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I'm John Ritchie and this is my financial market blog. It shows my analysis methods with current examples.
See my track record and what I can do for your organisation.

For any links in the older articles that don't work, just replace .com with .blog.

Is Facebook’s recent underperformance just the start?

My fourth article has been posted on seekingalpha.com.

I show that Facebook has ended its trend of outperforming the S&P 500 Index and look at previous examples of what failing relative strength can mean.

Then, I suggest two technology stocks as better choices and highlight their different progress in moving towards outperforming Facebook.

I’ve already got some lively comments below the article. You’re welcome to add or better still, get in touch to discuss how I could be used in your organisation.

Real estate hasn’t milked the good times, why keep for the bad?

My third article has been posted on seekingalpha.com.

I show that the relative strength of the real estate sector against the S&P 500 Index remains closely linked to the 30 year bond yield. I show that despite yield still being historically low after the post US election increase, a new long term relative low has been made. I suggest an alternative sector for relative return investors.

I’d like to have been able to publish this a week ago, before the resistance break. There is an editorial process at seekingalpha.com and I had to revise the article. It is right that they have that; otherwise it would just be a mass participation blog, otherwise known as social media.

In other news, I passed the Chartered Market Technician (CMT) Level Two exam in October.

Sector indices suggest infrastructure spending boost

My second article has been posted on seekingalpha.com.

I show infrastructure related sector indices improving their performance compared to the S&P 500 Index. I also show some sectors to sell to increase infrastructure weightings in a portfolio.

Situation update

In early March, I decided to focus on study for the Chartered Financial Analyst (CFA) Level Two exam. My job wasn’t taking me in the direction of being a market analyst, although it did give me some insights into the corporate debt market. I saw the huge scale of corporate debt issuance and how that has increased in recent years. I also saw that interest rates for corporates were creeping up. This is something that I read has continued, which could become a problem down the line.

I used the time up to early June constructively but it wasn’t enough, it is a very tough exam. I’ll have a head start should I take it again next year.

I also took the Chartered Market Technician (CMT) Level One exam in late April. This was easy enough, it is something I could have done years ago. I passed the Society of Technical Analysts’ (STA) exam years ago but the CMT programme seems to have greater employer recognition. I will take the CMT Level Two exam in October.

I have posted my first article on seekingalpha.com. Although I’ve built a good track record on this blog, enjoyed writing it and learnt plenty, it hasn’t put me out there enough, even with use of LinkedIn and Twitter. I also get a small payment for each article.

My first article covers consumer discretionary stocks. I will post links to the articles from here but I’m not allowed to duplicate the content. I may still post other articles here that I can’t or don’t want to put on seekingalpha.com.

The short position in the NASDAQ 100 from 29 April was stopped out at 4,600 for a loss of 6.0%. This still leaves a gains to losses ratio since the blog started of £3.05 gained for every £1.00 lost.

NASDAQ 100 has weekly reversal – go short

On 13 March, I set out the trading tactics for entering a short position on the NASDAQ 100 Index. There had been a long term moving average crossover, one of the set-ups I look for. These don’t give the exact timing of a trade entry, so I chose to enter a short on the next weekly reversal.

This will be triggered today and I go short in my model portfolio for this blog. The position is entered at the Friday 9pm price of 4,341, with a stop loss at 4,600, above the 19 April high.

The original moving average crossover has crossed back over slightly, but the long term top formation remains in place and this weekly reversal is a decisive break below the previous two weeks.

This is the right hand side of a top pattern and I’m expecting this to break below the August and February lows.

NASDAQ 100 Index

NASDAQ 100

 

 

 

NASDAQ 100 Index has long term moving average crossover

There has been a decent rally from the bullish breadth divergence that I identified in mid February. Now, major indices have rallied back into long term moving averages that have turned downwards.

A specific set up I look for is a long term moving average crossover, as explained in the My methods section.

NASDAQ 100 Index

NASDAQ 100 WEEKLY 130316

  • The 30 and 40 week moving averages last crossed over in August 2009
  • Divergence on the MACD indicator has been building since early 2014 and this was more pronounced when the final high was made in early December 2015
  • The moving averages first crossed in the last week of February, remember that the cross is not an exact timing tool
  • Now that price has rallied into falling moving averages, that makes price more vulnerable to continuing the topping process

Trading tactics

Enter a short position in the NASDAQ 100 Index on the next weekly reversal, with a stop loss above the most recent high. A weekly reversal this coming week will be below 4,232.08 or on the NASDAQ 100 Trust ETF (QQQ), below Thursday’s low of $103.31.

I will record this trade in the P&L for this site when it eventually is triggered.

Bullish breadth and momentum divergences in the short term

The Russell 2000 Small Cap Index has set up with bullish divergences on its 14 day RSI and one of its moving average breadth indicators (the % of stocks above their 50 day moving average).

This repeats a set up in late September 2015 (dashed line) from which the index managed an 11% rally into early December.

Russell 2000 Index, 14 day RSI, 50 day breadth
RUSSELL 2000 BREADTH AND RSI

  • The long term moving averages having rolled over, so I wouldn’t play them from the long side, we are in a bear market
  • I expect a rally to be smaller and over quicker but I would wait for a better entry opportunity on short positions
  • This means when this divergence has unwound and price is closer to the long term moving average (e.g. 40 week average)

Educational reference on divergences

My methods with daily and weekly RSI divergences
Examples of daily RSI divergences and how they turn out
Follow up on those 8 months later