Well, it's certainly beginning to look like the oft - predicted 'big drop' is imminent!
I had rather expected a bit more of a 'denial bounce' back up in the main indices, but overall things are looking pretty weak so I guess that for the foreseeable future, the benefit of any doubt needs to be given to the downside, and I'm getting confident that 3rd October 2005 will mark the end of the bear market rally of the last two and a half years.

The turn back down has been longer in arriving than anyone really would have expected - anyone who is bearish that is - but I suspect the more ursine among us are going to have our day (several years actually) pretty soon now.

Certainly, if I were depending upon any kind of personal pension/endowment policy for my future wellbeing, I would be getting more than a little twitchy because returns from such things are looking less and less likely ever to produce the goods.
If you have been a regular sufferer of WICS, you'll know my opinion of life insurance companies (the main providers in the UK of personal pensions, endowments, ISAs etc.) Currently, they're in the news again for another mis -selling fiasco: this time it's 'Long term Care' policies.
Frankly, just another among many examples of greedy insurers, married to equally greedy so-called 'Independent Financial Advisers' selling useless products to the ignorant consumer.
(It's in no sense the fault of the consumer, of course - he/she quite understandably expects the 'adviser' to be an expert in their field.) Sadly, there seem to be hardly any so -called IFAs who have the least understanding of financial instruments, nor of the fact that anything Stock Market - based is absolutely GUARANTEED to fall in value over at least part of its lifetime. Just so long as there's a nice fat commission, why should they care?

Talking of general financial ineptitude/possible malfeasance, I see that MAN Financial (one of the world's biggest brokers/money managers) seems to have 'lost' $175m from a hedge fund, causing a bit of a stink among regulators in the USA. Gosh, a whole £175m!
Believe me (and I'm not pointing a finger at MAN when I say this), the total that is going to be found 'missing' from hedge funds in general, once they are properly brought to account -if ever indeed they are - is going to be measured in many $billions, not pocket change.
The resumption of the bear market is going to cause some massive shakeouts. Just remember, you heard it here first!

By the way, let me reiterate that being bearish has nothing at all to do with being pessimistic - that's an individual state of mind, and certainly not MY state of mind!

Moving on, today's WICS is fairly brief because I'm on my travels, heading back home, but by an indirect route - a semblance of normality should be achieved by next weekend and for two weeks thereafter. Hitchhiking is just getting so hard nowadays.
Then it's back to Blighty for a few weeks again, including of course the 19th November workshop. (I've pretty much decided that will be the final one, but perhaps I'll be persuaded to run one in late September 2006 if I can find the time - certainly there won't be another prior to then so if you do wish to attend a workshop, 19th Nov. will be your best bet.)

During the week, one of you asked me about "Directors' Dealings" and the significance thereof, and I said I would answer today in WICS. (I would also refer you to Tony Martin's excellent 'Trial Index' at the top of the Archive WICS List - I have already discussed Directors' Dealings in earlier issues and the Index will lead you there.)

As with everything connected with trading, there's no set 'rule' that can be applied in every case, but some general guidelines are easy enough to outline, as follows:
1)If the dealings are to do with 'transfers out or in', or 'exercising options' then they are of no interest at all.
2) If the dealings are below about £20000, they are of no interest - there's no set figure, but above maybe £100000 gets more interesting, depending on how many directors are buying/selling.
3) If only one director is involved, they are of no interest. (Divorce/new house/yacht/Ferrari Enzo/whatever on a sell, long term investment if a buy but that doesn't imply they know what they're doing.)
4) If both the Financial Director and the Chairman and/or Chief Executive are doing the same thing, for decent amounts as above, that is of interest.
5) As in 4) above, if several directors are doing the same thing, INCLUDING the FD & CEO, that becomes very interesting.
And really, that's about it.

Oh, sorry - you wanted to know the 'why?' of number 5!
Well, if a share has reached a certain level, and all of a sudden, a number of directors start to sell in quantity, it's hard not to suspect they believe the price won't continue to rise. If YOU were sure that today's £17.50 will become next month's £20, would YOU sell £300000 worth today? No, I didn't think so!
Equally, if a price drops by say 15% and looks like it might keep falling, but then the most significant directors all pile in for several hundred thousand pounds, might you not conclude they are expecting something to turn the price back up? An imminent takeover bid perhaps? Would they all suddenly buy if they think the price will be cheaper next week?
The thing to do, as with everything else when examining a potential trade, is to ask yourself such questions.
But just remember that taken in isolation, Directors' Dealings have less meaning than when they confirm a chart pattern - eg, if a share looks pretty shaky on the chart, big sells would tend to reinforce the chart's view. Big purchases, on the other hand, might suggest you pause a little because these would tend at least partially to negate the other signals.
Note too that if a share is dropping and looking very bad indeed, yet some directors are buying up to say £10000 worth, then their action would tend to confirm the fact the share is dodgy.
Why?
Because they are likely to be trying to convince the public that they have faith in their business, yet they're only committing pocket change to try to do so. I need more convincing than that!

The specific question from my subscriber concerned the fact that he says there have been some biggish 'director sells' recently of Cairn Energy, so the chart, suitably annotated, appears below. (I haven't had the facility to check this out properly for myself, by the way, so I'm annotating the chart only on the basis of my subscriber's comments.)

Another question concerned Trinity Mirror and at what price it might be a viable 'sell' trade. You know of course that I don't give trading advice, but I have put up the chart because possibly it points towards reasons NOT to trade it at present - as I have suggested before, NOT doing something is a valid trading decision.

Anyway, I will have to leave things there for this weekend - it's gratifying to have received one or two emails from those of you who had been patiently watching the likes of Next begin to develop its inevitable downtrend, with a few of you selling at just below 1400 and now nearly into 'true' profit as measured by the dma. (Recent retraces in the retail sector undoubtedly
have been caused by the irrational exuberance of Marks & Sparks and W H Smith shareholders but I wouldn't be rushing now to buy the High Street on the back of those particular aberrations!)

Ignoring the July 'bomb effect', what price GUS for the next Next, I wonder? We shall see.

Until next weekend then, when I hope very much to be able to sit down in one place for more than a few moments to deal properly with your recent emails - if you can hold off sending any more till next weekend that would be most helpful.

All the best,
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'.