Hold tangible assets – October is here!

Dear Trading Diary: The headline-grabbing frenzy over Chinese shares cooled on Tuesday (down 7%) when the cash Shanghai market re-opened after the week-long break. In just two weeks, the A50 index surged by 40% (as did Hong Kong) and is now off by xxx% What stood out for me was what must be the Whipsaw Trade of the Century when Goldman Sachs was bearish two weeks ago at the low – and suddenly became raging bulls on Monday but only after the 40% surge and just prior to the 7% dip on Tuesday. I am sure their clients were not impressed.

It can be instructive to review your major campaigns and this is mine on this one: As you know I took the opposing stance in September and went long at the low and took profits on the way up, thus missing the sharp downward reversal. I did that because there is no point in trying to pick a top too closely. Close is good enough. This was the long term weekly chart I posted to VIP Traders Club members on Monday

I noted the rally has corrected an exact Fib 50% retrace of the move off the January 2021 ATH on a three up a-b-c. But the momentum was off the scale and had reached the same level as it did at the 2021 ATH. What a terrific place to reverse the rocket!

Of course an alternative option is that the rally is carving out a major 5-wave impulse with new highs to come and I will be monitoring the coming waves. But my successful bull campaign was a textbook Tramline method swing trade (otherwise known as a Take the Money and Run).

In retrospect, at the 11,000 lows of late September bullish sentiment was in the basement and that was one of the clues that drew me to the contrary stance I took. With the US indexes flying, how much longer could the second biggest global economy defy that trend? And then I adopted the opposite contrary stance when I took my profits.

If only they were all like that! As a swing trader, I do not need many of these hone runs in a year to grow my accounts. But these are rare beasts. Swing traders take a steady approach and treat these home runs as a bonus. I never go looking for them since it is always uncertain your trade will be a winner or a loser beforehand. You only gain confidence as the trade goes your way.

Net Zero Update: One more nail in the Net Zero coffin – BP announced it is turning off its ‘green’ loss-making projects and switching back to profitable oil and gas production in the Middle East and the Gulf of Mexico as it seeks to boost its share price. I am long for Pro Shares and look forward to commercial sanity returning to the energy sector in haste.

Also, sales of diesel cars outpace EV sales in September as diesel sales grew by 17% as EV sales to private buyers edged up by only 4%. Is Milliband tearing his hair out yet?

Update on my Crude Oil campaign: I have been warning of high volatility in the energy sector for a while – and boy, are we now seeing just that. Now daily swings in October of $3 (45) or more are common. And that means I am adjusting my tactics. Out are buying upside breaks and in are buying the dips.

The upward spike was hefty short covering by the hedge funds that are massively short that were frightened by the 40% China A50 surge. Overnight, the Chinese economy has turned on a dime and everyone is now bullish China. Of course, we know that the news does not drive markets.

A popular myth in the MSM is that markets ‘predict the future’. I had a few comments on market predictions last week. If by ‘market’ is meant the majority opinion and positioning of participants, then that is false. It is the minority contrarians going against Groupthink that foretell where markets are headed – at least in the short and medium term. )The recent China drama is a case in point.) And it is the series of short and medium term moves that trace out the long term trend.

The correction last week came down to meet the pink support/resistance zone and placed a kiss on it. If that is a genuine kiss, I expect a Scalded Cat Bounce (SCB) up which will be confirmed by large leaps upward now. I remain long with my kiss the guide to my stop level.

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ANNOUNCEMENT

I have now started a new nominal £5,000 account Phoenix 2 for Phoenix Traders Club. It will trade a variety of major markets sometimes different from Phoenix 1. My original Phoenix 1 £5,000 account started in March 2023 is now valued at £21,597.

Take a two week Free Trial to both here. Full membership is only £99 a month after two weeks

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Update on my Gold/Silver campaign: My call for a small wave 4 correction has played out correctly with the dip to the $2,605 level on Thursday and then a surge to close the week at $2,655. I expect this new wave 5 to make new ATHs before a major reversal sets in. I remain long.

But it is Silver I am turning my attention towards. It has the potential to out-shine gold in the weeks ahead. This is why:

Last week the correction dipped to kiss my trendline and moved up sharply into the week’s close. My Best Guess is that the market is starting a wave 3 of 3 up – the longest and strongest wave in the book. To confirm, I need to se sharp advances in the days ahead.

The old ATH at $50 was set in 2011 and I expect that level to be breached in due course. I remain long.

Update on my S&P watch: I have been trading in and out of the US indexes with small positions in recent weeks while I await the termination of the major rally phase.

The weekly chart is instructive and shows the recent rally as an exponential thrust in wave 5 of 5 off the major wave 4 low of October 2022. With the huge mom div (also on the 4 hr) I expect the reversal to appear soon.

But am I alone in this view? It almost seems so with money managers aligned to forecasting further gains into next year. They cite the Goldilocks economy with the Fed seemingly intent on cutting rates. But as I have pointed out before, lower short interest rates can sometimes be a sign of a weaker economy as demand for loans drops off.

In the meantime, long bond yields are advancing again as widespread forecasts of that ‘cooling’ inflation trend seems to have been a little premature. Maybe the surging Gold price is telling a far different story.

The US quarterly earnings season has just kicked off with the Wells Fargo and JP Morgan results on Friday boosting the Dow (but not the tech heavy Nasdaq). Big tech names report next week.

But ominously under the hood, the number of new Nasdaq 100 lows is rising rapidly from a low base as the M7 gains are not enough to push the index to a new ATH above the July top. Only the Dow and S&P made new ATHs last week.

But manic enthusiasm for investing in shares continues apace as ‘investors’ are euphoric about the ballooning number of new single-name ETFs appearing, such as the Nvidia ETF. They are falling over themselves to snap them up that they have pushed one half of a trillion dollars into this market in the last three months. Staggering.

If this is not an accident waiting to happen, I’m a monkey’s uncle (as they used to say).