Financial thread

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The S&P 500 is currently down over 3% today at around 2490, and the index may go down to test recent lows around the 2200 level over the next few trading days, particularly if Q1 earnings provide more news that will ignite further selling. Of more concern will be the outlook for Q2 going forward, which is obviously very difficult to gauge. Because of this, there are many companies out there that are postponing their outlooks until there is more clarity with regard to Covid - 19.

If the market does not fall to test recent lows, paradoxically I can see the possibility that the index could bounce a little from here, to somewhere between 2750 and 2800. This narrow range is the confluence of three recent 61.8% fibonacci levels, and should show some resistance there before selling off. If this does occur, the sell off could be dramatic, as I feel the recent bounce in the market is going to end up being a bull trap, and the overall trajectory is downward. Just my view.

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Apr 1, 2020 16:30:46 GMT @cgr said:

The S&P 500 is currently down over 3% today at around 2490, and the index may go down to test recent lows around the 2200 level over the next few trading days, particularly if Q1 earnings provide more news that will ignite further selling. Of more concern will be the outlook for Q2 going forward, which is obviously very difficult to gauge. Because of this, there are many companies out there that are postponing their outlooks until there is more clarity with regard to Covid - 19.

If the market does not fall to test recent lows, paradoxically I can see the possibility that the index could bounce a little from here, to somewhere between 2750 and 2800. This narrow range is the confluence of three recent 61.8% fibonacci levels, and should show some resistance there before selling off. If this does occur, the sell off could be dramatic, as I feel the recent bounce in the market is going to end up being a bull trap, and the overall trajectory is downward. Just my view.

Update - Yesterday the S&P just broke into the target area reaching around 2750. From that point the index sold off dramatically to form a very bearish doji candlestick, which is generally viewed as an indicator of a reversal in the direction of a particular market.

Unless there is further good news coming out with regard to Covid - 19 that would push the markets higher, we will probably see further high volatility as Q1 results and forward projections are released, and the potential of a sell off in global markets, which could possibly test March's low. Should that low be broken aggressively, the next level of support for the S&P 500 is around 1800.

Throughout all this turmoil, the Nasdaq has held up pretty well when compared with other markets, and has not sold off as much. This is probably because investors see tech stocks as leading a quick V - shaped recovery once the Covid - 19 is behind us. Should March's low not be broken, and either a bottom is carved out at that level, or better still a higher low is carved out, a V - shaped recovery could be on the cards, in which case 'get on board'. However, if March's lows are broken as a result of Company results and outlook, the sell off in tech stocks could be greater then any other sector. With the potential of a deep recession on the horizon, not many companies that look like they would ever make a profit, ever survive. Despite fiscal stimulus and QE, banks will again think twice about lending, especially if they think they might not get their money back.

 

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Throughout the last two to three weeks, the S&P 500 has been in and out of the target area, and has traded higher to test an even stronger resistance level around the 2900 level. Q1 results have been fairly strong so far, most of which covered the period before covid 19, and little information was provided with regard to the outlook for Q2, so there were no major shocks that would have reversed the markets.

Three of the major US indicies, the Dow, S&P500, and the Nasdaq are currently approaching major resistance levels again, retesting them after they hit resistance a couple of weeks ago. The markets seem to be at a critical juncture at this point in time. If they push through, and close above resistance on strong volume, we could see further upside, with the possibility that a renewed bull market could be forming, stimulated by recent massive fiscal stimulus and QE. However, although the markets have been rising, it has been on decreasing volume, which suggests that resistance levels might hold, in which case the possibility of a sell off becomes more likely. Recently, volume on the down days has been greater then up days, this could indicate that sellers are coming in on market strength.

With most of the earnings season out of the way, the danger of really bad news to spook the markets is greatly reduced, so we might see some sideways movement over the next few weeks, or even see the markets continue to rise on stimulus. Going forward, the great unknown is how bad is Q2 going to be? Bank of America has recently raised it's 18 month target for Gold to $3000 - maybe that provides the answer.

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Just noticed that the Royal Mint has recently launched a Physical Gold ETF on the LSE www.moneywise.co.uk/news/2020-02-14/royal-mint-launches-gold-etc

They are in partnership with specialist white label ETF issuer, HANetf (I don't know anything about them, but they are one of these etfdb.com/etf-industry/what-is-a-white-label-etf-issuer/ ).

Annual charges seem to be low @ 0.22%, and as the Royal Mint are behind it, it might provide some peace of mind for those that are thinking of investing in Physical Gold via an ETF, rather then one backed by a bank that might be susceptible to a degree of derivative exposure. I also understand that, unlike other precious metal ETFs, the ETF units can be traded in for bars/ingots should the investor require it, although I am not sure of the process or costs involved due to administration, storage or delivery etc.

I am not recommending this, just thought it might be worth a look.

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Is it not preferable to own physical gold as ETF's is owning hypothecated gold (gold sold to more than 1 party )?

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Apr 30, 2020 4:58:15 GMT sennockian69 said:

Is it not preferable to own physical gold as ETF's is owning hypothecated gold (gold sold to more than 1 party )?

I suppose it depends on one's personal criteria, what one is investing in Gold for, or any other commodity for that matter. 

I personally use ETFs either as a straight trading vehicle, long or short, or, in the case of Gold, also as a hedge against other investments. I find ETFs convenient, and they are relatively cheap. They suit my psychology. The risk side is always there of course, levels of which depend on the environment at the time. After all, if they are not too big to fail, JP Morgan could go under, as could the Royal Mint (long queues outside Buckingham Palace). 

If I was investing purely for the long term, to buy and hold, I don't think I would bother with ETFs at all, apart from maybe having a little in an ISA or SIPP to act as a general hedge against falling stock markets, and would probably buy only Physical, depending on how much it costs to store it over the long term. I wouldn't fancy putting it under the floorboards.

Personally I don't see any commodity as a good long term investment for appreciation, to hold forever, as stock markets have always, to date, outperformed all commodities. Physical Gold is however, a good 'just in case' investment, and at the mo it's looking quite perky*.

Update - 5th May - *My only concern at the moment is that, although Gold looks like it is forming a nice bull flag, any general broad based sell off in global stock markets (panic and capitulation) usually takes no prisoners, and takes everything down with it, and that could easily include safe havens like Gold.

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I'm not really into shares and investments, only (accidentally) having two lots of shares, both of which have tanked over the last few years!

But I now have an investment question you financial chaps might be able to help me with.

My kids both have Child Trust Fund Plans, which we invest in regularly on their birthdays. These funds are invested in a UK share-based fund, which has done very well over the years (I haven't yet had this year's statement, so might be in for a bit of a shock!).

But, starting on the child's 15th birthday, the investments are gradually switched over to a different fund, which is invested in "a balance of global shares and a range of other asset classes". This is to reduce the risk in the final years (it matures on the child's 18th birthday).

Until recently, this wouldn't have bothered me, but with the economic impact of the global shutdown and it's impact on shares, etc, I am worried that this is not the right time to get out of shares and into "other asset classes" - whatever they are.

Presumably, my daughter's fund has lost a lot of value over the last few months - which it could recoup if the markets recover in the next year or so. Or, of course, the markets might not recover, and her fund will lose even more value!!

So, do I stay with the plan (30% switched this year, another 20% next year, and the rest the year after), or would it be better to stay with a fund based on UK shares?

Thanks in advance for any help.

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It looks like Gold is trying to break out of it's recently formed bull flag, and so could possibly start to provide some upward momentum in the near future. However, whether that momentum will be aggressive is very much open to question. Much depends on how the risk on - risk off perception plays out over the next 5 to 10 days or so.

Although the US markets continue to rise, particularly the Nasdaq, due mainly to FAANG stocks, both the Nasdaq and S&P 500 are approaching even stronger levels of resistance, and could easily reverse over the next few days with volume seemingly starting to weaken. 

Don't be surprised to see some 'good news' announcement over the next few days, either from the FED or the White House, to try to mitigate any large reversal in the markets, should it look like the indices start to move south, particularly if respective support levels look like they might be breached.

At the moment risk appetite is very much on, with investors starting to feel comfortable with the current situation, helped by lots of money being pumped into the economy, and all the noise coming from Trump. Personally I see this as falling into a false sense of security. With fundamentals being totally ignored, at least some correction to sensible valuation levels will eventually take hold of the markets. This would be healthy for the markets in the long term.

From my own personal perspective, I want to see confirmation that the bottom in the markets are behind us before investing heavily (probably before the presidential election). Once that happens, and it is always possible that it already has, I will be looking to the US markets to once again lead the way, along with Japan, and down beaten UK, and invest by using appropriate open-ended funds (mutual funds) along with a good global fund, a and mixed asset fund for extra diversification.

I find a good way to find these is to use good research tools like Morningstar or Trustnet, where funds in the various categories can be easily be compared on long and short term performance. Although past performance is no guarantee of what the future will bring, generally the good ones are obvious. I find Trustnet particualarly good for this, and it is very easy to use. Their FE risk score is useful, and if you like statistics etc you should like it. I find it useful to highlight and paste data into a spreadsheet for my own analysis.

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Apart from the Nasdaq, over the last two days, the US markets (S&P 500, Dow, Russell 2000) have sold off a bit, and are now seriously testing support levels. With this six week or so rally having failed to reach new highs last week, it might be important to observe how markets react around these levels. In addition, it is noteworthy that the Dow Jones Transportation index (DJT) has broken and closed through resistance, and looks to be headed downward. Not a good sign.

More economic news should be coming out of the UK and US over the next couple of days. It is probably not going to be pretty, but I would assume that the nature of the way that news is delivered will determine how markets do react, especially the rhetoric surrounding the Fed's approach to the figures. The Fed knows that the markets are on the brink, so they will want to continue to support them, no matter what. Any good news for the FAANG investors to latch onto and the Nasdaq will be off again, at least for the short term.

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Well the US markets continue to grind higher, much higher then I expected them to do without a correction of some degree. Although I continue to be bearish, while this bull rally from March's lows continues I will continue to follow the trend until it changes, with appropriate safety measures in place (tight stops, and maybe some shorting/Puts should the need/opportunity arise.)

With the mass printing of money, Gold is consolidating well, taking a little rest, while Silver is receiving more attention as Investors eventually realised how far behind Gold in value it had dropped since the sell off. The Gold/Silver ratio is still in the mid 90s, and so is still very high. Long term it would not surprise me to see Silver go much much higher, especially if Gold marches on with it's advance. At the moment Silver is approaching a strong resistance level, and, depending on investor perceptions, it might take a little rest soon, hopefully to consolidate into a nice bull flag, rather then sell off aggressively if the Stock market generally goes into reverse.

Here's an interesting chat between two old traders, Kerry Lutz and John Rubino, with regard to their thoughts about all this money being printed. I find it particularly interesting what Rubino has to say about how he sees Gold Miners benefiting from the Fed's policy. www.youtube.com/watch?v=-e7xk4ClOns

Although I am bullish with regard to Gold Miners, and they do look like they are about to break out to the upside again very soon, I will continue to make cautious plays until a general stock market correction has taken place. Personally I would not like to heavily long Gold Miners if a sudden market correction turned into something bigger, where panic sets in, and everything gets sold off.

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I thought I would invest £5.25 in 4 cans of Stella Artois and they kept going down and down until there was nothing left but hey who cares?😁🍺😁🍺😁☹🍻🍰

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Jun 2, 2020 16:36:33 GMT sword65 said:

I thought I would invest £5.25 in 4 cans of Stella Artois and they kept going down and down until there was nothing left but hey who cares?😁🍺😁🍺😁☹🍻🍰

Stella looks a good investment in the long term. Buy as much as you can, and store them away to sell back into the market at a later date. Unfortunately empty cans would be virtually worthless All this money printing is likely to end up with aggressive stagflation rather then inflation. So your 4 cans of Stella @ £5.25 will be worth £21 in a few years time, while wages/pensions/benefits will have barely kept pace. Not bad. Although I don't think I would enjoy the £72 admission fee to see one match at the Gallagher.

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Here's an interesting article. History couldn't possibly repeat itself, could it?

www.theatlantic.com/magazine/archive/2020/07/coronavirus-banks-collapse/612247/?mc_cid=e631e167d5&mc_eid=19a8756480

I wonder what Michael Burry thinks of this article? I'm off to watch 'The Big Short' - brilliant film.

We might see a great deal of volatility in the markets in the coming week, probably selling off somewhat, due to 'quadruple witching' www.investopedia.com/terms/q/quadruplewitching.asp
So although the markets sold off last week, any further aggressive selling next week will not necessarily mean that it is the beginning of a major market reversal. However, as the
markets have risen aggressively over the last few weeks, we are due a good correction, and a little consolidation, in order for the markets to continue to rise in a healthy manner
going forward.

This sums up QE. www.youtube.com/watch?v=j2AvU2cfXRk

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Looks like Physical Gold might break out of it's 2 month long bull flag fairly soon. Indications are that it will be to the upside, however in this crazy world anything can happen. Long term though, all the news and events that are happening around QE etc are all positive for the yellow metal (and Silver) going forward.

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Jun 14, 2020 8:52:00 GMT @cgr said:

Here's an interesting article. History couldn't possibly repeat itself, could it?

www.theatlantic.com/magazine/archive/2020/07/coronavirus-banks-collapse/612247/?mc_cid=e631e167d5&mc_eid=19a8756480

I wonder what Michael Burry thinks of this article? I'm off to watch 'The Big Short' - brilliant film.

We might see a great deal of volatility in the markets in the coming week, probably selling off somewhat, due to 'quadruple witching' www.investopedia.com/terms/q/quadruplewitching.asp
So although the markets sold off last week, any further aggressive selling next week will not necessarily mean that it is the beginning of a major market reversal. However, as the
markets have risen aggressively over the last few weeks, we are due a good correction, and a little consolidation, in order for the markets to continue to rise in a healthy manner
going forward.

This sums up QE. www.youtube.com/watch?v=j2AvU2cfXRk

Following on from the above - www.marketwatch.com/story/why-the-feds-new-index-approach-to-buying-us-corporate-debt-changes-everything-2020-06-18 

FFS. Take note that the term "investment grade" is very fluid in it's meaning. It looks like this is going to be the biggest bailout ever. The Fed will do anything to kick the can down the road forever. www.commondreams.org/views/2020/03/28/our-economy-sick-beast-corporate-debt-crisis-explained