Calling the Bottom
I am going to call the bottom of the market (FTSE100). How do I do this ....... well it's all about the magic of Technical Analyst, and I am going to tell you when to reinvest again (buy Long)
You do not believe me, well here it comes. (for free)
THE BOTTOM
Well, guys, you miss it....... and it was not one but a double bottom. The first bottom was on the 15th of March and the second bottom was on the 19th of March.
REINVESTING
The time to buy back into the market is on the 23 March. You should make tentative purchases on this date, one or two small trades if the FTSE 100 pulls back to 5100. Then again on the 25th of March again tentative if the FTSE 100 pulls back to 5300. Each time with one or two small trades only. Then the all-out attack on the 29th of March if the FTSE 100 pulls back to 5,500. From then on the sky's the limit.
If I get this right or nearly right then I should write a book on investing, LOL. Let us review the situation in April.
This is all a bit of fun........... BUT what if I an correct?
Good trading guys and may all your trades make you money.
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44 comments
Note historically the day in a month the stockmarket is most likely to go up is on a New Moon (just passed) and the day the stockmarket most likely to fall is on a Full Moon (in 2 weeks)
Ignore this was written before yesterday’s comments but didn’t go apologies
you nailed it well done. What do you think now ? Low volume rally as the FED put kicks in again. No one believes in it or a V shape recovery.
Hi guys
I promised a review of my Bottom Call on 20th March, so here goes
For those that are interested, I was using the FTSE 100 4 hour chart. If you bring this chart up you can clearly see the triple bottom on the (16/4:19/4 and the 23/4). We now are approximately 970 points above the bottom and the price broke above the 200DMA on the 14th of April.
Thereafter I suggested a few tentative buys @ 5350 and 5950.
We are now about four weeks into a flat trading range between 5350 to 5950. The current price is about 5750, so no more buying until we see which way the market will go. If it brakes out above 5950 ... no, 6000, then start buying, If it drops below 5300 then start selling short.
MY current positions are as follows
LONGS: #LIO #DTG #PLUS #SLP #POLY #SPT #WIN and #AVCT
SHORTS: #MARS and #VOD
OK enough for now. Please keep safe and may all your trades be winners
Great prediction and sound advice. The VIX fell below 40 for the first time in a month which suggests also that the worst may be behind us, although it's too early to get complacent. The low oil prices are still a concern. But I'm cautiously topping up Rio Tinto (LON:RIO) and Scottish Mortgage Investment Trust (LON:SMT) at present. I will check out your long positions, although I'm wary of topping up on Liontrust Asset Management (LON:LIO) - they still look fragile.
Mr. Wilkonz
Feel free to check and comment, I will lock forward to it,
@ Terry
I think Spirent Communications (LON:SPT) is promising, I'm considering buying it myself. Plus500 (LON:PLUS) look pretty good and I note the directors have been buying it since the fiasco of the 'typo' last year when it fell to 500. Polymetal International (LON:POLY) is just about OK but a fraction too much debt for me. Sylvania Platinum (LON:SLP) I hold and think it will top 60 pence before the year is out. Avacta (LON:AVCT) is a loss-maker on a parabola so I wouldn't touch it. And Wincanton (LON:WIN) is just plain dull - I held a few years ago and it never did anything to get excited about.
Terry it's the 11th of April, Easter Weekend, and I'm taking a look in the rear-view mirror. You were spot-on with your 23rd of March lowest point in the FTSE All Share Index. The 29th of March date, a Sunday, had me fooled for a minute though! Congratulations, also for the confidence-inspiring 'sky's the limit' prediction. The 3rd of April may prove to be another significant date.
I think that you are calling the bottom of the first wave of the virus. The fear is that a possible second wave from November will be far worse in terms of deaths and the economy. No it won’t be as bad as the Spanish flu but there is evidence that it could mutate and that not everyone will have built up immunity.
Impressive Terry - well done to you.
Terry, this is either the case of a stopped clock being correct twice a day, or you have Mr Market on speed dial! Your predictions have been spookily accurate so far!
Thank you Mr. Bryans - I will update it in a week or so when we get a better picture
I take you mean £NCYT?
Yes, sorry for the typo
Just an update on my prediction from the 20th March.
Still looking good.
I told everyone to return to the market when the FTSE 100 reach 5500. 11:00 hours today (31/3) the FTSE at 5650.
When we hit the first of the three bottoms the 200DMA was 2100 points higher, now (31/3) we are only 510 points away.
On 20th March I had no open position. I am now Long on SLP; DTG; SPT; WIN and NCVT and Short on VOD and HMSO.
Keep safe everyone
It's the 25th of March around 9 am
Well, I wasn't far off (so far), but it was a triple bottom, not a double bottom, on or near 4840. The market is up again today, so I am now waiting for a downturn to around 5250, thereafter an upturn to around 5874.
Let us see
Keep safe everyone
Well shares are on a rip now based on Congress agreeing massive stimulus. Much more than the $800 billion back in 2008. Certainly a future headache and a read across for Gold, but that's another story.
In 2008 after the stimulus package was released shares still dropped until SPX touched the fated "666" level then fired off into an 11 year bull run.
This time, the storyline is either:
(a) this is a short rebound, which will be sold off as virus cases get going in the USA, similar to the Italy experience. So sit tight and wait, we haven't seen market capitulation yet. The dip buyers need to take some pain and sell off.
(b) the market will look through the next six months, has already priced in the Italy experience as it's already known data, see the massive stimulus coming down the line, and buy into that tidal wave of cash
If you go by the 2008 experience, you would pick (a) I think. If you go by the speed of this decline and reaction, you might go for (b) as the 'obvious' has been priced in already. The surprise would be a quick rebound as it's not consensus.
TBH either is quite plausible.
So my view is not to pick an index level so much, exception being I will buy the NASDAQ as a long term Tech hold, but otherwise make buying decisions at an individual stock level. Reason is, while the indices are whip sawing, some individual stock charts are making more stable looking bottoming patterns. So I'm picking up a few now, albeit with the caveat mostly large caps with liquidity, as if I'm wrong, can still get out.
If you buy now have to have a plan what you will do if they promptly drop 10% the following day(s)
Either way, I have to admit, even if I miss the bottom buying today is a lot cheaper than buying a month ago.
Tend to agree with what someone recently said and so I leave bottom picking to the proctologists.
Wow Terry you've played a blinder so far.
Below is an extract from yesterday's daily ChartAdvisor newsletter (24th March 2020) from Investopedia. It suggests that the VIX (uncertainty index based on futures market) could indicate the bottom of the market when it settles below 40. The DJIA ended the day up 11% but the VIX also finished slightly higher at 44 - contradictory signals indicating strongly divided opinions among US investors.
Eight days ago the VIX options were pricing in a 50% probability that the VIX would remain above 40 for 40 days from that time (about April 24). Today the pricing has eased up a bit and there is now a 50% chance that the VIX will drop below 40 by April 23. In the worst of the 2008 financial crisis, the VIX stayed above 40 for nearly 100 days, but once it closed below that level, the markets hit bottom and rebounded strongly.
The link below puts you on the free Investopedia mailing list. But if, like me, you don't click on to unknown links, you can subscribe to the newsletter directly from Investopedia.com .
https://link.investopedia.com/...
Huh. Well so far you seem to be absolutely right. Tell me more can I subscribe to your newsletter? ;)
When it comes to confidence in the market, I'm wondering how people compare both the trend - which has been consistently down, versus theories such as "most people only have so much capacity for panic, even if covid isn't done by a long shot, people will mentally have to resume normality"
NASDAQ at least has consistently outperformed DJI which makes sense to me, information businesses such as facebook/MS/google are less impacted by WFHing than say a Burger King.
Given historical examples of probable declines in recessions it's more likely the FTSE 100 bottoms around 3,900 - 4,100. Should this recession turn into a depression, again probable, 1,500 - 3,000 is a more realistic expectation - i.e., 60 - 80% decline.
We all wish we knew the answer to that one :-)
I started with screens that eliminated the obvious sectors affected.
Then I looked for high, well covered dividend yields, thinking that these would protect the downside. Then realised that historic figures were moot, so moved on. The yields got better as the share prices collapsed. Then they oscillated a lot, but the zags (down moves) were bigger than the zigs (up moves). Then companies started cancelling dividends.
I then worked on a screener for 'quality'. The quality screen focused in on high ROCE (>15%) with no or low debt. I worked out a price I'd be prepared to pay assuming 'earnings yield' <= ROCE. Nothing qualified. These companies were still too expensive and a lot more downside implied. These too oscillated a lot and lurched generally downwards.
Then I screened for net cash and historic high ROCE + growth. Again too expensive. These too proved to be far from immune to the Corona effect.
I added positive Relative Strength, in the last month, to all screens. The survivors (due to survivorship bias) all had fallen less, but were still 'directionally challenged' in absolute terms.
The old site has this chart composed of 'composite' guru screens (1 month selected below). Nothing has worked as a theme (possibly the Short composite - I think you need to reverse its performance score)
Of the long Guru screens only negative enterprise screen has a positive result over the last month:
Although if you run it for all of Europe this appears to be a market specific affect:
R&D Breakthroughs may be worth a closer look, however, I bet it is dominated by speculative biotechs which are currently fluctuating a lot. I've not looked.
The growth investing books that I've read, suggest the big money is made by the growth strategy on the other side of the bear. Not during the bear. A good investment then would be to read up on these. Value strategies time may come again if the index becomes range bound at a lower level.
The dilemma is that until things settle down we are all flying blind and no one knows. There will be plenty of opinions and someone might be right and be elevated to Guru, until the next event. This 'bear' really is different and not in a way that favours stock picking (I think). Even the companies themselves don't know what the long term impact may be. People will be second guessing this all the way down. Those that guess right will either be lucky, smart or both. Cognitive biases will downplay the luck element
Guru pitch: All that is certain is short term disruption which will vary from mild to catastrophic. Then things will stabilize. Then there will be an overreaction; overstocking, which will lead to overcapacity. Whole industries will be declared strategic assets. Strategic reserves will be established. Supply chains will be reconfigured to be robust, as well as efficient; this will allow whole regions to be isolated, without critical supply chain shortages. Travel will be troublesome and may be discouraged. Staycations more common. Teleconferencing will become normal. Less demand for office space. When the economy reboots, it may be greener. People will probably wash their hands more. Then a new generation will emerge and wonder what all the fuss was about.
I'm trying to work out if there is a viable alternative to cash. Even Gold hasn't held up. (Daily bars below (ignore the arbitrary technical indicators - they are just a way for me to see trend, and distance from 6m highs & lows).
Possibly have to wait for the expectation of inflation to generate demand ...)
Thank you so much for such a detailed and honest reply I really appreciate it.
Clearly, I have a lot to learn yet I could follow your logic and it felt as if I was on the analysis journey with you. Therefore, I am going to use any spare time to learn more. However, being in the Armed Forces it is likely over the coming months any spare time I have will be used helping others.
Thanks again and stay safe
I am new to investing and this is my first post, so please be gentle.
My question is which metrics are the best indicators for a future stock's success in a bear market? And can anyone suggest a screener which encompasses these?
"My question is which metrics are the best indicators for a future stock's success in a bear market? And can anyone suggest a screener which encompasses these?"
Chris Dillow of the Investor's Chronicle occasionally mentions a simple 200 day Moving Average Rule that was popularised by Mebane Faber, an American financial blogger. This is to buy stocks when the United States stock market index (the S&P 500) is above its 200 day (or 10 month) Moving Average, and to sell stocks when the index is below the Moving Average. Note that I wrote the index's Moving Average, not that of individual stocks. Apparently extensive back-testing by Mebane Faber has shown that this simple rule doesn't always work, but it is effective in providing similar long-term growth over many years to a buy-and-hold strategy whilst limiting the extent of drawdowns in bear markets.
I have been applying a modified version of this rule to my own portfolio, which consists mainly of investment trusts and funds rather than individual stocks. My modified version of this rule is to consider buying an investment trust if its share price is above its own 200 day Moving Average and to consider selling an investment trust if its share price is below its own 200 day Moving Average. This can be done easily by setting up a Stockopedia screen or a virtual folio holding the investment trusts one owns or is interested in buying, and displaying the %200 day Moving Average. If the latter is positive, then the share price of the investment trust is above its 200 day MA, and vice versa. The use of this rule has led me to sell most of my investment trusts gradually over the last month, starting with the ones whose share prices were most sensitive to the panic over the corona virus. My portfolio is now 80% in cash and it has fallen in total value over the last month by about 15%, which I think compares well with other investor's experiences. If I had followed my own rule exactly, I would now be 100% in cash, but I still own a couple of multi-asset investment trusts (Capital Gearing and Personal Assets) which only have about 40% in equities. I am thinking about selling those also this coming week. Had I followed Meb Faber's rule of selling everything if the S&P index is below its 200 day Moving Average, I would probably have converted my portfolio to cash sooner than I did over the last month and its total value would be higher than it is now. But I don't like making abrupt "all in" or "all out" decisions, which is why I have been using my own modified version of the rule. However, I suspect that applying my modified rule to individual stocks, which are much more volatile than investment trusts, might not work well.
Just had a look at the S&P 200MA, it is now about 24% below the 200MA so it has quite a way to climb and some of the better stocks will probably recover first, so I'm inclined to buy earlier than that, maybe when the 200MA starts to move up?
I think the bottom maybe when the new virus cases and deaths start to drop here and in the U.K.
There was a time when I thought it was possible to find the bottom. After using many different indicators and combinations of them I concluded that it isn't possible. I also concluded the only way to get a vague idea of where the bottom might be is to watch the volume then be wise after the event.
Another way to get an indication is when experts start talking the markets down. This is to create panic selling, while that is happening the 'smart money' is buying which eventually forms a bottom.
So, how do we find out what the 'smart money' is doing?
So, how do we find out what the 'smart money' is doing?
As you and the previous commentator have already suggested, volume is key, A decisive upward move on higher volume is a sign of institutional buying. Since institutional investors have to accumulate their positions over a number of days, this will tend to support stock prices in the coming days, which then instills longer term confidence in the market.
Interestingly, the FTSE 100 was up on Friday on the highest volume since the crisis started, However, neither the price action nor the increase volume were decisive enough to yet call a bottom.
My current take on the COVID19 crisis is that it will be severe but probably not as severe as 2008. The UK and other governments are now signalling that they are prepared to take unprecedented measures to keep the economy intact, for example, wage subsidies to encourage businesses not to lay off staff. Although there is uncertainty about the trajectory of the pandemic, the direction of travel in terms of government support is becoming more certain. It is more a case of just how much of this will be needed.
The cost of this will be huge and so what seems likely is that government debt will be monetised. The intention will be to create price inflation while keeping wages down in order to spread out the cost across the whole economy. So we are not facing the possible collapse of the financial system as we were in 2008. However, we are talking about a long period of recovery - several years at least.
Isn't Italy going to be a problem though? Many people have been worried about a Greece style financial collapse of Italy causing extreme stress to the Eurozone and then we all start talking about complete financial collapse again.
If Corona virus isn't going to tip Italy over the edge then what is? I hope it turns out to be ok but there are some bleak scenarios out there.
Unfortunately triple bottoms are also a recognised chart pattern....but only after the event!
I'm taking my guidance from CANSLIM and price action.
My interpretation of the CANSLIM method is:
After a new low:
That method puts us on day 2, unconfirmed (for All share, or day 0 for the S&P).
Price action: Alternatively here is a snapshot of the All Share Index (Heiken-Ashi candles):
Waiting for a 'close' above a prior green Heiken-Ashi candle might be a good strategy. This is even safer if using weekly candles when you might just choose to wait for a green candle.
Why are we trying to time the bottom?
I think the massive falls make it extremely tempting to believe that there are bargains. Is this anchoring? Will the upwards volatility be the same? Do we need to see capitulation? Should we wait until volatility declines?
I don't think the information is known/knowable (even the supermarkets might not be benefiting as there is some debate as to whether on-line is profitable - more might not be better).
There are still things to work through the system; new things are emerging day to day. The economy is fundamentally changed in ways we can't yet know. For now I'd say too soon to know; price/volume rules though so I have a couple of triggers and time to work on watchlists.
I'd say potentially as low as 3300. FTSE100 looks to be approaching the midpoint of the range now. The government appear to be indicating the COVID-19 crisis could last until 2021 and possibly beyond, so in reality no one really knows.
It's a little like swimming in the deep end of the pool. You think you can touch the bottom and when you do you are already 35% under water and gasping for breath!
Good morning all, I am new to this site and I wondered if anyone could help me? I'd like to set up a folio that will show me companies % fall over the last month across LSE. That may be a good place to start research if it can be done? Thanks for taking the time to read this and any help would be greatly appreciated. Andrew
Good morning all, I am new to this site and I wondered if anyone could help me? I'd like to set up a folio that will show me companies % fall over the last month across LSE.
Simplest way is to navigate as below
Then change the table view to momentum
Then sort on one of these
However, learning to use the screener is much more powerful and flexible https://www.stockopedia.com/learn
Thank you for taking the time to reply. Yes I agree, a lot to learn.
Thanks for starting this thread. As you say it's a bit of fun. We really have absolutely no idea where the bottom lies, although I'm pretty certain we haven't got there yet. If we can get Covid-19 under control in 3 months, I think the FTSE 100 will bottom out between 4000 and 4500. If it takes 12 months, as some are predicting, then the bottom lies between 2000 and 4000 as it's impossible to calculate precisely the cost of all the damage to industry. At the moment I'm going short on the DJIA and FTSE 100 via spread bets playing the 21000-19000 or 5250-4800 range, but only with very small sums and tight stop losses. The regular new lows tell me that the downward trend is continuing. The VIX has just fallen from 80 to 60, but that merely confirms rampant uncertainty. In the immediate future, the supermarkets looks a reasonable long punt with an increased turnover of 25%, followed by the major pharmaceutical companies. The company that makes the first successful vaccine will be worth a trillion dollars overnight. In the meantime, lots of hand washing and E45.
The 15th of March was a Sunday
The major indices are open 24/7. Trading never stops.
True, but only via derivatives, I would questions its reliability in TA, it is not entirely representative of true market moves.
Yes I agree, I have seen large differences in prices on the futures markets and the real prices when they become live, happens all the time in the US.
What fun!
If you look to any charting package you will see that the 14 day ATR on the FTSE100 is approximately 5%. The 10 day Standard Deviation is currently around 6.5%. So if you wanted to use some confidence level - say 3 * StDev or 3.5 * ATR - then that is a bit like saying that between 23rd, 25th and 29th March we might be within 17.5% (plus or minus) of the bottom.
That's volatility for you!
Everyone always says that they want volatility when there is none. I never say that. I hate it.
But playing with numbers is fun! So let's see what happens. The recent VIX numbers say that the range of possible outcomes is so wide that virtually anything could happen.