Weekly Wrap
ANNOUNCEMENT
In conjunction with my book publishers, we have launched my Tramline Trading Alert service. This service will highlight promising trade setups such as those I have featured in my Weekly Wraps – but before they happen. The Alerts will not give specific trade orders, but will focus on the setups that may develop into great trades.
I will send the Alerts as and when I see a good setup forming and I expect to send on average about 6 – 10 per month.
The Alerts will contain references to the relevant chart setups in my book Tramline Trading and will be invaluable if you wish to delve more deeply into my trading methodology. Most will reference my five top chart patterns that I outline in my book.
You can get full details here.
This means that the format of my Weekly Wraps will change. I will keep focused on market commentary, but will have few trade setups – those will be reserved for the Alert service, which will become much more valuable since they will highlight potential great trades before they happen, not after.
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This Wrap will be shorter than normal this week – I will be away all weekend.
If anyone is in any doubt that we have a house of cards in the financial markets, ponder this. US corporate bond sales have just reached a new all-time high at $1.5 Trillion and the year isn’t over yet.
And what are they doing with these funds? Investing in new plant and equipment to produce a steady income stream for years to come? Of course not, that is so last century.
With interest rates at rock bottom, companies are buying back their own shares and pumping out the dividends. But in the world of junk, trouble lurks. Yields are rising there steadily.
And how about Amazon, the perennial loss-maker? It just borrowed $6 Billion to push up its debt to over $8 Billion. Will that produce a first-time profit?
Last week, Draghi announced to a hushed audience that he would positively in 2015 do – nothing. No sign of QE (you read it here months ago). Why would the Germans suddenly relent and agree to sovereign debt purchases to bail out the PIIGS? After all, they are happy the euro is weakening as it helps their export trade.
And the almighty dollar keeps getting mightier. The GBP sunk even lower last week – the UK twin deficits are getting embarrassing. It appears the government plans to downsize the state. Naturally, this is producing howls of anguish from the vested interests that are used to gorging on a bloated state. But I say good luck with that. It will be as easy as taking candy from a baby.
Waiting for Godot
Yes, I have been waiting for ever for the tops in stocks. Some have already been made, but the US indexes keep powering ahead into new highs almost daily. Several times, I believed I had a complete EW count with fifth waves of several degrees. But those waves kept sub-dividing upwards to reveal another five wave set!
Divergences are widening to eye-watering levels. The junk bond to Treasury yield is climbing fast – a sure sign of a switch to risk off which has in the past accompanied tops. Also, advance/decline ratios refuse to confirm the tops.
I have a feeling Godot will show up before Christmas.
GBP/USD
For my Tramline Trading Alert subscribers, I posted this chart on Wednesday showing my forecast over the next few days:
I have a nice wedge and forecast a dip out of the wedge to break support at the 1.56 level. This is the chart as of the close yesterday:
The market has broken that support and now is the moment of truth. Having taken out sell stops below 1.56, will it now rally hard?
I have an entry strategy ready.
Incidentally, I had a quote from the classic film 2001 – A Space Odyssey last week. By sheer coincidence, I note that it was re-released in cinemas last month.
