GML - Where to from Here? - 08th June 2011

Markets Meandering - May 2011 - a month of vacilation

During May I made three attempts to write WTFH concentrating upon the FTSE 100 but on each occasion was thwarted by weak market action at crucial times. As I have always attempted to avoid waffle and searching for words which would assist in assessing the markets progress was illusive. All I uncovered was a mishmash of conflicting signals followed by market action fortunately eliminating most of our buying set ups. ‘Don’t tell the market what it should do but let the market tell you what to do’

Firstly the FTSE 100 along with most other world stock markets was hovering under significant upside resistance. The FTSE 100 meandered down from the 6000 area throughout May showing no signs of an upward breakthrough which it had failed to do throughout the year.

However the FTSE 250 was more suggestive of strength by making several attempts to penetrate its resistance at 11850. However this index failed to neither break above the 12000 level nor produce a buy signal when above 11850.

Alongside this faint suggestion of strength was the action of the Dow Jones Industrial index which in April had made a bullish move above 12440 since which time it has shown weakness significant enough to claw back the April gains and thus failed to trigger a buy signal.

As interest in early May was aroused by these and other market decision areas such as Gold Mines, Australia etc the informed buyers index was consulted.

During April prospects for May strength was supported by the Informed Buyers index which had shown strength. However despite this rise the index remained flat. For a major buying signal we would have had to see the FTSE falling as the informed buyers continues to rise. This therefore did not constitute a buy signal but was another feature favorable to give credence to near term strength.

These factors demanded our undivided attention and a considerable number of stocks were featured in ‘Focus’ lined up to provide buy signals on any upside breakthroughs. We were to be disappointed. Yet again in 2011 a huge effort was unrewarded as most stock markets fell away during May.

My current world stock market analysis is bereft of anything to get excited about being limited to possibilities for Australia and China subject to strength from the support levels shown above.

In view of recent overall weakness the question to be addressed is whether ‘shorting’ should now be considered. Gann’s number one rule is trade with the trend. Generally the trends are just still bullish with two week charts showing higher tops and bottoms. The angular support is also just about holding but both could shortly be violated opening up possibilities to consider ‘shorting’

In the meantime opportunities outside the equity markets have proven to be more interesting without yet showing any particular excitement. Our analysis has placed in buys for Gold, Royal Gold Mines, Silver, Cotton, Oats and Canadian Dollars which are all in profit without setting the world on fire.

For the vast majority of the year we have been heavily into cash with current moves possibly about to adjust this negative stance. Of late, as is usual for the second half of the year, the commodity markets, where we incidentally consistently achieve returns of over 20%pa, are starting to look promising. Further weakness in the equity markets could shift the trend to the downside signaling the ditching of weaker equities.

Regards,

Fred Stafford,