Hello again - welcome to this weekend's "Wet and Windy West Country Wics", which will be pretty brief because there is something amiss with the local broadband connection and service has been somewhat interrupted today. There's very little that has changed anyway, as far as "the markets" are concerned, and things are simply in the process of staggering along, trying their hardest to avoid the cliff face, but sliding inexorably towards it for all that.

A Mori poll in the UK during the week, is suggesting that "economic optimism is at its highest levels since 1997" and that of course is entirely consistent with predictions for a big drop ahead - people are always at their most optimistic about the economy AFTER a strong push to the upside, and that is especially the case in bear market rallies. Why? Simply because last year around this time, things looked mighty bleak and indeed kept right on looking even bleaker at the year end, but the rally since March has seen people breathe a huge sigh of relief that after all, things were nowhere near as bad as some folks were suggesting they might be - folks like IW for instance! Unfortunately for a huge number of jobs however, "things" are about to become unpleasant again, as of course you are fed up hearing.

Still in the UK, wee Allie the chancellor has been told by the OECD that he can't afford any more bribing of the electorate. Hmm, will he listen?

And mention was made here last weekend about the comments by "an analyst" suggesting that the commercial property market was improving - that doesn't entirely gel with the Nationwide Building Society's comments anent their big drop in profits, which seemingly are down 60% largely as a result of "a dramatic fall in commercial property valuations." Absolutely - and with a whole lot of refinancing falling due next year as commercial loans end their term, together with the fact that banks STILL have loads of undeclared toxic nasties lurking around, it's going to be interesting. The proposed sale of about 500 of the (bust) Threshers off - licence leases may not raise enough for a small round of drinks to console the 3700 redundant staff, that's for sure.

Another interesting snippet was the headline "Deflation returns to Japan" - that's incorrect, because it hasn't been away from Japan for about 20 years - and for sure, nobody in "the west" has learned a solitary thing from that fact.

Back again to Blighty, and the World Trade Association (WTO) is suggesting that the Broon one may be guilty of protectionism regarding the bank bailouts. Oh yes indeed. Protecting his political future, no doubt. Since ALL politicians are self serving scum as far as IW is concerned, rarely is a blatantly politically biased comment made in these ramblings, but here's an exception to that, in the form of a plea - for the British voters to get rid of the Broon creature in as emphatic a way as possible. Please.

Over in the US of A - again where "optimism" is now at a bit of a high - don't lose sight of the fact that around 95% of the alleged "assets" of most banks, are still in the form of mortgages, whether as direct loans both to individuals and to companies, or indirectly via "packaged" - ie "securitised" deals. More bankruptcies to come in that sector methinks! And don't lose sight either, of the fact that government revenues are falling fast while the costs of unemployment benefits are increasing rapidly - hardly a recipe for the start of a new bull market? We'll see.

Anyway, that's all for today - before the charts however, here are a couple of emails and my replies, which hopefully may be of some general interest, and the first one is from "Jeff", who is by no means the only person to be asking this kind of question at the moment:

"Ian - I have a question for you and I would be very interested to hear your view. When and what will be the catalyst that precipitates the Armageddon - the major market correction - which you and your Really Scary Granny (RSG) are so convinced will happen.
It seems to me that , as long as the central banks continue to print new money at unprecedented levels ( most of which has not even been used yet ) - and interest rates remain at very low levels ( FED last week stated will remain for "extended period" ) - and dollar continues to depreciate ( maybe that is the key.....) - the markets will continue heading north ( apart from occasional blip ) a lot lot longer than was originally envisaged ) - mid /late 2010 ???
With all the new money washing around - low interest rates continuing for "an extended period" - and cash and bonds offering poor returns - just possibly we could continue to see the markets ( including gold and commodities ) heading even further north for a a lot lot longer ..... US does not even seem to be bothered about unemployment - last week announced new unemployment figures ----- horror scenario had reached 10.2% ( highest for a long time )- what happened , they were brushed aside and DOW finished up on the day ! Just possibly you and your RSG may have to have a rethink !
Anyway sometimes it is interesting to hear another viewpoint . I am not stating that the above is my viewpoint - but what interests me is when - and WHAT will precipitate the major correction ? I look forward to hearing your views .
Kindest regards, Jeff."

My reply was as follows:

"Jeff - thanks for this (an understandable question of course - and one asked by a large number of people!) There are several longwinded answers perhaps - but only one very simple one, which in fact is also the most powerful one - "a growing change in the way people feel".
I mentioned last weekend something about recession only becoming an issue for you when YOU lose your job - a neighbour losing his/hers affects you very little in the early stages of the matter, although once that person's house is repossessed & falls in value, you start to take notice. But you don't really "want to know" till recession impacts directly on YOUR wallet - that is normal human behaviour. People in the mass are starting to spend less as they begin to worry more and more about the future, and since "the mass" = "the flock of sheep", the change from optimism to pessimism begins to take on an energy & momentum of its own. Have a look at WICS of 29th June this year re "buy, buy".....
Once enough of the mass truly believes in "bad times ahead" rather than "it can't be as bad as all that surely" the markets will keep leaking away to the downside, no matter what any government does - see the comment about Japan in last weekend's WICS. Thus "Armageddon" is unlikely - just a steady fall in markets and an equal & opposite steady rise in the value of the US Dollar as frightened people come to believe more and more that the USD is meantime the "only safe haven".
It will take several years before the markets bottom out and the next bull phase begins (at which stage the US Dollar will indeed struggle again) but I don't think it's a "sudden huge crash" scenario, at least not for a while yet. It was interesting the other week when driving from Silverstone to the far southwest of England, to note the number of car breakdowns by the side of the motorway - far more than might statistically have been expected from my past experience.
Being the inquisitive person I am, I got talking to an RAC guy at a motorway service area and he told me there has been a noticeable increase in callouts these past few months, almost all due to lack of maintenance of vehicles. He suggested that "People are just economising by not having the car serviced, but it's a false economy". In its own small way, seeing all these breakdowns and hearing the RAC man's words, helps reinforce the understanding that human feelings are truly what drive the markets overall.
I hope this helps.
Ian."

The second email today comes from "Roger" - the relevant chart is covered tonight in video clip 2944:

"Morning Ian Just a query about patience and managing a winning trade. On my trading to date, my losers seem to happen very quickly, at the moment, with large retraces and, perhaps too tight a stop ( but staying within discipline of 1-4% of bank). My winners seem to take longer but make up for the losing trades, however my proportion of winners is out weighed by the proportion of losers at the moment. I realise I have to maximise my winning trades and if possible double or treble ( and more) my stake to make the bigger profits. I am still learning the ropes on discipline to await for opportunities as they arise. So, a little guidance on Fenner (FENR) please - I was filled on a BUY just above 120 in early September 09, using the 30 dma I am now in profit. Stop at moment just under 159. Did I have an opportunity to double up at break above 170 ( resistance late Oct 09)?. Have I now got an opportunity to double up on a break of resistance above 190?
Many thanks Roger "

Here's my reply:

"Roger - winners by definition take a longer time to evolve than do losers, when you think about it. Staying within the bank criteria is essential, BUT if you do so only by sometimes keeping your SL too tight, you are not following the methodology correctly. If you can't afford a trade using proper SL management, it's going to stop you out for a loss - that's how this game works! Re doubling up - that's fair enough but always remember it uses up one of your available "slots" per money management and the total number of open trades. I'll do a video for you tomorrow re Fenner - of interest to us all in fact.
Ian."

OK - on to tonight's charts and first we'll look at Murray International Trust, which might or might not be showing a trendline probe and a retrace, as well as horizontal support. I have left it without annotation so that you can try to see what might be happening for yourself - it's a "learning process" here, after all! (Including for IW, by the way - nobody stops learning in this game if they're playing it properly....) Then we'll take a look at possible "pennants" on the charts of Hikma and Marks & Sparks, before we update the chart of the CAC40 index.

That's all for today then - it's time now for a bracing clifftop walk before dark I'm told........aagghh.......

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'.