Dubai in the news for the wrong reason. This little paradise in the desert is not the real cause of the latest sell off. The banks and institutions are the real culprits. They are telling us to sell because they'll buy low.
This is not common knowledge, however, I believe that banks scared investors days before one of the most profitable months of the year, December.
In fact some banks have been buying big chunks of stocks last week, they know the market will rally, can't wait for Santa Claus to arrive!
There is no secret. even if you are not a bank, a simple observation of the FTSE 100 chart reveals potential profits in the next few weeks, see chart.
Of course there is no certainty the FTSE 100 will rally but the odds favour the bulls: the long term trend is up, fundamentals are strong, the pull back retraced a bit more that the famous 61.8% Fibonacci retracement of the preceding decline, we have a completed Elliott wave (counter trend), seasonal influence is positive and the BTI, a unique sentiment indicator, is about to turn bullish.
To learn more go to www.eyield.co.uk
Monday, November 30, 2009
Thursday, November 26, 2009
Ending diagonal with impulsive pattern in first wave
Ending diagonals are terminal patterns. They occur at the end of a move, either in wave 5 or C.
Ending diagonals take a wedge shape within two converging trendlines, the pattern is complete when there are five subwaves inside it, see pattern.
Each subwave should be in three, however, it has come to light that there is a variation of this pattern in which the first wave is not in three but in five, see chart.
Wave (i) is in five waves [i,ii,iii,iv,v] intead of the normal three wave pattern. It seems this is the same pattern currently unfolding on the FTSE 100.
To learn more go to www.eyield.co.uk
Ending diagonals take a wedge shape within two converging trendlines, the pattern is complete when there are five subwaves inside it, see pattern.
Each subwave should be in three, however, it has come to light that there is a variation of this pattern in which the first wave is not in three but in five, see chart.
Wave (i) is in five waves [i,ii,iii,iv,v] intead of the normal three wave pattern. It seems this is the same pattern currently unfolding on the FTSE 100.
To learn more go to www.eyield.co.uk
Tuesday, November 24, 2009
A rally to new highs
The FTSE 100 is pushing to the 5380 level, will it break higher? take a look at the chart.
The FTSE rallied in five waves [i,ii,iii,iv,v] from the low on 20 November. A five-wave rally means the trend is up, the trend is a continuation of the rally from the November lows therefore last week's decline was a correction [(a),(b),(c)].
A possible scenario would allow for a continuation of the bull market until December. Wave i (circle) is over, wave ii (circle) was last week correction and wave iii (circle) up is now underway.
Because the timing indicators, 13-day BTI and Top 20 Differential, are near overbought, we expect wave iii (circle) to be shorter than wave i (circle). This pattern, where the third wave is shorter, would be an ending diagonal. It's too early to confirm the pattern but there are not many alternatives, in the short term prices should rally to 5430.
To learn more go to www.eyield.co.uk
The FTSE rallied in five waves [i,ii,iii,iv,v] from the low on 20 November. A five-wave rally means the trend is up, the trend is a continuation of the rally from the November lows therefore last week's decline was a correction [(a),(b),(c)].
A possible scenario would allow for a continuation of the bull market until December. Wave i (circle) is over, wave ii (circle) was last week correction and wave iii (circle) up is now underway.
Because the timing indicators, 13-day BTI and Top 20 Differential, are near overbought, we expect wave iii (circle) to be shorter than wave i (circle). This pattern, where the third wave is shorter, would be an ending diagonal. It's too early to confirm the pattern but there are not many alternatives, in the short term prices should rally to 5430.
To learn more go to www.eyield.co.uk
Friday, November 20, 2009
A long term breakout on Reckitt Benckiser
News that Reckitt Benckiser is thought to be in merger talks with Colgate-Palmolive sent the share price into new highs. The move follows a long term breakout, see chart.
In general, long term breakouts of either support or resistance, or any pattern such as triangles or head and shoulders, are accompanied by short term pull backs.
This is because the short term pull back is a subwave inside the wave of larger degree (the long term wave) and, as a result, will retrace a portion of the previous subwave before resuming in the direction of the wave of larger degree. Unfortunately the breaking of the long term trendline may happen at a time when the internal subwave is nearing an end, therefore going long on the breakout may result in the position being stopped out on the pull back.
This is why, after a long term breakout, it is preferable to wait for a pull back before going long. As you can see on the Reckitt Benckiser chart, prices broke out at the end of September to reach 3170. The ensuing pull back to 2970 provided an opportunity to buy.
To learn more go to www.eyield.co.uk
In general, long term breakouts of either support or resistance, or any pattern such as triangles or head and shoulders, are accompanied by short term pull backs.
This is because the short term pull back is a subwave inside the wave of larger degree (the long term wave) and, as a result, will retrace a portion of the previous subwave before resuming in the direction of the wave of larger degree. Unfortunately the breaking of the long term trendline may happen at a time when the internal subwave is nearing an end, therefore going long on the breakout may result in the position being stopped out on the pull back.
This is why, after a long term breakout, it is preferable to wait for a pull back before going long. As you can see on the Reckitt Benckiser chart, prices broke out at the end of September to reach 3170. The ensuing pull back to 2970 provided an opportunity to buy.
To learn more go to www.eyield.co.uk
Wednesday, November 18, 2009
A potential double top in Real Estate
The double top is a reversal pattern. Prices make a new high, then pull back. The next move is a rally back to the top but this time prices fail to make a new high. This is precisely where the Real Estate sector is, see chart.
In a double top, prices should pull back a second time back to the support line at 1904. A break below the support line would constitute a downside trend reversal and complete the pattern. A price target is calculated by projecting the depth of the pattern from the breakout point. In this example the target would be 1590.
To learn more go to http://www.eyield.co.uk/
In a double top, prices should pull back a second time back to the support line at 1904. A break below the support line would constitute a downside trend reversal and complete the pattern. A price target is calculated by projecting the depth of the pattern from the breakout point. In this example the target would be 1590.
To learn more go to http://www.eyield.co.uk/
Friday, November 13, 2009
Last push to new high
The FTSE 100 broke into new highs yesterday, the trend is nearing an end, see chart.
The bearish divergence between the BTI and the FTSE remains in place. It is now ten days since the FTSE started to rally, yet the BTI is still declining.
The FTSE must turn down soon otherwise there is a risk the BTI will turn up. A rising BTI would be bullish however, at this stage of the rally a rising BTI would not be significant because the Top 20 Differential is overbought and the 34-day BTI is negative (bear market).
We are already in a bear market, according to the 34-day BTI, the FTSE may push moderately higher today but the odds of a decline are increasing as the Top 20 Differential is now overbought. This is another piece of evidence that the FTSE is near a top.
The BTI is a sentiment indicator used to assess the mood of investors. When the daily change in the BTI is down sentiment is bearish. When the daily change in the BTI is up sentiment is bullish. The BTI is used to assess the near term direction of the market and confirms the Elliott wave count.
To learn more go to www.eyield.co.uk
The bearish divergence between the BTI and the FTSE remains in place. It is now ten days since the FTSE started to rally, yet the BTI is still declining.
The FTSE must turn down soon otherwise there is a risk the BTI will turn up. A rising BTI would be bullish however, at this stage of the rally a rising BTI would not be significant because the Top 20 Differential is overbought and the 34-day BTI is negative (bear market).
We are already in a bear market, according to the 34-day BTI, the FTSE may push moderately higher today but the odds of a decline are increasing as the Top 20 Differential is now overbought. This is another piece of evidence that the FTSE is near a top.
The BTI is a sentiment indicator used to assess the mood of investors. When the daily change in the BTI is down sentiment is bearish. When the daily change in the BTI is up sentiment is bullish. The BTI is used to assess the near term direction of the market and confirms the Elliott wave count.
To learn more go to www.eyield.co.uk
Thursday, November 12, 2009
BT breaks up
Today BT Group shares surged by as much as 5%. The move was triggered by a positive announcement this morning, in particular, the company raised its full year cahflow target after cutting jobs.
While no one can predict the outcome of any announcement, the chart's pattern over the last two months was bullish, see chart
We discussed HSBC the other day, today we have another pause in the uptrend pattern in BT. Consolidations or pauses in the uptrend are generally sideways moves in five waves [A,B,C,D,E]. Now observe wave B and D, they are both in three legs [a,b,c]. This is what you would expect in a consolidation. If it was not a consolidation, prices would continue to move up in five waves but here these small rallies are in three legs and are followed by a pull back.
The third pull back which is wave E marks the end of the consolidation. This is where you would buy.
To learn more go to www.eyield.co.uk
While no one can predict the outcome of any announcement, the chart's pattern over the last two months was bullish, see chart
We discussed HSBC the other day, today we have another pause in the uptrend pattern in BT. Consolidations or pauses in the uptrend are generally sideways moves in five waves [A,B,C,D,E]. Now observe wave B and D, they are both in three legs [a,b,c]. This is what you would expect in a consolidation. If it was not a consolidation, prices would continue to move up in five waves but here these small rallies are in three legs and are followed by a pull back.
The third pull back which is wave E marks the end of the consolidation. This is where you would buy.
To learn more go to www.eyield.co.uk
Tuesday, November 10, 2009
A pause in the uptrend
HSBC Holdings, Europe's biggest bank, said third-quarter pretax profit rose as bad loans declined. Profit was significantly higher than a year ago.
The stock was up 3.8% at 3.05pm. Today's rally could be the initial move of a short term rally. A similar pattern occurred in mid July, see chart
Note the similarity between patterns preceding the start of the rally in July and today. The pattern is a consolidation where prices decline slowly in a tight range. These moves are consolidations because they tend to occur prior to a sharp move up.
If history repeats itself the stock should continue to rally, the only difference today is that the current move is a fifth wave, it should be shorter than wave 3.
To learn more go to www.eyield.co.uk
The stock was up 3.8% at 3.05pm. Today's rally could be the initial move of a short term rally. A similar pattern occurred in mid July, see chart
Note the similarity between patterns preceding the start of the rally in July and today. The pattern is a consolidation where prices decline slowly in a tight range. These moves are consolidations because they tend to occur prior to a sharp move up.
If history repeats itself the stock should continue to rally, the only difference today is that the current move is a fifth wave, it should be shorter than wave 3.
To learn more go to www.eyield.co.uk
Monday, November 9, 2009
Bank stocks in a bearish pattern
UK stocks rose for a fourth day led by miners. Bank stocks are still diverging, see chart.
Note the bearish divergence (declining relative strength line) since August on the lower chart, the FTSE is trading higher but the Banking sector is more or less at the level where it was in August. When the banks lag the FTSE is unlikely to rally further.
Today's counter trend bounce in the FTSE could easily turn into an impulse wave, however, for some reason the formation of a potential head & shoulders pattern in the banking sector supports my view that the rally is a counter trend.
A head and shoulder is a bearish pattern. The pattern will be complete when prices break below the neckline. This level is currently 4687. If this is the correct pattern then expect a break below 4680 in the next few days. A falling banking sector would drag the FTSE lower.
To learn more go to www.eyield.co.uk
Note the bearish divergence (declining relative strength line) since August on the lower chart, the FTSE is trading higher but the Banking sector is more or less at the level where it was in August. When the banks lag the FTSE is unlikely to rally further.
Today's counter trend bounce in the FTSE could easily turn into an impulse wave, however, for some reason the formation of a potential head & shoulders pattern in the banking sector supports my view that the rally is a counter trend.
A head and shoulder is a bearish pattern. The pattern will be complete when prices break below the neckline. This level is currently 4687. If this is the correct pattern then expect a break below 4680 in the next few days. A falling banking sector would drag the FTSE lower.
To learn more go to www.eyield.co.uk
Friday, November 6, 2009
The return of the bear market
From now on we are in a bear market, that's according to the 34-day BTI.
The 34-day BTI is used to assess the main FTSE trend. When the 34-day BTI is positive the FTSE is in a bull market, when the 34-day BTI is negative the FTSE is in a bear market.
The indicator became negative yesterday. In addition the BTI, an indicator measuring investors mood, is still declining at a time when the FTSE is rising. This bearish divergence is a common feature of bear market rallies. In a bear market, rallies should be accompanied by declining BTI which is what we are seeing.
It has to be said that the news has been good recently, yesterday's manufacturing output in the UK and jobless claims and productivity in the US came in better than expected. Today's big news is the US nonfarm payrolls at 1.30pm. If the figures are good the market will spike, this would provide a good entry level to go short.
The FTSE may move moderately higher today but in the near term the trend is down, see chart.
To learn more go to http://www.eyield.co.uk/
The 34-day BTI is used to assess the main FTSE trend. When the 34-day BTI is positive the FTSE is in a bull market, when the 34-day BTI is negative the FTSE is in a bear market.
The indicator became negative yesterday. In addition the BTI, an indicator measuring investors mood, is still declining at a time when the FTSE is rising. This bearish divergence is a common feature of bear market rallies. In a bear market, rallies should be accompanied by declining BTI which is what we are seeing.
It has to be said that the news has been good recently, yesterday's manufacturing output in the UK and jobless claims and productivity in the US came in better than expected. Today's big news is the US nonfarm payrolls at 1.30pm. If the figures are good the market will spike, this would provide a good entry level to go short.
The FTSE may move moderately higher today but in the near term the trend is down, see chart.
To learn more go to http://www.eyield.co.uk/
Wednesday, November 4, 2009
The difference between Buy and Strong Buy
The WMI gave a "buy" signal on 2 November and a "strong buy" signal on 3 November. Here we have a good example of efficient trading using the WMI.
The most accurate readings occur when the indicator says "Strong buy". The strong buy came yesterday at 9.55am when the FTSE 100 was trading at 5,000. This proved to be an excellent level to go long, as I write the FTSE 100 is trading at 5,080.
Since a "buy" signal is equally a signal to go long, according to the guidelines you should have gone long from 5,075 on 2 November with a half position and yesterday you should have added the other half at 5,000. Your average price would be 5,037 and your position would be showing a profit right now.
You can take a full position on a "buy" but it is not recommended. As you can see it is preferable to take a full position when the signal is "strong buy". In the above example it worked very well.
More about the WMI, click here
To learn more go to http://www.eyield.co.uk/
The most accurate readings occur when the indicator says "Strong buy". The strong buy came yesterday at 9.55am when the FTSE 100 was trading at 5,000. This proved to be an excellent level to go long, as I write the FTSE 100 is trading at 5,080.
Since a "buy" signal is equally a signal to go long, according to the guidelines you should have gone long from 5,075 on 2 November with a half position and yesterday you should have added the other half at 5,000. Your average price would be 5,037 and your position would be showing a profit right now.
You can take a full position on a "buy" but it is not recommended. As you can see it is preferable to take a full position when the signal is "strong buy". In the above example it worked very well.
More about the WMI, click here
To learn more go to http://www.eyield.co.uk/
Monday, November 2, 2009
The trend is down
When a decline is in five waves, the trend is down. This is the theory, in practice it is not as simple as that.
A problem with Elliott wave is that it is often late at identifying the main trend, or it can sometimes lead to errors depending on which degree of trend is being looked at. For example: a five-wave rally may suggest that the trend is up, but in reality the situation is more complex. A five-wave rally could be a countertrend move in a long term bear market. Assuming the trend is up because the rally was in five waves, in this instance, would be a mistake. This observation and subsequent research led me to develop the BTI or Bullish Trend Indicator.
The BTI is a sentiment indicator. This unique indicator tells us whether investors are bullish or bearish at a specific time, regardless of the state of the fundamental news. This is an important factor, for when investors are in a bearish mood there is a high probability that the market will fall.
Furthermore, when the BTI is declining (bearish mood), the FTSE should decline in five waves as shown on the following chart.
The BTI turned bearish on 16 October. It was a good call as the FTSE turned down soon after, the decline was in five waves as expected.
To learn more go to www.eyield.co.uk
A problem with Elliott wave is that it is often late at identifying the main trend, or it can sometimes lead to errors depending on which degree of trend is being looked at. For example: a five-wave rally may suggest that the trend is up, but in reality the situation is more complex. A five-wave rally could be a countertrend move in a long term bear market. Assuming the trend is up because the rally was in five waves, in this instance, would be a mistake. This observation and subsequent research led me to develop the BTI or Bullish Trend Indicator.
The BTI is a sentiment indicator. This unique indicator tells us whether investors are bullish or bearish at a specific time, regardless of the state of the fundamental news. This is an important factor, for when investors are in a bearish mood there is a high probability that the market will fall.
Furthermore, when the BTI is declining (bearish mood), the FTSE should decline in five waves as shown on the following chart.
The BTI turned bearish on 16 October. It was a good call as the FTSE turned down soon after, the decline was in five waves as expected.
To learn more go to www.eyield.co.uk
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