Hello again - loads of emails during the week asking "Has the long - awaited market collapse arrived at long last?"

My reply has been "Nearly, but probably not quite."

Why not? I hear you ask - given how long I have been predicting disaster for shareholders, should I not now be getting pretty keen on selling the market?

Well, 'yes, and no' because as always, there are contradictions around, and the conundrum for the moment is that although European markets are extremely jittery, those in the USA are holding up pretty well in the face of overall bad news. Yes, they have been dropping, but they are certainly not yet collapsing and the Dow/Nasdaq/S&P500 could well bounce up next week.

During the week, I answered an email about this by suggesting that 'denial' is one of the strongest investor emotions, if not indeed the very strongest, and markets have a habit of staying supported more or less on thin air, for quite a while after the foundations have been kicked away from under them. The longer they hold up in such circumstances, the less they'll need Fred Dibnah's successor eventually to knock them down.

Therefore, although in Europe I can certainly see a continuing drop in the early part of the coming week, I suspect some support may be found and there may well be another bounce back up.

There's a chart of the FTSE 100 below that may assist in letting you see where I'm coming from - just remember there is no 'trading advice' being given here!

But in all seriousness, I am becoming more and more certain that in the 'Big Picture' the coming drop is going to be severe, and destructive of many shareholders' wealth.

Merger and acquisition fever (eg Boots/Alliance Unichem) has been high, but is now sharply tailing off - historically, such froth marks the top of a market as investment banks frantically scratch around for fees in their characteristically greedy way. It won't be that easy for them now, for quite a while, I suspect, and City bonuses next year won't be anywhere near as fat as this year. (And before you ask, no - I don't think Boots/Unichem will be a happy marriage. Just ask Sir Ken Morrison about Safeway, not that he would ever admit to moronic behaviour I suppose.)

And while I'm in cynical mode (Williams cynical? - surely not) consider this nonsense about the Chinese planning to employ 1200 people at Longbridge to build sports cars for the world market.
Dream on! "The funding is not yet fully in place, but we shall do everything to ensure government grants are made available, blah blah..." quoth the TGWU.
Short memories, eh? John Delorean springs to mind.
The tiniest amount of due diligence would show that there are all sorts of problems around intellectual property rights, engines would have to be built in China and shipped to the UK, they would need to sell 100000 cars a year to be profitable, and the site is antiquated to boot. Oh yes, and the cars in question are the MG TF and ZT. Do the taxpayer a favour, guys - don't waste any more of their cash!

Some more wee snippets: CBI research says 'Mortgages drain homeowners' - gosh, there's a revelation - I bet you didn't know that.

More CBI figures say that retail sales are falling at the 'fastest rate since records began 22 years ago'.

And a comment from the Chief Executive of House of Fraser: "Consumers have money, but they are now using it to pay off debt. Something has spooked them." I wonder what that might be?
(Actually, his somewhat superficial comment holds within it a major truth about the markets - one of these 'Secrets hidden in plain view' I mention in the manual in fact.)
What is it?
Simply that once the consumer is 'spooked' he or she will remain 'spooked' for a considerable time. It's feelings and beliefs that drive the main direction of markets - I mention 'the Sheep' in the manual and how they mill around, constantly seeking leadership and direction.
Once a few change direction, more and more join in, till eventually there's a stampede in a new direction before they all start milling around again. Once enough consumers are 'spooked' - very soon now - the markets will reflect the new pessimism by dropping a very long way.
Of that I am absolutely certain.

Another question awaiting my return from the Big W (yes, thanks, to all who enquired - it was more enjoyable than anticipated!) was to ask if I thought the change to the SIPP (Self Invested Personal Pension) rules would cause house prices to stop falling and indeed turn strongly back up. (If you were unaware of the new rules, they mean that those with self invested pensions will be able to buy houses with the cash, and get major tax breaks on the cost.)

My answer in essence is to remind you of something I said in WICS of 14th August about 'the strong selling to the weak'.
It seems to me that the new SIPPS rules will help true (ie knowledgeable/professional) property speculators sell to the amateurs at a good price.
Yes, that may well support property prices a while longer, in Gordon's last ditch attempt to shore them up, but if you think about it, if enough people fall into the trap, there will be a glut of properties to let, meaning rental returns will drop. There will also be management charges, not to mention property maintenance costs - all the things that add up and considerably reduce the gross margin - ie the monthly pension cheque in due course. And it will be possible to take out mortgages, which unsurprisingly will have to be serviced. Then when house prices really tumble and some new asset class becomes flavour of the decade, those holding most of their pension assets in poorly performing property will become increasingly
disillusioned, but they'll not find a house as liquid as a share/gilt portfolio - ie nowhere near as easy to sell. Nor can you just decide to reduce the property percentage that easily - if you hold one house in the portfolio, you either keep it, or have no house in the portfolio.
There will also be massive scope for valuation fraud, I suspect - particularly regarding overseas property - and many tears ultimately may be shed.
Now please be aware when reading the above, that I give no kind of trading nor investment advice, nor do I have any type of personal pension in the accepted sense, but if I did, I sure as heck wouldn't fall into that particular potential black hole.

Moving along, I promised the competition winners would be mentioned this weekend - obviously, confidentiality means I won't give out their full details, but they know who they are!
In order of 'ladies first', they are Janet F, Anne G, Jagdish P, Hans B, Nick C, Tony J, Steve H, and Phil G.
They're all equal winners in my view. The common thread is that they have all thoroughly read the manual and WICS, and have applied the methodology not blindly, but having carefully thought through how best to apply it within their own particular circumstances/likes/dislikes.
Their questions to the mentoring service have been considered and thoughtful - clearly they think things through for themselves before seeking assistance - which really is all I ask.
Tony J is the most financially successful of the winners, with his starting bank nearly trebling in 11 months - the least financially successful has seen a 3 month increase of 20%.
But as I suggested above, they are ALL winners, because they understand what I'm trying to achieve, and they are steadily taking ownership of their OWN TTEW methodology.
Well done to them all, and indeed to everyone who took the trouble to enter.

Finally, before we look at today's charts, you may notice there is now a 'WICS Index' in the archive. Currently it covers 2004 only, but the plan is soon to expand it to encompass all of WICS. I take absolutely no credit for it - frankly, I would never have had the time to produce such a magnum opus. It is entirely down to the good offices of one of you folks - Tony Martin, and I would like publicly to thank him for having taken on such a challenging task, with no agenda other than to offer his expertise in the interests of helping us all.
Before tackling the 2005 index, Tony would like some feedback from us, and he has very kindly allowed me to publish his email address so that you can send any comments directly to him.
It's unlikely, by the way, that direct website links will be available to each topic because there would just be too many to cope with.
Those of you who use the mentoring service, will know that my replies to you are succinct to the point of brusque, and Tony's sole request if you contact him, is that you keep your message equally to the point. He can be contacted at tonydrimla@tiscali.co.uk. Please observe normal protocols and keep his email address strictly to yourself.

On to today's charts, then, and as mentioned above, I have put up the FTSE100 again, to look at the potential for a trend change.
The other charts (Cadbury Schweppes and HMV) are there partly to show the same kind of trendline probe pattern, either clearly developing or yet to form (if indeed it ever does) and also to reiterate the need to make 'patience' one of your trading watchwords.
Kingfisher is featured again (last mentioned in WICS of 25th September), just to let you see a little more of how you should allow a trade to develop, using the appropriate dma to manage your stop position.
Anyway, you'll find more comment below, on the charts themselves.

That's plenty for today - I haven't been able to cast a fly for a whole fortnight so no prizes for guessing where I'm off to now!
All the best till next weekend.
Ian.

PS: I'm informed that there are still a few places available for my last workshop, to be held near Birmingham on Saturday 19th November. To those who have already booked - I'll be sending you the details, including an access map, in the next couple of weeks or so.

.'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'.