FuturesTechs Blog

As per our previous post, where we looked at how we’d done over the year in the Bund, here is a similar excercise for Brent Crude:

Brent has been through a volatile period this year and proved difficult for many investors and fund managers to trade successfully. At FuturesTechs we’ve called things pretty well, capitalising on the move up at the start of the year as the Libyan situation escalated, and subsequently calling the move down. Sideways trade since has proved a challenge, but our trend following mantra and reliance on Candlestick patterns as well traditional reversal signals has ensured a vast percentage of the moves have been captured. The chart and captions below review our commentary and thoughts at some of the major turning points throughout the year.

A: Maintained a Bullish SkewBar throughout the start of the year until a neutral stance during a period of consolidation late January.

B: Highlighted the upside breakout as Bullish and called for a move to 104.98.

C: Maintained a Bullish stance during this pullback as a ‘Buy the Dip’ scenario

D: ‘‘Only a big reversal pattern on the daily chart would see me thinking of anything other than bullish thoughts’’ 24.02.2011

E: ‘Shooting Star no confirmation’ – Still Bullish.

F: ‘‘Bearish Engulfing Pattern. For the first time in a while I might just disagree with an outright bull trend following approach.’’

G: ‘‘Are we breaking this consolidation phase to the upside? YES WE ARE!’’

H: ‘‘Don’t buy Brent Crude today’’ Rule of 9.

I: ‘A drop through 119.03 will give us a Double Top sell signal’ 05.05.2011.

J: ‘We would expect 113.50 to continue to hold and for 115.48-62 to give way some time soon to give the bulls encouragement to head to higher levels. ‘

K: ‘’Our Bull Skew got smashed to pieces yesterday. All change.’’

L: ‘‘The Hammer candle indicates the potential for a change of trend so about the previous days Marabuzo line at 107.13 we’ll back the bulls expecting a move to 110.90-111.73.’’

M: ‘’The failure to sustain new highs for the move followed by a significant sell off suggests the bears have the upper hand. A sustained break below 114.66-78 see’s our Skew firmly back the bears. ‘’ 02.08.2011

N: ‘…a Hammer candle indicating the rejection of the new low. This is a potential change of trend signal and on a move through Marabuzo and Fib resistance at 106.14 and 107.01 respectively our Skew backs the bulls for a move up to 110.58 and 112.13.’

O: Our SkewBar struggled whilst Brent chopped around, then we said ‘This pullback has left a potential Right Shoulder of a Head and Shoulders Top formation on a shorter timeframe chart’ 19.09.2011.
‘Our Skew is in neutral territory requiring the bears to break 108.07 before backing them.’ 20.09.2011

P: ‘’Our chart has taken a step back  today and put the recent price action within the confines of a broad down trend channel, which we have also labelled a-b-c.  This is an Elliott Wave annotation which we’ve added as it’s possible that this recent move lower is the bottom of a counter trend Wave 4. If this is the case, much higher prices are on the horizon.’’ 06.09.2011

Q: ‘’Friday resulted in the 9th Green candle in a row. The ‘Rule of 9’ suggests that this rally will not post more than 9 green candles. So today we expect to post a red candle’’

R: ‘Buying dips was our favoured outlook, but given yesterdays Engulfing candle and a 3 day Evening Star formation  our Skew is going to tighten to the broken trend resistance at 111.45. below here our Skew turns bearish acknowledging the reversal candles.’’

S: ‘A trend line across the recent lows provides the Neckline of the potential Head and Shoulders Top and provides support at 105.93 today. Our Skew is in bearish territory below 113.53 down trend resistance.’

T: ‘’This morning the Neckline of the Head and Shoulders is being retested and presents a selling opportunity at 105.77. The 61.8% retracement at 102.45 is the next target for the bears. The Head and Shoulders target is 95.42’’

The kids have just finished school for the year and we’ve had their reports. I’m pleased to say all the little Lamberts have been working hard and doing well (mostly!!). But how have we done here at FuturesTechs Mews in 2011?

We took a look back at our reports for the Bund Futures over the year to see. You can click on the chart below to make it bigger.

Our trend following approach meant we “caught” the moves higher in April to June and July to September. Our reliance on candlesticks saw us call several of the turning points in the ranging markets seen in Q3.

A - 12th January - turned bearish on trend break (125.44)

B - 16th Feb – Bullish on break of 123.12.

C – 24th March – “We didn’t manage to retake 122.55 yesterday, although we did fail bang on this level (the high was 122.56), so despite posting a green candle the bears are still in the box seat”.

D -13th April – “So we have a trend break and a powerful reversal pattern, and this combination cannot be ignored” – Turned bullish

E – 29th June - Bull stance adopted since April is abandoned.

F - 7th July – “..we posted a decent sized green candle, reasserting the bull trend, and suggesting (as we head into today’ ECB decision) that we can head back to the recent high at 127.57, with interim resistance at 127.03-04”.

G – 27th July - Back to bullish!

H – 25th August - Hit the sidelines once more

I – 26th September – “…this left us with a powerful “Outside Day” in western terms, and a “Bearish Engulfing Pattern” in candlestick analysis. We are now very close to channel support at 137.25 and gap support at 136.83, and if these two give way we will have to rethink”.

J – 5th October – “In candlestick terms yesterday was a Shooting Star, a powerful reversal pattern…”

K - 18th October – “We are testing the bears’ resolve after a really strong session yesterday that has left us with a Bullish Engulfing Pattern and a Bullish Outside Day, all rolled into one…This strongly suggests that the retracement is over”

L - 31st October –”…this looks like a dip to buy”

M – 1st December – “…we posted a third small bodied candle in a row, suggesting that the bulls might well defend this key support zone, and we will retake the broken trendline, and get back to bullish”

So will it all get sorted this week? Can we enjoy Christmas safe in the knowledge that Merkel and Sarkozy have made good the Eurozone crisis, and that 2012 won’t be an annus horribilis for all of us?

If, like me, you read the Sunday Times yesterday you must have (like me!) struggled to get out of bed this morning, because what’s the point??!! Goodness me, I’ve never been so depressed on a Sunday. Well, not since West Ham got relegated last.

But get up this morning I did, as the loyal customers of FuturesTechs expect their daily slug of chart talk.

Another reason to want to stay in bed today is the busy week I had last week, which included 3 days “up north” visiting a chap called Fred Stafford who runs a company called Gann Management Ltd. Their website is www.gann.co.uk. Fred is one of the country’s most experienced (and I’ll also now say most vociferous and interesting) exponents of the work of WD Gann, the legendary Investor and Technician from the early part of the last century. Gann’s name will live long in the annals of TA as a “founding father” of modern day Technical Analysis along with Charles Dow and RN Elliott.

Fred’s analysts suggests that the market is due a big drop, and he talked about a target for the FTSE of 1737 (yes, you read that right, 1737). This seems like one of those “crazy” calls that I often say are ridiculous, let alone irresponsible. Until I read the Sunday Times, that is, then it all seems to make sense.

But I’ve done a bit more reading this week as well. I am a keen reader of books on Technical Analysis and am becoming increasingly interested in it’s history. The Society of Technical Analysts store a huge number of books at the Barbican Library in London for their members use, and I drop by there whenever I have a spare hour or two in the City. Last week I had such a window so headed to the Barbican and straight for the Gann books. Below is an excerpt from “45 Years in Wall Street”, one of the books I found there. It was referring to the crash of the 1930’s.

“Every time stocks made bottom, the newspapers, government officials and economist said it was the last bottom, but stocks went down, down down… They went lower than anybody dreamed they could go. People believed that the Government, by buying cotton, wheat and loaning money, could stop the depression, but once a cycle is up and prices are due to decline, nothing can stop them until it has run it’s course”.

I’ve long said that the best way to resolve a crisis is to “let it run it’s course” and that whatever the politicians of the world attempt, it’s not going to stop it. I always try my best to avoid making “big” calls, especially about governments and policy and the like (funny-mentals, as I call it) but it seems that my “views” are pretty well aligned with Fred’s and his Mentor, WD Gann (and David Smith at the Sunday Times, I guess!!!).

Rant Over!! Have a good week!!

Cheers, Clive.

The last few days have seen some big swings either way in Equity markets.

“Where next?” I hear you ask! Our chief market analyst Clive Lambert was on CNBC last night trying to pick the bones out of this price action, looking at the S&P 500 Futures, FTSE Futures, and suggesting Fresnillo as a Stock to buy.

See it on our media page by clicking here.

I have been on CNBC this morning talking about the outlook for the FTSE and Eurostoxx after a big week last week.The link for the interview is on our “Media” page here.

The crux of the comment was that the FTSE Futures broke higher to new territory for the year last Thursday, getting above it’s Arpil high at 5796.5. The big question when you get this sort of news driven breakout news is whether it’s sustainable, or whether you should “buy the rumour, sell the news”. In other words are we going to fall over as swiftly as we’ve broken higher? Friday’s price action, I think, offered a clue. We had a big support level at 5822 and it held firm. This suggests to me that the bulls are in charge, and hot to trot.

The next big resistance level above is 6396, the May 2008 high.

The Eurostoxx 50 Future is a different story and still has a few big resistance levels to see off, as I mentioned on CNBC.

Another market making positive noises is Oil, and Brent Crude is now breaking higher, although it has a big level to see off above at 89.58, so we’ll keep a close eye on that situation.

Gold is a hot story and has reached psychologically important resistance at 1400. We aren’t that worried by this level but have a target above that we’re aiming for.

Silver is a standout, and we’re bullish on this one while it’s above $25, and are advising our clients to buy dips to support while we’re holding firm at these levels.

Finally something for the Fixed Income mob. The Bund saw a decent turnaround last week and is back above 130.00. It now looks good to head back to it’s all time high up at 133.26.

Our clients receive reports every day on all of these markets and many more. We are happy to offer a free trial upon request, so please click here to get this set up.

We also provide an extensive service for UK Equity Fund Managers, Traders and Brokers, giving buy and sell recommendations on large cap stocks as well as daily technical signals,  adding a unique new dimension to your daily routine.

Have a good week,

Cheers,

Clive.

PS. I’ve just joined LinkedIn, so look me up if you want to “connect”!

In what may become a weekly feature of the blog, here is a summary of our coverage of the FTSE futures for the week 28th June - 2nd July.

Monday, 28th June

We said:

“The bigger picture clears things up a bit. On the line chart plotting daily closes we are shaping up to give a big “Head and Shoulder” sell signal if we saw a close below 4966… Hence we are siding with the bears, and looking for a test of these key supports below”

What happened:

We got the sixth red candle in a row with the market failing short of R1 (through not reaching 4966).

Tuesday, 29th June

We said:

“…it looks increasingly like we’re going to retest 4970, then 4883.5, then 4801… 4897.5 is “the big one” as far as the longer term skew is concerned.”

What happened:

The Futures closed at 4862.5

Wednesday, 30th June

We said:

“We think a break of 4897.5 (already done) and 4852.5 (not yet done) will trigger further selling, but we are tempering our targets to 4620, or at worst 4342.

What happened:

There was a low at 4811 and a close at 4814.

Thursday, 1st July

We said:

“Unless we get back above 4851.5 and 4897 a bit sharpish things could deteriorate very quickly, and we could be in for a couple of weeks dominated by bears”

What happened:

The market failed at 4858 and sold down to 4757.

Friday, 2nd July

We said:

….we’re still below the Neckline of our Head and Shoulders pattern, and unless today’s US employment numbers can craft us a close above 4850 we’re going to get a close that doesn’t look good from a chart point of view.”

What happened:

With the jobs data it spiked briefly up to a high at 4852.5. As of 14:45 the market is threatening to test this level again….

In Brief: All I keep hearing at the moment is how we will have a 10% correction, so, let’s have a look:

The “funnymentalist” community, particularly Stateside, seem pretty happy with the idea that this pullback will be a “normal” affair and will pull back 10% from the January highs, at which point you can happily pile in, buy the dip, and carry on where we left off…

I thought it would be useful to know where this level is on the markets we watch. So here goes, and we’re looking at the Cash Indexes here, NOT the Futures:

Dow: High was 10730. 10% pullback level is 9657 (currently 10023)

S&P 500: High was 1150, pullback level is 1035 (at 1065 right now)

NASDAQ: High was 1897, pullback level is 1707 (1743 now)

DAX: 6094 was the January high, 10% off that is 5485.  BROKEN

FTSE: 5600 high, 5040 is 10% pullback. 5033 was last week’s low, so holding…

Eurostoxx: Pulled back from 3044. 10% back from here is 2740. BROKEN

CAC: high was 4088, so 10% back from there is 3680, BROKEN.

So to summarise,  if anyone stateside says to you about 10% pullbacks the simple thing to say is “thanks, but we’re already beyond that!”… especially if/when the FTSE breaks 5030-40.

Keep safe in these markets.