"Trends change when the public least expects them to".

Much bullishness last week once again, with the entire world seemingly desperate to jump into owning stocks, and much impatience on the go, judging by one or two of your emails!

Lots and lots of excitement on Friday when the Dow pushed up so hard in early trading, and a complete lack of appreciation of the fact that it is still down since the start of the year, and indeed it closed down for the week.

Nothing has changed, folks - 'down' is going to be the overall market direction over the coming months and years, whether or not there are still a few wee 'exhaustion rallies' on the horizon.

My sources in the USA are suggesting that we can expect some major job losses to surface over the next few weeks, with all the knock - on effects that are associated with these (house repossessions, credit card default and so on) - which leads me neatly to this side of the pond, where Lloyds TSB has just reported that its provision for (retail) bad debt has just been increased by 21%.
HBOS, RBOS, HSBC and Barclays are all reporting this week, and I would be astonished if they too have not substantially increased their bad debt provision.
The Head Banking Analyst at CSFB certainly expects this, due, as he puts it, to "deterioration in personal loans, overdrafts, and in particular, credit cards."

I gather too that there are currently about 21,000 house repossession orders on the go in England and Wales - up 50% from the first half of 2004 - and gravity can't be defied for ever.
If you still don't believe that property prices are in for a major downturn, and that the western world is headed for recession, then I'll be happy to take the other side of your bet!

Moving along, I had occasion during the week to 'lock horns' with someone who used to work in investment banking, or as he put it, INVESTMENT BANKING. Normally, I wouldn't dream of arguing with anyone who doesn't share my views - I know it's no longer a free country but I always have respect for others - but this guy was just so unpleasant that I felt I had to stand up to him.
Anyway, he had some kind of thesis that only fund managers could produce 'acceptable returns', as he put it, and that private traders such as myself had 'no chance' of beating stock market indices.
So, being the unbiased person that I am (not!) I conducted a wee bit of research, and without getting into all the detail, here's an interesting snippet for you: from 1983 to 2003, in a strongly trending market, the S&P500 Index made gains that worked out at 13.1% per annum. Not bad. The average mutual fund (unit trust fund) linked to that index, made annual gains of 3.5% for its investors. Eh??
I have to conclude that my correspondent was quite right, and I apologise to him for doubting his veracity: only fund managers can produce acceptable returns - for fund managers. After all, when we place a 'GTC' order as private traders, we mean 'Good Till Cancelled', but when a fund manager places a 'GTC' order, he means 'Get Two Commissions'. (Sorry - wash my mouth out with soap - only a joke, honest!)

Continuing to bang on about 'patience' as per the last couple of weeks, Rolls Royce was featured in WICS of 17th April, suggesting that either it was going to produce a 'sell' trade below 240, or it would resume its uptrend, which of course would imply a 'buy' trade.
You know what I say about 'keeping an eye on watch lists' and for sure, RR was on the 'watch list' by definition, having been looked at in WICS.
It was good to get a few emails over the last couple of weeks about it - shows at least some of you have been paying attention!
I have put up a chart of RR today, because it contains more than one 'lesson' at the moment.

The other chart today, is of Abbott Group, and it's there both to illustrate a fairly 'classic' TTEW style resistance break that produced a nice trade, and also to demonstrate shorter term resistance - in both cases, things to be looking for as you trawl through the charts.
(And don't forget, the fact that I'm overall a 'bear' in no sense means that I don't also look for 'buy' trades - being bearish in the Big Picture context has no relevance when it comes to looking at military/tobacco/utilities/basic necessities type shares, as you also know from previous WICS.)

Okay, that's about it for this weekend - I realise you won't be able to read this till Monday afternoon, but given my webmaster's fantastic cooperation in uploading WICS almost every weekend for us, we would be more than churlish to complain, and I hope he and his good lady are enjoying their wee break.

With best wishes,
Ian.

PS: Just a point of clarification - I gather from an email or two, that my publishers (Streetwise Publications) are now promoting a 'Fixed Odds' financial betting service, provided by Jack Milton.
To save more of you asking me (given that I would imagine you might well be on the mailing list), my comments are as follows:
1) Yes, I was asked by the publishers to analyse and explain to them the basis of the Jack Milton service.
2) Yes, I believe it to be well researched and accurately presented.
3) Yes, my email to the publishers, confirming my opinion, has been accurately reproduced in their marketing literature.
If you want further details, please contact Jack Milton's publishers, not me!

IW.

'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'.