How the mighty have fallen!
Last week, I changed my stance on the stock indexes from bear to bull. That wasn’t an easy decision! I daresay there have been very few analysts brave enough to do that in public. After all, we had been making significant profits in the Dow bear trend most recently off the April high and into May. So why did I change horses in mid-stream?
As an analyst gains a certain reputation, he/she tends to become more entrenched in their views. Success breeds success, does it not? Normally it does, but not necessarily in the financial markets!
The downfall of Neil Woodford – once said to be the UK’s Warren Buffett – is a sharp case in point. He gained a massive reputation by buying ‘value’ shares at the right time and achieved outstanding performance over years. Imagine what that would do to one’s ego!
Think of it this way. Woodford happened to pick the right strategy at the right time. For every Woodford, there must have been a great many others who picked the wrong strategy, but do you hear about them on the front pages of the financial press to be lauded as geniuses? Very rarely.
So Woodford was one of the few who was in the right place at the right time and rode hos luck (that’s where it takes real skill).
And that performance attracted big money as investors bought into his story – and that continued even as his performance dropped off. Of course, in the meantime, his confidence at its high, he ventured into uncharted waters investing in start-ups – a field he had previously ignored. That’s what happens when you get too bullish in your ability to walk on water.
And finally, his hubris ran rampant! But could he change his stance? Of course not – he and his followers had too much emotionally invested. Despite the dreadful results, he had to persist, praying for a turn-around. And anyway, he held non-liquid assets that are not easy to escape from. That is why he gated all redemption requests, of which there was a deluge. many investors have lost big money.
To be a master at swing trading, given the huge contradictory forces sweeping around the markets at all times, I believe it is absolutely essential to have a flexible approach. Let the market decide where it wants to go – not you – and keep your eyes open at all times. Unless you have unlimited funds, you are up against some very smart opponents who have vastly more firepower than you – and you are powerless.
The only asset you have is a better understanding of how markets really function. Not one person in a hundred has this knowledge – even the big boys.
So make no mistake, fear of making an utter fool of myself loomed very large last week when I made the critical decision to go from bear to bull. Egg on face is not a pleasant experience. But VIP Traders Club members are certainly glad I did! And this is why:
We were riding the lovely slide off the 1 May high to the 1 June low and when it started turning up on a momentum divergence, that is when it seemed the trend might have changed. And wasting little time, I advised members to take remaining profits on shorts – that had accumulated many hundreds of points – and then reverse to the long side.
That was when the Dow was trading at around the 25,400 area and into overhead resistance. Naturally, I was more than a little nervous as the most likely path at that time was in a pull-back. In fact, because there was no pull-back, that gave me more confidence I had done the right thing with excellent timing. And now we have gains of around 700 points so far.
And on Monday, I advised taking some of these profits at the 26,060 level for a profit of about 650 points. As I say, flexibility is key in these very volatile markets.
Sometimes, fortune does favour the brave. And what a market to get right! Most members are trading the Dow as their most popular market.
So what is the background to all this activity? Of course, the US/China trade war has not concluded and any positive developments here should support equities as should continued talk of the Fed slicing rates.
And I have noted a surge in bearish gloom-and-doom MSM articles recently – and that is never a bullish signal. Many are calling the rally ‘false’, asif the actual quoted prices are unreal! Nonsense!! The market prices are real enough.
Poor old Marks and Sparks keeps heading south
That venerable UK institution Marks and Spencer just can’t catch a break and its shares are plumbing ten-year depths
This is the very long term weekly which shows the sorry state of affairs. I started my Pro Shares service in September 2016 and one of the first shares traded was this one. Even back then, I recognised that the UK high Street was losing the battle against the up-and-coming online retailers and that Marks and Spencer was an old dog for which learning new tricks was not on the cards.
I confidently expected the shares to lose value over the next few years – and started a long-term bear campaign at the 350 area and have added to shorts on the way down on counter-trend bounces. They are trading now at 215.
Members who have hung in there are being well rewarded. And this shows the other aspect of my trading style. Some trades are deliberately short term to capture a wave of perhaps a few days (we have had one in Apple this week). And others are very long term, which are the preferred time scale. In this case, it is the very opposite of ‘buy and hold’ and is in fact ‘short and hold’.
Beyond Meat is not quite beyond a joke
Alright, M&S is not as exciting as the latest hot fake meat company Beyond Meat which has just had its IPO. But I can almost guarantee that my campaign in M&S will make money for more people than Beyond Meat. Many have jumped on the vegan bandwagon in classic herding behaviour as they chase the story and momentum.
But how many will exit at a suitable time when the excitement fades? To my mind, this is just a short term trading vehicle. However, its current price at $150 is way over its issue price at $25 in a frenzy of buying.
But this is not the first time vegan and vegetarian trends have challenged the desire for meat, Meat consumption has tended to trend with wealth and economic activity as it has been viewed as an expensive luxury ingredient. It is a bull market food!
Here is a fascinating chart of the per capita consumption of meat over the years
From the depths pf the 1930s Great Depression, consumption has advanced along with stocks but in a telling five waves that ended around the millennium. It has fallen since then to follow the bear down to the 2009 lows and is currently in rally mode together with shares off that low.
It appears with the advent of Burger King’s Impossible Burger that contains no meat, consumption of genuine meat is destined to decline – and with it, stocks. But not quite yet.
Gold surges, as forecast
New highs today with silver also tagging along
The blue line is the very long term trendline from the August 2013 high – a good six years old. That makes it a very reliable line of resistance – and now support.
I have much higher targets that VIP Traders Club members already know.