Hello again from a very mild and sunny deep southwest of England - it's quite a shock to the system to be near the seaside after having been so long at 900 metres above the salty spray! Certainly there was no problem falling asleep last night, that's for sure. Mme W just loves this part of the world, but I guess I'm just too much of a "mountain person" to be comfortable near the sea, what with all this alleged global warming stuff and the worry of waking up floating on the briny........anyway, salty air makes cars rust and that's more than enough excuse to keep IW away from it as much as possible, relatives and Christmas shopping notwithstanding. (Or is it the "relatives and Christmas shopping" part of the story, that's the IW turnoff? Perish the thought!) Oh well, there's some decent enough fishing to be had, even at this time of the year, and IW's Santa - related buying trip will be strictly online only as usual, so shopping duty consists simply of waving Madame off at the railway station tomorrow - she and daughters can deal with Oxford Street/Bond Street for a couple of days (although hopefully not too much of the "Bond Street" bit....) while this guy and fishing buddy deal with matters of greater import and certainly of less expense.

Anyway, what about "the markets" then? Have they been behaving themselves these past few days? The only relatively surprising thing has been the strength of the latest rebound in this ongoing bear market rally - probabilities favoured a smaller retrace than actually happened. (By "the markets", what is meant is "the main indices" - like the S&P500, the Dow Jones Industrial Average, the FTSE100 etc etc.) So does this mean the rally will continue, and if so, does it mean that what is developing is a new bull market? Is the IW Really Scary Granny's (RSG) crystal ball just plain wrong? Should we all capitulate and buy that new house right away before it becomes far too expensive again? In the words of that great social commentator S. Claus: Ho ho ho.

Seriously, all we're seeing is a rebound in the late stages of a dead cat bounce, to use a bear market rally's rather less agreeable name. Do we need to be patient here? You already know the answer to that! Were you wrong if you had sold an index the other week, only to be stopped out when it rebounded higher than you expected? Nope - probabilities favoured the idea that a drop would be fairly sustained, and just because the first attempt might have failed, that certainly doesn't make you "wrong"! In fact, here's the latest email from "Chris", who is on his world tour and very kindly keeping in touch in a most helpful manner indeed. It and my reply thereto might help put things into a little more perspective:

"Hey Ian
Well, I’ve just finished my tour of the US and while I accept it was limited - I didn’t visit places like Detroit etc, but the only places I found the recession was Florida and now in California, and that isn’t immediately obvious. Everywhere I have been, all the talk has been of the cuts that local government, schools, benefit systems etc are going to have to make, just not yet. This economy is on Government funded steroids. Every mall from the expensive to the outlets has been busy, some Saturdays you cannot get a parking space, people are spending money they may or may not have, adverts for subprime mortgages are back on the TV (does nobody learn?), car loans are being offered at less than 2% and funds etc are fighting very hard to keep the profits that they have made this Financial Year - after all huge bonuses ride on this carrying on until Dec.

I agree totally with you, and many other commentators that I respect, that this rally is not real but it is funded, certainly in the US, by huge injections of cash. Jobs have been saved in the short term, (although a real measure of unemployment is over 18%) probably at the cost of the future of the US (and UK). The one thing that I have learnt from this section of the trip is that there is no substitute for watching the real world as well as the charts and the USA is on fire. (Literally soon probably).

Also on the international front, I have also been chatting to a friend I will be visiting soon in Western Australia, their 20% house price drop has already happened but the mining sector is booming again.

I agree totally with you and RSG but it just may be a while longer than we all think, there are too many vested interests at stake (Political and Financial).

I hope you and the family are well & keep up the great work.

All the very best
Chris

PS I am writing this on a business class flight to LA and it is full (although economy is nearly empty!!) "

My reply was as follows:

"Chris - thanks for your thoughts, as always. Yes, things may take longer than seems reasonable as regards the coming crash, but in the bigger picture, it's a crash that "should have" happened a few years ago, so it has already taken a whole lot longer to develop than expected. I totally agree with you re "vested interests" - politicians and bankers have been working a very nice little (massive!) scam on the taxpayer and that will continue till in due course there really IS no money left. They can print as much as they want - as with Japan these past 20 or so years, they can't fight deflation effectively and that (deflation) will prevail, as mentioned often in WICS. This current rally (since March) is certainly fighting hard to keep going - but the same thing happened after the 1929 crash, with uncanny similarities. As we know, "the past is the key to the future" in this business and people ignore it at their peril. "Weeks" or maybe "months" will be the timescale for the next downwards phase to begin, but begin it will, and the next leg down will go a whole lot further than did the one that ended in March this year. That will apply in Europe and Australia etc too of course - the Australian property market is living on borrowed time - commodities will tank along with everything else and that fact will really hurt the Australian economy in particular.
Ian".

(Important note, folks - don't get the idea that the likely crash will mean "no buy trades to be found" - refer to WICS of October 18th this year for more thoughts about "crashes" etc etc, and try typing "investing" in the search engine too.)

Anyway, moving on to one or two of the bits and pieces that caught the IW eye these past few days - and first there's the latest ploy from the O'Leary one at Ryanair, to pre-empt the bad news about planned cutbacks. It's all going to be Boeing's fault for failing to agree a decent deal on new aircraft, necessitating a regretful cancellation of the Ryanair order and thus major reductions of the routes meantime provided. Sure now, if we can't get the *****n' planes, how can we offer the *****n' service? And of course there's all the great excitement about Britspanish Airways. Hmmm, it's not a done deal though, is it? BA has an alleged market capitalisation of £2.5bn, but a pension fund deficit of £3bn that's rising by the day. And the Iberia head honcho has inserted a nice wee "get out of jail" card into the pack, so we shall see.

Warren Buffett may be back on track - he has just bought a railway company. That's a brave but farsighted notion methinks. And UK car sales were well up in October 09 compared to the previous October - yet franchised dealer insolvencies have doubled. Jobs of course are still vanishing all over the place while banks get more and more money thrown at them by the taxpayer - exactly as per Chris' email above of course. And finally before we look at a chart or two, the stupidest comment of the week came from an analyst at JP Morgan, anent the UK's commercial property market: "This is the quarter that the market turned the corner. Property values have increased by around 1.5%, which when you add in the gearing effect of debt, means an increase in net asset value of 3 to 4%." Duh. "Turned the corner" might be accurate - into Skid Row perhaps?

OK - on to today's charts, and first we'll look at that of Hikma - thanks to "Jonathan" for asking a question about trade management after the strong break upwards out of the earlier resistance along the top of the triangle. Then we'll update the chart of Big Yellow, which we last examined on October 25th this year - you see there has since been a decent trendline probe and a nice retrace. Finally there's an update of the German DAX index from video clip 2876 - after the break down out of its wedge, it has not only probed through the bear market rally's trendline, but has also retraced very nicely to a tad above that trendline, providing a potential "sell" entry if the earlier probe is broken.

That's all for this weekend then - time for a bracing stroll along a clifftop, I'm told! All the best till next weekend, if I don't fall off......

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'.