Well, don't you just love Mr Market and his consummate ability to pull surprises out of his hat? As mentioned in this weekend's video updates, the general upwards push during the past week, was certainly unexpected in its intensity and speed - albeit not at all unexpected in the context of "there are always retraces"! It just goes to prove the points made in last weekend's WICS - stop loss positioning always needs to be considered, and having too many trades all heading (or intended to head!) the same way, is a very bad idea overall. Anyway, does the strong move upwards invalidate the IW notion that the bear market rally has ended? Not at all - in the words of my late Mum, things are just having another "wee turryvee" before they head back to reality. (Try Google if you want a definition of "turryvee" - as with the odd Scots word that occasionally enters these ramblings, it's part of my native language. Consider them as a bonus to your subscription!) But the serious point to make is that many of the major indices like the DJIA and the FTSE100 etc etc, could very easily see a "new high" achieved during this rally. Why? Again simply because of Mr Market's unparalled ability to hurt the maximum number of participants at any given time. As mentioned in today's videos, there will be an awful lot of "shorts" now open after the recent big fall in prices, and an awful lot of perspiration flowing right at the moment, after the week's bounce. Many - most - stop losses will be held just above the previous "highs" - especially in the likes of the FTSE100 where there's such clear resistance to be seen just a tad below 5200. That fact is almost (but not quite!) a guarantee that 5201 will be hit. Indeed a good distance higher could be achieved, to take care of the many stop losses at 5211....or 5221.....or....You get the idea. But nonetheless, there are fewer and fewer stop losses for Mr Market to pursue, the further you get from 5200, and like any other bear, once the chase seems hardly worth the potential reward he'll just stop for a moment to have a good scratch, before ambling back down the hill. And yes, bulls will do exactly the same thing in reverse when markets eventually reach a long term low - although it may not be so easy for a bull to have a scratch......... Now (again as mentioned last weekend), don't get the notion that I'm speaking about "market manipulation" here - individual stocks are certainly capable of being fiddled with, but the indices are really much too big to suffer in that respect. Sure, government intervention (ie manipulation of the economy) in the form of bank bailouts for example, might be perceived as having caused the bear market rally to happen - but if you stop for a moment to think, don't governments everywhere, intervene in everything, ALL the time?

No, what actually caused the rally was NOT government intervention. It was the BELIEF by market participants, that the intervention would work. And what will cause the next big market collapse? Exactly the same thing - a BELIEF by people, that intervention is no longer working! It won't matter a jot even if government action were actually helping - once people change their beliefs about it, nothing the politicians do will make a hoot of difference.

Anyway, one final thing anent the above - what I'm suggesting (and have consistently suggested) is that index trading needs pretty wide stop losses and fairly deep pockets. Don't confuse index trading with that on individual stocks however. For stocks, stop losses can be much tighter, as per the contents of the manual, WICS, and the ongoing video updates. Sure, stopouts can come along unexpectedly, whether via a takeover bid, a sudden profits warning, or indeed a wee bit of jiggery - pokery, but that's trading folks! (Don't you love the term "profits warning"? It's like "We're warning you that we're going to make a profit" whereas in fact they're saying "We're making a huge loss"......The other one that amuses this guy is "Negative earnings." Ho ho ho.

OK, moving along, we see that Lloyds' Bank is maybe going to tap investors for another £15bn, while JJB Sports is seeking a mere pittance of £100m. A couple of months ago they might have got away with it, but now?? Anyway, we'll see. Whatever it might be, it's not good news for "investors". Still in the UK, we see the Royal Mail trade union turkeys voting for Christmas via the proposed strike action. Already Royal Mail has lost contracts with Amazon, eBay, Argos.....whatever the union's gripes about management might be (and since I don't know, I can't comment) they have chosen a very, very bad time to get huffy, that's for sure.

Over the Baltic Sea, the Latvian government turkeys too have voted for Christmas, by suggesting that all that country's financial problems have been caused by foreign banks irresponsibly lending far too much to Latvian citizens, so the plan is to allow holders of foreign mortgages simply to default on a largish percentage of their loan. Hmm, that will create an environment of trust abroad, and assist inward investment in Latvia, will it not? At most risk are Swedish banks, followed by many in the eurozone. Not that IW is cynical or anything, but you have to wonder whether the Latvian prime minister might have a biggish mortgage in Swedish Kronor?

Back in Blighty, it was amusing to note that Trinity College has just paid £24m for part of a lease on some London property. Hmm - maybe they don't offer mathematics degrees in that particular section of their venerable university? They certainly haven't looked closely at the bigger picture - commercial property possibly might not be the world's top investment right now. Oh well, university degrees aren't all they're cracked up to be anyway....

Speaking of "amusing" - how about the story regarding Morrison's supermarket in Leeds? Seemingly a (fiftyish) lady was not permitted to buy a bottle of wine because her seventeen year old daughter was with her and the booze "might have been bought for her". What utter and complete tosh - it's actually not in the least amusing in fact. "Pitiful" would be a better description.

Moving along to a couple of your emails, and the first one tonight is from "Mark", expressing a very understandable concern about property:

"Hi Ian, As you know, residential property has been rising over the last several months with 1.6% reported last month. Not sure if this is simply seasonal or low interest rates taking effect or the stock market bounce making people feel more positive. As we 're renting in the uk at present I have a keen interest on when to get back into the uk market. I know it's a home but I would like to get the best deal possible as I could use some surplus cash for investing/trading. I would value your thoughts on the current situation. My thoughts are that there is still more downside to come over the next 12 months but this market bounce has given me a dose of the jitters along with friends saying I should get in now. Many thanks, Mark".

My reply was as follows:

"Mark - the property "price rise" is totally false. There is a lack of available property to be statistically valid re overall price calculation, because many people are not willing to sell, and that which IS selling, is in the SE of England and at the top end of the market only. Also a few punters are jumping in because they think they can make a quick profit. But overall, mortgages are way too hard to get for property to rise very far - and the next phase of the bear market will see prices take a bath. It's almost certain that the next 12 months will see another drop. After all, the so -called "average" price is still running at over 5 times the "average" salary, & it's not that likely that salaries are going to rise as deflation takes a real hold. There is also the (not) small matter of ongoing job losses to consider. Thus, house properties need to fall - to around the long term norm of 3 to 3.5 times salary. I cannot obviously advise anyone whether or not to buy a home - but as an "investment", right now the whole scene is overpriced in my view. Ian."

The other email today is from "Richard" and it's about the question of "prices":

"Hi Ian, A question. The definition of a market is people buying and selling. This zero sum idea. If a price starts to fall it is said that everyone is selling. However if the price is falling because everyone is selling surely the same number of people are also buying. So why doesn't the price go up ? I've been scratching my head about that one for a while. Thanks Richard"

Here's my response:

"Good question Richard! Essentially, if MORE people start to sell than the number wishing to buy, to begin with the numbers might well pretty much match each other, but as soon as it becomes evident that the above is the case -ie a lot of people trying to sell, potential buyers will start saying "Nah - it's still too dear. Tell you what mate, I'll give you 10% less than you want, just to take it off your hands." In other words, the offers to buy will be at ever lower prices, and thus the potential buyers will be in control of prices. The more they realise this, the stronger becomes their bargaining power, and the more worried the sellers become, the lower the price (they will be happy to accept for the share) becomes. In other words, just as in the manual & the chickens therein, the actual price is not set until the haggling is finished. Only THEN does the buyer "match" the seller. And then if there are even more potential sellers around, the process begins again, etc etc. The reverse of course is true if more people want to BUY than to sell. It's all in the manual!
Ian."

On that note then, on to a chart or two, and first of all today we'll take a look at Aveva again - you saw some "support" mentioned in last weekend's WICS and that has now become a bit stronger. Then we'll update an old favourite from the "watch list" - Stagecoach broke out of its horizontal resistance back in September, and more recently has formed a small, diagonal channel - we'll see if it's potentially one of these currently elusive "buy" trades. Finally we'll update the DJIA, again from last weekend's WICS. I suggested then, that "10000 would be unlikely now to be hit" - but that situation may have changed!

That's all for this weekend - time now to catch up on the strimming after an incredibly warm and "growthy" few weeks in the mountains!

Ian.

'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'.