That was the week that was
As a ‘child’ of the sixties, I watched a very popular and lively TV show (in glorious B&W) called That Was The Week That Was. It was the first of a succession of satirical political programmes that kicked off the transition from the age of deference (doffing our caps to our ‘betters’) to the current age of outspoken condemnation (and worse) of our so-called leaders (aka the ‘elite’).
That description can equally be attached to last week’s extremely emotional and turbulent market action – particularly in stocks. Hourly swings both up and down of several hundred points in the Dow were common. In fact, it was an ideal hunting ground for day trading, but not for taking positions to be held for ever.
A key test of the budding decline in stocks is what is happening in China. The Year of the Tiger is the theme for next year which starts on Tuesday 1 February. As it happens, the tiger is the most auspicious creature in the Chinese calendar. It signifies boldness, strength and the ability to overcome dangers. Mothers love their children to be born with that lucky animal in their makeup.
The obvious question for traders is therefore can the Chinese stock markets (and the linked property markets) boldly recover in 2022? Astrologers would certainly veer that way!
The China A50 leading index has declined by 30% off its ATH set at the last New Year – in February 2021 (which was the Year of the Ox – an unadventurous hard-working creature).
Here we are at another New Year and a glance at the chart reveals that there is a massive shelf of support here that has been in operation for eighteen months
Of course, a bullish outcome here would be highly contrarian as bearish sentiment dominates – and that is why I believe the odds favour it. We know what effect an announcement of more stimulus from the authorities can produce and one such issued about now over the holidays would likely send the shorts running for cover when the cash markets re-open after the holidays.
This policy contrasts starkly from that of the Fed, which is running down its stimulus QE money-printing operations to end in March (the ‘taper’) – and planning to raise policy rates The two stock markets may go their separate ways this year.
Until Friday, the week was dominated by continued sharp declines especially in the US Tech Titans. This was a repeat performance of the Chinese tech shares exactly a year ago when they topped out! So with the huge spread between the US and Chinese techs, will that gap now start to narrow as investors recognise the extreme relative value over in China? Many analysts are setting a 12 times Chinese earnings valuation for 2022 – way below that of the FANG Gang.
The almighty dollar is about to be toppled
Bullish sentiment towards the dollar – and away from the euro – has been extreme as traders have eyed the imminent boosting of short term rates in the US thanks to the Fed who is being forced to ‘fight inflation’. In fact, there is very little the Fed can do to counteract the results of its previous low rates/money printing QE policies of the past few year. They have been the major factor behind the current commodity price increases across the board.
Last week, dollar index traders were spread 10/1 bulls/bears – an extreme.
Yes, I have been calling for a reversal in the dollar for some time – and have been early (a tendency of mine!). But with last week’s surge to a new high, it has done all that is necessary to consider the move complete, or nearly so. All of the waves are in place and on a mom div.
With hardly a dollar bear in sight, the reversal will be violent so I shall be taking an early position.
INVITATION TO APPLY TO INVEST IN MY NEW FUND
LAUNCHING 14 FEBRUARY
As you know, I have been managing two trading Funds for about 120 investors since August 2020. Performance since has been mostly disappointing but I am about to report some great news on Monday. In January, the Funds have mostly recovered from losses and are on track to produce gains going into 2022.
Briefly, I have amended my trading approach at the start of the New Year – although keeping within the parameters of my Tramline methods – and this month’s results are quite outstanding. That is why I believe this is an excellent time to launch another Fund.
Minimum investment is £5,000 with launch date set for Monday February 14th. The Fund will be managed through IG and the bookkeeping by Stephanie. I will issue monthly Reports.
My Performance Fee will be 20% per month (based on High Water Mark valuation) with no Management Fee.
No withdrawals will be permitted in the first year. Investors must be committed for the medium/long term. APPLICATIONS MUST BE IN BEFORE MONDAY 14 FEBRUARY
Investors in my two operating Funds may wish to apply for this one as well.
To receive your application, please email me at email@example.com
NatGas explodes higher – but is that it?
NatGas has been on a rocky road with the strong rally off the June 2020 lows at 15 to the 65 high set in October, and then the correction down to 35 in December – a massive loss of 46%. That was a period I avoided! All the while, the MSM has been full of headlines moaning about the huge cost of living increase especially from home heating costs. Of course, manufacturers have not escaped the recent boost to their energy input costs.
Here is the roller-coaster chart
When the market was testing the major support line, I began to take another interest in long positions. The first rally off that line was nipped in the bud and prices fell back to test that line again. But that was the kick-off for a week-long surge – and slap bang into major pink resistance on Friday.
With the odds favouring at least a decent pull-back, I decided to take some profits off the table. I consider a strong push above my link line less likely next week. But I retain part position to take advantage of the unexpected!
So here are three different markets – China A50, the US Dollar and NatGas – that have met important crossroads. Next week promises to give me clues which way the wind is blowing….