Category: Technical Analysis

December 2017 – End of Month Update … and Bitcoin again

Slack Investor remains IN for US, UK, and Australian index shares.

… and further gains for the Australian Index (+1.6%) and the US index (up 1.0%) on the month.  The UK Index is in record high territory, up 4.9% in December.

Slack Investor is on the couch again and congratulates himself for being involved with the world stock markets in an environment where a no risk cash 12-mth term deposit will reward him with a paltry 2-4% p.a.

From Pixabay

In order to reach financial independence it is necessary to embrace some risk – but as discussed below, Bitcoin may be a “Bridge too Far”.

Bitcoin Revisited

Bitcoin USD chart from Dec 30 2017. Latest chart can be found at etoro.com

Bitcoin is a regular feature in the papers and even around the Christmas Table. Since my last note on Bitcoin, the price has been on a bit of a wild ride.

Going deeper than Slack Investor really wants to go is a whole world of Bitcoin – and its own language – such as “forking”. This is “sort of” explained by Business Insider. Oh yes … there are “Hard forks” and “Hybrid forks” and “Coin Splits”, and “Bitcoin Cash” and “Bitcoin Gold” and … and … see Wikipedia. The complexity is amazing and “makes my head hurt”

Yet, despite this wild chart, in only a six weeks, Bitcoin has almost doubled in value.

Slack Investor has thought of another way of doubling your money that is much simpler … and faster! Go down to your nearest Casino, stroll to the Roulette table  and  put your investment money on “red” … No No No … Black! (This is not Investment Advice! – Slack Investor is just experimenting with a Dream Sequence). If you are lucky, you can double your stake in minutes, and walk out with a smile – or, if not, you can walk out feeling like an idiot.

The reason that Slack Investor doesn’t go to the Casino – OR invest in Bitcoin – with his hard-earned investment money is RISK. The bitcoin price might get to $100000 USD, or it might crash to nothing.  The trip to the Casino and investing in Bitcoin represents too much risk to my capital.

40% of all bitcoin value is held by 1000 people. There is an obvious price risk if one of the bitcoin “whales” decides to suddenly sell. There also could be a difficulty in getting your bitcoin money out if there is a sudden crash.

What does  the great investor and Slack Investor hero Warren Buffet think …

“It doesn’t make sense. This thing is not regulated. It’s not under control. It’s not under the supervision [of] any…United States Federal Reserve or any other central bank. I don’t believe in this whole thing at all. I think it’s going to implode.” – from Forbes 

My case rests your honour.

All Index pages and charts  have been updated to reflect the monthly changes – (ASX, UK, US). I have also done the quarterly update on the portfolio page. A newcomer to the portfolio is the Vanguard FTSE Asia ex Japan Shares Index ETF – (VAE.AX) on Yahoo. This should give me some exposure to a wide range of companies in the growth region of Asia with not too much expense (MER 0.4%). Bought October 9, $62.34; Monthly Stop Loss $58.79)

November 2017 – End of Month Update … and the rise of the Asian Middle Class

Slack Investor remains IN for US, UK, and Australian index shares.

… and further gains for the Australian Index (+1.0%) and the US index (up 2.8%).  The UK Index dropped 2.2% in November due to what the Financial Times attributes as the “Firmer Pound contribution”.

Slack Investor is on the couch again and

From Pixabay

marvels at the sage judgement of the Financial Times – and most other financial publications that always assign a reason for the random walk of market fluctuations after the fact.

 

Asian middle class on the rise

While on the couch, Slack investor has an ear out for world affairs and came across an article from the accomplished fund manager (and Asia Buff) Kerr Neilson – The Rise of Asia – worth a full  read if you have the time. The article points to the need to consider Asia, and its effect on the world economy, over the next 10-20 years. It is a powerful collection of facts e.g,

  • China and India have grown their economies consistently at 6-7% for the past 20 years – they are now 4 times bigger than they were in 1998.
  • When measuring purchasing power, their combined GDP of US $33 trillion is 50% larger than either the US or the EU!
  •  China and India originate nearly 120 million high-spending overseas travellers each year.

The last point is backed up by CNN Money who report that the number of Chinese tourists travelling internationally has more than doubled to 120 million people over the last five years – 1 in every 10 international travellers now comes from China. 

Chinese people tend to begin traveling abroad once their household earns about $35,000 – from CNN Money 

The rapidly rising middle class of these countries is behind this increased tourism and the graph below indicates the influence of these two economies will be on the rise.

Sourced from Australian Financial Review

Mental Note Slack Investor – Look for Asian themes in your investments.

All Index pages and charts  have been updated to reflect the monthly changes – (ASX, UK, US).

 

October 2017 – End of Month Update … and Index Page Updates

Slack Investor remains IN for US, UK, and Australian index shares.

… and what a bumper month it has been with all markets that I follow on the rise – The Australian Index rockets 4.0%, the UK index up 1.6% and the booming US market up a further 2.1%.

From Incredible Charts

Slack Investor gets off the couch and has a look at the UK Index … as it is recovering from a small fall in September where the monthly price range (the red third bar from right) breached the 10-month moving average (black line). This breaching is a trigger for the Slack Investor trading method as it establishes a new “higher low” for a moving of the stop loss upward – as a new support price has been established.  The stop loss for the UK Index was moved upward from 6677 to 7196.

Index Pages Updates … Radical Man!

Based on image from Pixabay

I have undertaken a major change to the Index pages (ASX, UK, US). Previously I have been basing my decisions on Exchange Traded Funds (ETF’s) that I own that are proxies the actual Indexes for each market. As there are a multitude of these ETF’s, it makes more sense to make my decisions on the actual indexes – as this will have more relevance to the readers that are exposed to the general market indicies through whatever means e.g. another index-based ETF, Superannuation funds or Retirement Plans (US).

From the current investment cycle, Slack Investor will base his decision on the following charts

All Index pages are updated together with the charts to reflect these changes. Also, the the previous charts based upon the Index ETF’s are also kept at the bottom of the page for reference (for the super keen!) on the index pages – (ASX, UK, US).

June 2017 – End of Month Update … and Stop Losses!

Slack Investor remains IN for US, UK, and Australian index shares.

Despite a bad month for the UK index where the previous month gains were wiped out, there are no alarm bells yet. All markets have had a reasonable financial year (to Jun 30, 2017) with 12-month returns for the US, UK and Australian Index of 15.2%, 13.0% and 9.6%, respectively. These returns, for simplicity of calculation, do not include dividends. For the Australian market, the dividends would add another 4-5%!

And now for a confession …. Slack Investor has been slack … and not moving his market index stop losses properly! I put this down to an oversight and have included an extra few columns on the Index pages to help me not do this again.

Stop Losses are very important to the Slack Investor’s method and offer a detached way in which to make decisions at the end of every month. The stop losses are set at the time of share purchase and moved upward according to a modified version of Dow theory. This trend method was discussed in an earlier post The Trend is Your Friend … 

 

 

 

Slack Investors’s Index trading method involves moving the stop loss level upwards to a new higher low when it is established on the monthly chart. There are a couple of rules that I have to keep me in the index trade as long as possible.

Stop Loss Rule No. 1: A Higher Low can only be established below the 10-month moving average (the wavy black line on the index chart pages).

Stop Loss Rule No. 2: Stop Loss Rule No. 1. does not apply if the monthly closing price is more than 20% above the set stop loss.

For the UK Index, back at the end of February, the end of month price rose 21% above the stop loss level. I should have moved the Stop Loss level then … but I have now caught up and include the adjustment on the UK Index page. I include the technical chart information for some readers who are interested … but don’t worry, Slack Investor will tell you at the start of each month what each of his decisions are in the monthly updates for the US, UK and Australian Index.

From Huffington Post

Warren Buffet has some much more famous investment rules …

Rule No. 1: Never Lose Money.

Rule No. 2: Never Forget Rule No. 1.

Mr Buffet is being a little flippant here, and even the great investment master has lost money at times on individual investments. However, overall he has not lost money … and this is the same approach that Slack Investor is trying to emulate. It is impossible to completely avoid losses, it is just part of investing,  and there is no use beating yourself up about a loss when it happens … However, you can limit losses by using stop loss levels … and, with Slack Investor Stop Loss rules … they should be limited to around 20% (there may be some slippage!.

I have updated all Index pages and the Portfolio page.

The Trend is Your Friend

“The trend is your friend”

The origins of this trading maxim are a little hazy but scores of successful trading schemes have grown from these roots. The highly successful US trader Ed Seykota is the source of many wise words on trading and he completes this saying with

“ … except at the end where it bends”.

This summarises the simple message of trend trading – but the complexity comes in determining when the trend has started and finished.

HigherHighsThe basis of trend trading is in Dow theory. Charles Dow was one of the pioneers in technical trading and described how a stock price chart can be seen as a succession of peaks and troughs. He defined an uptrend when a chart was showing a series of higher highs and higher lows and a downtrend when a series of lower highs and lower lows were being established. The uptrend breaks when the stock price moves below a previous higher low. Slack Investor makes use of this trend finish signal as an exit for the index trades shown on the ASX Index, UK Index and US Index pages. There is a refinement to this simple strategy and the Slack Investor will exit an index trade only when the closing price is below a stop loss set by a previous higher low. This refinement helps to screen out any short term price lows that might occur during trading.

Ed Seykota has also has stated that

“Trends become more apparent as you step further away from the chart”

These wise words echo the Slack Investor strategy of trading the long term trends – by analysing trends on weekly or monthly charts.