Trading the Easy Way

Well, you certainly can't complain that you weren't warned about the imminence of the 'tipping point' - I'm by no means the only trader who had been predicting the end of the long bear market rally - even though it has taken far, far longer than any but the grizzliest of bears might have been able to tolerate. It would be grossly hypocritical of me not to observe that I'm more than a little pleased that at long, long last, some sanity might be about to prevail and that markets are going to adjust towards a more sustainable level - giving us some tremendous trading opportunities as they do so.
People who actually own shares in whatever form of course are going to be somewhat less than delighted, but as I mentioned above, don't say you hadn't been well warned over quite a considerable time.

Are markets going to keep sliding without respite?

I don't think so - fairly soon there will be a sharp rebound in my view, as lots of people begin to believe the recent selloffs have been far too extreme and that here we have a 'great buying opportunity'. (Just for fun by the way, if you happen to know a so - called 'Financial Adviser', ask him or her whether it might be a good idea right now to buy into - say - a FTSE 'Tracker' unit trust. I would take a pretty big bet that the answer will be "Absolutely - this current correction is a great buying opportunity!"

Nope - to this slightly cynical market participant, any rebound now will be a '"Suckers' Rally" - aka a "Dead Cat Bounce" (horrible term!) Try not to be a sucker - after the inevitable bounce, markets are going to keep right on sliding throughout this year at the very least, and probably well into next year before any kind of reasonable rally can be mounted.

During the week I have (understandably) received a lot of emails suggesting it's time to open 'sell' trades in every share that looks like it's tanking, but my reply has been that if you have been using TTEW criteria during rising market conditions, why would you start to become impulsive now things are starting to drop? Surely the same criteria apply - a falling market is after all but the mirror image of a rising one - indeed there will still be plenty of 'buy' trades to be had, as well as the inevitable 'sells'. Not all shares will fall in price - there will still be takeovers for example, and as mentioned in an earlier WICS, most things related to military markets are likely to keep rising, along with petroleum exploration etc. It may well also be the case that as the City Slickers begin to see prospects for their next Christmas bonuses melt away, there will be a final burst of M&A (Merger & Acquisition) activity that verges on the desperate - MFI anyone?? (Not that I 'know' anything but it kind of looks like something might be brewing when you examine the chart thereof, does it not?)

It certainly appears however as if property - related companies are at last becoming somewhat out of favour - for example, nobody seems mad keen on Savills any more, after having ramped up the shares to an extraordinary height over the last couple of years. For sure, I can foresee an imminent suckers' rally in that particular sector!

It has been more than a little interesting to read in some of the media that 'everything stinks at the moment except gold'.

Hmmm, late to the party as usual, guys - gold too has dropped back around $80 an ounce in the last week! (Yes, I expect a suckers' rally there too, followed by an ongoing drop, but you'll have to wait for my Commodities course later in the autumn for further comment thereon.)

A complaint from one of you the other day was that "All twelve of my trades were stopped out the other day!" That would be all 'buy' trades then. My reply (suggesting that it's better to aim for a balance between 'buys' and 'sells') elicited the response that there had been 'no sells to be found'. (This comment of course referred to before the recent big falls began in the indices.)

Not so - an example might be found in French Connection and the chart appears below to prove my point - a fairly 'classic' TTEW trade, surely? And don't say you have never read my previous comments about French Connection because that would truly not impress me.

This past few days, guess what a few of you are now suggesting?

Correct - an observation that there are now 'no buys to be found'! I suspect some of you still struggle a little with the concept of ORDERING a trade, for a fill at some (as yet unspecified) FUTURE date. In other words, you should only want to be filled IF the cash price reaches a certain figure. If it does NOT reach that figure, then you won't get the trade and there is nothing wrong in that. In fact, there is everything RIGHT in that! (That of course applies equally for both 'buy' and 'sell' situations.)

The ongoing watchword of course is 'Patience' - there are always going to be opportunities in BOTH directions and in that sense absolutely nothing has changed - the only difference being that from now on, you may need to work slightly harder to find possible 'buys' where a couple of weeks ago the harder work (but by no means impossible as touched on above) was finding viable 'sells'.

In terms of 'buy/sell ratios', to anticipate your question, in an ideal world I naturally would like 50/50 to be the figure, but whereas I would be uncomfortable with more than 65 - 70% 'buy' orders working at any particular time, I don't really mind the converse.

Why? Simply because 'market shocks' tend to be towards the downside - as of course we have just seen. Too many 'buys' have far more chance of doing damage to your bank than do a relatively disproportionate number of 'sells'. (Orders, mind - not necessarily 'fills'.)

Anyway, on to today's charts - doubtless you'll be expecting some more 'big picture' chart analysis this weekend, given recent events, so below you'll find a bit of FTSE100 comment.

Also today, as well as French Connection I have included another couple of what might be termed 'classic' TTEW trades, by way of a reminder to you, that assiduous searching - using TTEW criteria - will always cause you to find something viable!

On that note, I'll wish you 'patient trading' and all the best till next weekend,

Ian.