funds and the need to install capital controls.

The term “barn door and horse bolted” comes to mind if one looks at the “capital flight” from Greece over the past six-years, not just this week.

19 June 15 Blog 1.

In April 2013 as the financial system in Cyprus was imploding I wrote an article entitled, “Deposit warning, It’s Not Just Cyprus,” providing the following warning:

“Contrary to what you may read in the press, Cyprus was not a one-off, it’s fast becoming a blue-print for future bail-ins, with policymakers suggesting that it’s only “fair” that depositors should shoulder a share of the losses rather than just the tax-payer. (Somehow failing to recognise that they are often the same entity.)” The residents of Greece are obviously making alternate plans for their bank deposits.

Everyone is getting rather tired about Greek debt, so let’s hope that policy-makers can find a workable solution on Monday to put the problems to bed.

As we said in 2013, “It’s not just Cyprus,” and it will not just be Greece. There are legal tax-efficient solutions to prepare against the next one and the solution doesn’t have to be as follows:

19 June 15 Blog 2.

 

 

 

 

Investment Markets Overview — W/E 12th June 2015

A report by the US Peterson Institute for International Economics suggests that if foreign countries had pursued growth through domestic demand, post the financial crisis, instead of through “currency manipulation,” the dollar would have been weaker, the US trade deficit would have been smaller, and US growth and employment would have been higher. This view is purportedly supported by the former Fed chair, Ben Bernanke, himself no stranger to market manipulation. The report goes on to state that, “during the past 15 years, countries around the world have realised that currency manipulation is an easy way to goose economic growth at the expense of the rest of the world.” Strong accusations indeed which certainly chimes with the “beggar thy neighbour,” policies by the world’s central banks’ over the past few years, if not longer. It’s quite ironic that as the report was released, the UK’s CB chief, Charmer Carney, and his partner in crime, Chancellor “you can call me Jeffrey” Osborne, used the annual Mansion House speech to warn that the “age of irresponsibility” is at an end for the banks and the financial services sector, promising tougher penalties for market abuse, including jail-time, but not for the central bank or finance ministry, of course, as their manipulative activities are considered to be “prudent stability actions.”

12 June 15 .

Subscribe to the Full Investment Markets Overview Newsletter which contains the following:-

Additional Commentaries:
•US economic data . . .
•Euro-Zone . . .
•The UK . . .
•Out East . . .
•The $US index . . .
•Within the commodities complex . . .
•Economic data due next week includes . . .

Returning to the UK Mansion House speech, Chancellor Osborne announced the sale of the former largest bank in the world, the Royal Bank of Scotland ……

Charts:
1.  Indices Weekly
2. US Job Openings V US Unemployment
3. E-Z GDP V E-Z Household Consumption
4. Japan GDP V Japan M3 M-S and Credit
5. Commodity YTD  Moves

Table:

13 Indices, 11 columns of detailed information, for accurate analysis

“Maths to a politician is Far different than that of the Electorate.

Click Here to view Details of the full version of this Newsletter which includes full text and detailed

Place Your Bets

The casinos in Macau may be suffering of late, but they are alive and well in mainland China and in Hong Kong, albeit that for the latter two it’s their respective stock-markets as opposed to the slots and tables. Increased volatility was evident once again last week as China’s main stock-index, the Shanghai Composite, fell by 5.4% during Thursday’s session, before rallying to end the day with a 0.8% gain, the third of similar moves within the past few weeks. The volatility swings over the past 10 days are larger than all of the 70 other benchmark stock indices tracked by Bloomberg. Since the exchange link with Hong Kong commenced seven months ago, trading by Chinese investors have fuelled some of the biggest swings witnessed on Hong Kong’s exchange, the HSI, including the recent “soar and crash” examples of Hanergy Thin Film Power Group Ltd, whose share price saw a 1-day collapse of 47%, whilst Goldin Financial Holdings Ltd and Goldin Properties Holdings Ltd took a 67% haircut over a two-day period. Events such as this damage investor confidence and perhaps the mid-April warning within our “Twin Peaks” post is now transpiring.

10 June 15 Blog 1.

Finally, we are interested to note the ongoing fall of retail sales within Hong Kong, despite the booming stock-market index, as represented by the HSI. Historically stock performance and retail sales have shown a close correlation, as can be seen above, but no longer as can be observed.

Either sales are about to jump OR the HSI is about to follow retail sales lower. It’s time to place your bets!

 

 

Investment Markets Overview — W/E 5th June 2015

The Chartered Management Institute’s National Salary Survey, released this week, surveyed the pay of 70,000 UK managers and concluded that a third of those given bonuses were rated as “not meeting expectations.” Its CEO, Ann Francke said, “too many managers are reaping the rich rewards of their positions despite being poor performers,” with the average bonus for under-performing company directors put at £45,000 and sub-par managers at £9,000. Management in businesses and organisations is the function that coordinates the efforts of people to accomplish goals yet another observation within the report states that, “it seems to be a lot easier to reward poor performance than to face the awkwardness of having difficult conversations with underperforming staff.” It’s not just the UK problem either, as shown within last year’s Towers Watson’s “Talent Management and Rewards Study” of 320 US and Canadian organisations, recognising that 24% of companies responding to this survey pay bonuses to employees “who fail to meet even the lowest possible performance ranking,” which is surprising given an era where companies are constantly under financial pressure and relentlessly trimming costs. Aside of helping to explain the declining productivity figures of late, the clear message is that poor performance will not only be tolerated – it will be rewarded. It is also management without really managing.

5 June 15 .

Subscribe to the Full Investment Markets Overview Newsletter which contains the following:-

Additional Commentaries:
•US economic data . . .
•Euro-Zone . . .
•The UK . . .
•Out East . . .
•The $US index . . .
•Within the commodities complex . . .
•Economic data due next week includes . . .

The casinos in Macau may be suffering at present, but they are alive and well in mainland China and in Hong Kong, albeit that for the latter two it’s their respective stock-markets ……

Charts:
1.  Indices Weekly
2. US ISM Sevices V US Personal Spendng
3. UK Base Rate V UK Market Rates
4. HK Stockmarket V HK Retail Sales
5. Commodity YTD  Moves

Table:

13 Indices, 11 columns of detailed information, for accurate analysis

“It is generally agreed that casinos should, in the public interest, be inaccessible and expensive. And perhaps the same is true of stock exchanges.” – John Maynard Keynes. 

Click Here to view Details of the full version of this Newsletter which includes full text and detailed

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