A couple of topics to focus on today, as a result of some of your emails during the week: 'Patience', and 'Divergence'.

"What on earth is he going on about?" I hear you ask.

Well, to take 'divergence' first, quite a few of you took issue with my remark last weekend, that 'European markets are still likely to rise for a time, whereas the USA is about to break down' or words to that effect.

Many of you seem to reckon that the vast majority of markets move in lock step with those of our beloved cousins across the water, but my replies to your emails, were to suggest that in fact, that scenario pertains no more than 50% of the time.
The other 50% of the time, major markets 'do their own thing' in terms of what one might call a 'TTEW timescale'.

And what do I mean by that, exactly?

Essentially, if we look at the 'Really Big Picture' - say from the Industrial Revolution onwards, major markets worldwide have indeed pretty much moved in unison - for example, the late 19th Century surge in world trade pushed stock prices up worldwide, just as the Great Depression that started in the USA after the 1929 crash, sent shockwaves around the entire
world. However, one market might have peaked a year or two before another, but in the context of such a long timeframe you wouldn't be able to see the difference on a chart so to all intents and purposes, they all moved together.

Sadly, the 'Really Big Picture', interesting though it might be, isn't a lot of good to us as regards a 'trading timescale' because we might need to wait an awful long time to see any returns from using it.

The sort of timescale that interests us (or should interest us perhaps), is anything from maybe a couple of weeks, to possibly a year or so, and when you analyse world markets within THAT kind of time frame, you'll see that it would be fair to say that my '50/50 view' is fairly accurate overall, and the way I see it, it's a pretty dangerous game to base trading decisions on any idea that just because things look bad for the USA, it would be a good idea to sell European indices. All too often, whereas the IDEA might be bang on, the TIMING will be totally wrong - just as happened to me with the FTSE250 index last year, as mentioned in an earlier WICS.

In the 'Really Big Picture' I am convinced a major worldwide fall in share prices is on the cards, and that all stock markets will be hit by this, but on a 'TTEW timescale' I'm willing to hazard an opinion (dangerous things, opinions, mind!) that the USA indices are about to take a serious tumble over the next few weeks, whereas those on the civilised side of the pond are going to push even higher in an ongoing bear market rally before they too succumb to the 'RBP'.

(The reason I think the USA faces imminent breakdown, by the way - or one of the reasons anyway - is that despite the July 4th long weekend, which historically boosts the Dow, and despite the quarter end reporting requirement for financial institutions, which adds to the bullish effect, the Dow only managed a measly 40 - odd points to the upside on Friday, well short of what I expected as a reaction after the earlier big falls.)

So, in my usual Ronnie Corbett manner, what I'm suggesting is that over a time frame measured in weeks and months, markets do NOT move in 'synch', whereas over much longer periods, they DO.

The other point to make about 'divergence' of course, is the one I made a few weeks ago, that the falling popularity of the retail sector for example, drives up the price of the more 'defensive' stocks like the utilities, tobacco, basic foodstuffs and the like - things people can't, or won't, do without - even when money is tight.

Anyway, onward to topic number two: 'patience'. Again, mentioned before in WICS (and no, I'm not saying when it appeared because you folks need to do some of the work!)

'Patience' goes together with 'courage' in this game - courage to be patient, in effect.
A fair number of emails lately, have been asking why a trade has 'gone wrong' so quickly, and in almost all cases, the reason has been either (usually a combination of both) that it was taken too soon as related to TTEW criteria, or the stop loss was far too tight.
Likewise of course, 'impatience' goes along with 'fear' and is what causes winning trades to be closed far too soon.

There's no rush - there will always be trades, so please try to develop patience as a major attribute, because the impatient tend to fail, which is why almost all who try daytrading, lose their money - they choose to daytrade due to their impatience for quick results, not realising that the few consistently successful daytraders have immense patience!

Moving along, an interesting little fact (maybe not so little?) that I stumbled over during my weekly researches, is that the current amount owing on UK credit cards is now over twice that of the total of the rest of the EU countries all added together - I confess I'm going to very much enjoy watching the lenders squirm when they find that collecting all that debt just ain't gonna happen!

Speaking of the retail sector - the High Street that I often allude to - take a wee look at French Connection some time. Again, I've asked this before, but will Next be next? We shall see.

Have a look at the chart below, of another bastion of the High Street, GUS - will it experience a sustained downturn if it falls below the horizontal line I have drawn?

The next chart (Enterprise Inns) is an update of one that appeared in WICS of both 17th April and 1st May, just for your interest, and the final one for today, of Tate & Lyle, is to illustrate how one or two different things can sometimes come together, possibly (only possibly, mind) each reinforcing the other.

That's all for now, and don't forget that due to my webmaster's holiday commitments, there will be no WICS next weekend - the next issue will be on 17th July, so until then, let 'patience' be the watchword!
All the best,
Ian.

PS: Spreadex have let me know they're offering a bottle of Bollinger to those TTEW students opening new spread betting acounts with them - just the thing for a warm summer's evening!
Anyway, I know you'll check them out to see if they might suit your trading needs, and you won't open an account purely on the basis of free booze - in any event, you'll need to have completed a couple of trades with them before your bottle arrives, which of course is fair enough. Overall, I find they are pretty good. Here's the link if you're interested:

'IMPORTANT NOTICE: These WICS charts are for EDUCATIONAL PURPOSES ONLY. They represent only MY understanding of what is happening in the market for any particular share, stock, commodity or index. In NO circumstances should they be construed as recommendations to trade. If I choose to trade what I see, that is MY decision. YOU must, in turn, come to YOUR OWN conclusions about what action, if any, YOU might choose to take'.