A MAJOR INFLEXION POINT IS UPON US

IMPORTANT DECISIONS ARE NOW IMMINENT

THE STRATEGY

Decisions taken over the next few weeks could prove to be critical for capital protection and future progress. The likelihood is that markets will now fall and perhaps significantly. Despite recent market strength the medium and long term trends are still decidedly down as per the trend indicators on the left hand side of the charts below showing falling tops and bottoms…these are not good signs. One of our major rules is not to trade against the main trend thus our non participation in the recent rally which would have been against the trend. However as the trend is still down this now allows us to consider a further negative stance. Current analysis suggests that the next fall could take the FTSE 100 down from the 4000 area to 2752; the S & P 500 down from the 900 area to 454 and the Euro Stoxx 50 down from 2340 to 1170, this being conditional upon the short term trends turning down from the upper levels mentioned.

In my March report it was noted that significant support levels had been broken followed by prices regaining these levels with a significant break back. The question was whether this break would continue to support resulting in the commencement of a new bull market as was the case in 2003.

My own view, at that time, was that a new bull market was highly unlikely as the informed buyers had not joined in the buying spree. Many markets had not recovered the broken support levels. However the markets were far stronger than I anticipated taking prices up to higher resistance levels where we find ourselves today.

Today’s analysis (22/4/09) has isolated 5 possible bull world markets but no less than 18 markets looking decisively bearish including the UK, US and Euro. The charts under show the precarious positions for these three markets. The informed buyers have not participated in the recent rally having withdrawn from the market. Our current holdings also indicate a bearish scenario with 30% cash; ‘shorts’ in gold mines, energy and natural resources; two commodity ‘shorts’ supported by a questionable holding in US Treasury Bonds. Please note that these trades are market inspired and not influenced by any view or prejudice of the analyst.

The overall view is that we are at an important decision point and so far the indications are that a bearish stance is appropriate. If the market should ultimately contradict this assessment then a more bullish view would have to be considered. Let the market tell you what to do and don’t tell the market what it should do!

Regards,

Fred Stafford.