Over the past week the London market has sold off and the low of the ascending triangle that has been a feature of the VectorVest Composite over the past month has broken to the downside. For all of last week the Primary Wave on VectorVest has been down and the advice was to sit on hands and not to buy shares at this time. The chart of the VectorVest Composite UK is shown below. FIB students will note that the 62% retracement of the last significant daily range brought support to the market of Friday.
The underlying trend remains UP by the skin on its teeth. The underlying trend is defined by the Market Timing Indicator (MTI) being above a figure of 1. After the close on Friday, the MTI was sitting exactly on 1. Any weakness on Monday and the UK market will print a trend change. This is not the week for a fishing trip.
The next chart is the FT100 index. This index is dominated by large multinationals and the strength in the pound plus the fall in the copper price last week propelled the blue chip measure downwards. In this case the 100 share index was stopped in its tracks by a 78% retracement of the last significant range since the lows in April 2017.
FIB students should observe the Gartley pattern on the Ft100. The pattern was made famous by HM Gartley in his book written 100 years ago. It’s a bullish countertrend pattern and those traders who subscribe to MR Gartley’s thoughts and ideas will be getting ready to buy or already have bought into the index. Make no mistake this is a vital level in the UK market, but as always, the Color Guard on VectorVest will tell us exactly what to do. If I observe the Color Guard becoming positive and showing green lights confirming a bottom, then with the Gartley pattern, it will bode well for a strong rally. Until the latter occurs I will sit, prepare and watch stops carefully. In this present moment the Primary Wave is down.
The situation is quite different in the US markets where the trends both short term and underlying are both strongly upwards. In a Q and A webcast, I pointed out the reverse or hidden divergence between the price of the USA Composite and the MTI which invariably precedes a strong move. The divergence is marked on the chart via the blue trend lines on the price and the MTI on the chart shown below. The MTI is showing a value of 1.36. The MTI can easily get to 1.6 before indicating that the Composite is overbought. This means the swing upwards still has legs.
The Oil market seems to be charting out a 2 ½ year reversal pattern in the form of an inverted head and shoulders reversal. The oil price needs to trade above 53$ to confirm the pattern. If this should occur the probability of a trending move upwards in oil becomes high and there will be money to be made.
Below I show the chart of Royal Dutch Shell using the Midas Touch format. This is a standard study on VectorVest and applies a double smoothing technique to reduce the noise and thus to focus on the larger trends at work. On VectorVest, please click on “views” and then on “special reports” to find a report on the Midas Touch technique.
On the chart the 10 day average of the VectorVest stop loss has crossed above the 65 day average of the stop loss. The VectorVest stop loss is based on a 65 day average of the share price and thus the double smoothing which gets rid of the price noise. Below the price in a separate window is a 40 day average of the VectorVest metric, Relative Timing (RT). This has just crossed above 1 which is also positive showing that momentum is rising. When both of these signals fire simultaneously, then invariably a new strong trend has started.
If the advice on the front page of VectorVest becomes positive and RDSB.L turns to a Buy signal on VectorVest, then I will be thinking strongly of initiating a small position to which I can add if and when the trend proceeds. A decent capital gain plus a few fat dividend cheques from RDSB.L would be very pleasant.
Please study the Midas Touch trading system. In 25 years of active searching, I have not found a better position trading tool.
Finally I get to why I named the article “Braveheart”. The combined fundamentals and technical picture of gold mining minnow Griffin Mining look very interesting. I spoke of the share on Core Finance last week and the interview is recorded on this blog. The chart is shown below in my normal format. The share is undervalued and growing EPS strongly.
GFM.L moved upwards strongly during July 2017 but since has consolidated in what technical analysts refer to as a “flag” pattern. This is a very bullish formation and over the past few days the share seems to be trying to break out and upwards once more. The share is on a Buy on VectorVest. To my standard layout I have added volume. This study shows volume on GFM.L rising on Up days and falling on Down days, which is also a bullish phenomenon. Please note the large volume printed on Friday 15th as the price tried to break through the resistance offered by the top trendline defining the flag pattern.
The share is a play on the Gold price and the latter may need to pull back to the last old high on the bullion chart even under the most optimistic conditions. This would be a move down to around 1295$. Friday was a down day in Gold and Griffin was actively bought on high volume which is a very good sign in my humble opinion.
Please note that Griffin is a small cap miner with assets in China and is suitable for only those aggressive traders who understand and that have experience in position sizing and risk management.
Please stay in the moment and let’s sit on hands until the Color Guard tells a different, more positive, story.
During last week, I disposed on Carnival after holding the share for most of the last year. This was done at the open on Friday after discussions at the West of England User Group at Taunton which took place on Thursday evening. I am watching the rest of my portfolio carefully.
September 17th 2017