 |
Gann Management Ltd- Celebrating 28 years of
continued success!
|
Telephone 0161 285 4488 | Fax 0161 494 6432 | Email
info@gann.co.uk |
|
16th July 2008 |
TAKING THE RIGHT PATH
There are millions
of words written about the investment markets with even more verbal garbage
spouted by questionable experts in the media. Sadly these opinions are rarely
if ever accompanied by any performance history of the 'expert' in question.
Such information would help to properly assess the value of such advice. As
this information is scarcely available it follows that unqualified advice can
be extremely dangerous and should be seriously questioned.
With this in
mind I looked back at my recent thoughts and words. I wondered whether my
guidance would have been of value during a period when taking the wrong path
would have had fairly serious consequences…mistakes in the future will
have even more serious effects if the wrong road is chosen.
Of course,
giving advice to those who refuse to see is a pointless exercise and equally
frustrating to those who see but do not act. Those who choose to follow and act
on sound guidance should feel proud as it takes as much wisdom to follow sound
advice as it is to give it, especially in a period when all is doom and
despair.
CLICK HERE to see the
headlines from our WTFH advice since the top of the market in November of last
year.
WHERE TO FROM HERE
From these headlines it is
obvious that we have recently travelled down the right path but we are now at
the next juncture where a further major decision is upon us. Either path ahead
is currently shrouded in mist and a little patience will be necessary to
determine which way the markets are likely to jump.
When in doubt my
first action is always to look at the informed buyers index. Not surprisingly
they are still in selling mode. Whilst the markets have fallen and are now at
some semblance of support this index confirms that this is not the bottom of
the market. Always remember that it is never too low to sell provided the trend
is down and attempting to catch falling knives can be a painful experience.
Don't follow those who perpetually advocate that the markets are too low and
oversold to reinforce their covert motives to sell their products. Always
consider that Bear markets fall down a river of hope.
Recently
Institutions, from being only reasonably effective in rising markets in the
past, have introduced Absolute Return Bonds where the sales force entice the
public with promises of profits even in falling markets. Since launch most of
these Bonds 'have' lost money some with double digit losses.
The fact
is these organisations do not have the expertise or mindset to be successful in
falling markets. In such conditions their long standing philosophy prevents
them from developing the intrinsic expertise to determine tops before
'shorting.' Neither do they have the universal coverage to escape from defunct
investment areas and utilise benefits from less well known areas where a very
special expertise is required. Our results of late prove we have this essential
dexterity.
I continue to be amazed by how many of the investing public
ignored the failures of the 2000/2003 crash and the incompetence of so many
'big' names who later spent many years in the courts unsuccessfully defending
their incompetence . These organisations have just drawn the same investing
public into the scandal of the credit crunch and the inevitable fallout.
Substantial losses have been suffered which will invariably escalate into major
catastrophes ending up with the world this time being dragged into a major
depression.
So how do we continue to avoid the consequences of the
Credit crunch and its logical consequence, Stagflation? As we have proven in
the past such a scenario can present substantial opportunities for those who
know how the markets truly work. As I write we are up approx 20% whilst most
indices are collapsing by as much as 50%. We are on the march but we must
consider carefully which of the paths we should choose.
1 - THE FTSE
100
The informed buyers confirm that we are not at the bottom of
the market but there is support at 5400 (15 circles). There could therefore be
a rise from here which might prove to be a dead cat bounce or a reasonable rise
to the falling angle at approx. 6200 which would be worth taking on as a short
term trade. There is, in consequence a risky opportunity which should be lowly
geared.
The alternative is a fall under current support for a nasty or
lovely fall down to 4400 depending whether your mindset is correctly attuned.
The odds are on a fall as the mist disperses due to recent weakness taking the
index below the rising angle suggesting time has run out. The move down is
almost signalled but not yet triggered.
2 - THE WORLD'S STOCK
MARKETS
Earlier on this year we had the experts, economists and
fund managers assuring us not to worry about weakness in the West as the
emerging markets would provide opportunities which would balance out any
weakness elsewhere. How wrong this has proved to be with China, India, Hong
Kong all down disastrously, accompanied by all those other wonderful
opportunities conjured up in the minds of the intellectual elite. Never ever
follow those who tell you what the market will do but let the market itself
tell you what to do.
So where do we stand today. Well for the first
time ever I have been unable to isolate ANY world market worthy of
consideration in my weekly world market report. The only market of interest was
UK Inflation linked stocks. As is often the case in difficult times this is our
only holding for our privileged pension policyholders who have 'never' suffered
from a falling market for well over a decade since we undertook to look after
these most important of savings.
The world markets are probably along
with the FTSE on the cusp of a significant move, with markets currently being
finely balanced to go either way. The odds appear to be on collapsing markets
rather than a temporary respite.
3 - THE GOLD MARKETS
Whilst the
Gold Bullion price is still below its March highs the recent trading range
could now be broken on the upside. This could signal a rise into new high
ground which should produce some significant opportunities…certainly a
sector upon which to concentrate. We have 21 possible trades lined up.
4 - COMMODITIES
Our commodity trades are up 34.35% this
year and all profits are now snuggled up in cash. We have no fewer than 28
trades lined up so we see an interesting period ahead.
5 - ENERGY
Over the past few years we have been served well buying energy
related stocks but of late doubts are growing as to the potential over the
shorter term. Our expectation is that the Oil price will top out at 162
probably followed by a sharp reaction as speculators flee the market before new
opportunities emerges.
Our analysis has recently been extended to
include energy alternatives. Whilst to date these investments have generally
been disappointing we will be prepared to take advantage as and when the sector
takes off.
6 - NATURAL RESOURCES
Along with energy this
sector has been an area of special interest since 2005 and may be ready once
again to take off after the recent correction but all is not certain just yet.
7 - THE BOND MARKETS
There is so much volatility in the
asset markets and therefore sound potential profits, that Bonds have been
relegated to second class status at present. International Bonds have shown a
little strength of late but could now hit upside resistance. There would not
seem to be much promise here but they will not be totally discounted.
THE SUMMARY
We see the areas above being
prominent in the third quarter being bolstered by Inflation Linked stocks
giving sound support when necessary and of course being a rock for our pension
investors. The future looks promising provided we go with the markets which is
always our overwhelming challenge. As ever our emphasis will be on capital
protection and not uncontrolled risk taking, despite our recent successes. Our
long time experience in markets has highlighted that success massages the ego
just before the market knocks you down. We will remain humble.
(Click here to see our Investment
Philosophy)
HIGHLIGHTS FROM OUR RECENT 'WTFH' STRATEGIES
Following our warnings of a forthcoming
bear market from analysis of the informed buyer's index our concerns climaxed
on the 25th October last year just before the top of the market in November.
1 - A SIGNIFICANT REVERSAL!
Following our
overall strategy of Great Defence we rushed into cash to avoid any serious
downturn in the markets thus ensuring that our clients would have avoided the
suffering of a potential Bear market. It is little understood that as markets
rise they become technically more and more dangerous. This necessitates a quick
exit strategy together with a widening of risk if the effects of a major
turndown are to be avoided.
The markets have now dictated that we
should be repositioned with a wide spread in mainly specialist areas with some
interesting consequences which look especially exciting at this time. (WTFH
25/10//07)
On the 1st November the FTSE 100
topped out on a short term triple top. By the 14th matters looked increasingly
ominous.
2 - 'OPPORTUNITY OF A LIFETIME JUST AHEAD
PROVIDED YOU PREPARE NOW'
(BEWARE THE IDES OF MARCH.)
Now is a
time to develop a steely attitude in order to consider an alternative
investment strategy, before the next opportunity unfolds. This is never more
important than after long periods of progress or weakness. Market strength has
now been around for almost 5 years. The time is nigh to plan, prepare and
commence a profound self re-adjustment programme to adjust from a bull market
mentality into alternative strategies. It is now important for future success
that trading is maintained but with a strongly defensive bias. (WTFH 14/11/07)
November & December saw a sideways move
but the January thermometer produced a severe warning of trouble ahead. By the
way the ides of March (see previous report) saw a peak of the credit crunch
with big falls. It was time for us to issue our January report with a stark
warning.
3 - 2008 - THE GREAT OPPORTUNITY IS UPON US!
"The essential requirement in trading ranges is to exit as markets fall
as one day, usually when least expected, support is reached and then shattered
followed by swift debilitating falls. Buyers are no where to be found and
without buyers you cannot sell those plummeting shares. The only answer is cash
as markets fall in trading ranges before reaching the lows of the range. Of
course, in rising markets corrections precede the time to buy. Distinguishing
between the two types of falls is often the demise of the investor."
So
here we are at the end of January… support is being shattered, buyers are
nowhere to be found and we only have one small share which is rising! We are
heavily into cash. Now is the time to plan for the big opportunity (WTFH
21/1/08).
By the 11th February it had become
obvious that the market was replaying the beginning of the 2001/2003 market
collapse falling in line with Gann's 7 year cycle.
4 -
DON'T FOCUS ON MAKING MONEY; FOCUS ON PROTECTING WHAT YOU HAVE……PLAY
GREAT DEFENSE, NOT GREAT OFFENCE….THEN THE PROFITS WILL FOLLOW' PAUL TUDOR
JONES
If there is ever a time to follow our basic philosophy,
borrowed from Paul Tudor Jones, it is now. The market over the past year or so
is a remarkable reflection of the FTSE 100 seven years ago. If it should
continue then a great defence will be essential if you are to protect your
capital. (WTFH 11/2/08)
During February our
analysis was exposing a number of 'shorts' and a distinct lack of buys.
5 - Over recent years our analysis has failed to expose
'Short' positions but this has now reversed dramatically with 50% of our future
signals being 'Shorts' We also have more bear sectors than bull sectors
emerging from our Sector analysis. This is also indicative of a bear market for
2008.
Our medium to long term trend analysis from 2 week charts is
showing the vast majority of share and market trends turning to the downside.
If you are trading on 'hope' you would be wise to face reality as you could get
smashed before you realize that living on hope is NOT a strategy in bear
markets As we stand today we are fully invested with a sustainable level of
leverage with happily 45% in short positions; happily 22% silver and gold
holdings and not so happily with two smaller holdings in South Korea and UPM.
(WTFH 5/3/08)
By May, just prior to the May
collapse, we had experienced a typical Bear Market rally…I then listed the
reasons for the forthcoming slide.
Why am I looking for a
fall rather than an upside surprise?
1 - The informed buyers are
selling into the last rise which continues to be bearish.
2 - The advance
decline line is showing more shares declining than rising despite the index
rallying which is bearish.
3 - Even more bearish is that my analysis has
exposed no fewer than 78 shares as possible 'shorts'.
4 - The index has
retraced 50% of the last fall and for chartists it has also risen to the
falling 30 week moving average.
5 - The index could fall through the rising
angle any day now.
6 - The index has risen to 4 percentage levels from
recent lows.
7 - There is the possibility of a triple top formation on the
weekly chart which is very bearish but this is tempered by a neutral two week
chart trend which would become bullish on further strength.
8 - It should
be noted that major moves often commence after public holidays.
9 - The US
S & P 500 is also tracking itself seven years ago suggesting a heavy fall
could be imminent.
10 - Most commentators, economists, experts are now
getting bullish. This is bearish from a contrarian perspective.
This
time 7 years ago we were showing returns of over 100% from our 'Shorting'
programmes. ..Fancy joining in this time round? (WTFH 3/5/08)
The
result of these views since November has resulted in a performance which will
stand comparison with the elite of the Hedge Fund world with no assault on
capital and little volatility.
|
RING 0161 285 4488 TO BOOK YOUR
FREE SEAT AT ONE OF OUR FORTHCOMING SEMINARS OR CLICK HERE
TO BOOK ON-LINE.
© 2008 Gann Managament Ltd.
All Rights Reserved. Gann Management Limited is authorised and Regulated by the
Financial Services Authority.
GML Company Reg Number: 2069317 GML VAT
number: 616003878
All information on this website - www.gann.co.uk are
subject to the terms of this:-
DISCLAIMER. |
|
