Hello and welcome to week 35 of my stock market musings.
We are still in no man’s land as far as direction is concerned and I am still (patiently) waiting for my next opportunity to enter new positions.
I will not enter any new positions until the stock market gives me a clear signal as to it’s likely direction.
Sitting it out like this can be frustrating. Let’s take a look at the FTSE 100:
The problem I have is that the FTSE’s short, medium and long term trends are to the downside. We also still have negative macro economic news, but the price has rallied and going on past experience, the price could rally as far as 5900 before resuming its downward trend.
Moreover, price could start declining again this week in which case if it went below 4800, my view is that it could get to 4000 or lower.
It’s difficult in times like these and in reference to the new additions to my trading plan, I will be trading with reduced risk until people much smarter than me show their hand. Speaking of which, this article is a good read if you want to know a bit more about shorting and also the difficulty with which some smart people are having finding a direction to global stock markets.
Stock Markets This Week
The big news this week was the failure of the US to create any jobs at all in the month of August. This heighten fears among economists that the likelihood of a double dip recession has been raised to about 50/50.
Closer to home, UK manufacturing output – a pivotal cog in the economic recovery – fell into contraction, its first drop since 2009. This has raised fears in the UK of a double dip recession. It has also fuelled expectations that the Bank of England will need to perform quantitative easing to prevent another economic catastrophe.
Meanwhile BP (BP.) is having a hard time doing business in Russia, sending its share price even lower and adding further pressure to chief executive Bob Dudley to break up BP in order to avoid a takeover from a foreign firm. This is on top of the US Department of Justice ruling before the end of the year whether or not BP was negligent over the oil spill disaster; it lost £10.4billion last year as a direct result of the spill.
My Trades
No trades to report – 100% cash
For a humbling experience, check this link out. Be sure to turn up the sound and expand to full screen 🙂
Newsletter subscribers get additional commentary about my closed trades – its free.
Any trades or companies mentioned above are closed trades as I do not make public open positions.
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