Monthly Archives: May 2013

28th May 2013 – More action on the Nikkei

After last week’s wild ride on the Nikkei 225, yesterday morning there was a fantastic opportunity to open a relatively low risk long position in this index.  Using the MIDAS Method as the primary guide, two other technical analysis techniques combined to give a strong buying signal at about 13,700.  These were the 30-minute RSI and 50-day moving average indicators.

Within 24 hours the Nikkei had jumped over 700 points.

 

MIDAS Method Overview
Stock/Index/Currency/Commodity Nikkei 225 (Japan)
Support Launch Month APR2013
Level of Support 2nd
Price of Support 13,974

 

But first to recap, below is Friday’s MIDAS chart;

 

Nikkei 225 MIDAS 24_5_13 distribute

Please click for full image

 

The Launch Point for APR2013 support (light blue line in the diagram) was April 4th 2013.  Although this Launch Point is above NOV2012 support (purple line in the diagram) on this date the nature of the Japanese equity market changed fundamentally as the Bank of Japan began its massive Quantitative Easing programme.  If recent history in other countries is anything to go by, the outlook for Japanese stocks is extremely bullish while this QE programme lasts.

Continue reading

24th May 2013 – Has the Nikkei confirmed a significant support line?

The plunge in the Nikkei in the last two days caught the market by surprise.  Comments by the Bank of Japan have suggested they may reduce their QE programme.  The market clearly doesn’t like this idea.

From its 15,942 peak on Thursday, the Nikkei plummeted to an intraday low of 13,962. Within 36 hours it rebounded sharply, rising 1000 points (about 7%).  This strong rally originated almost exactly from an extremely interesting MIDAS level of support.

MIDAS Method Overview
Stock/Index/Currency/Commodity Nikkei 225 (Japan)
Support Launch Month APR2013
Level of Support 2nd
Price of Support 13,974

Subscribers to Technical Forecasting’s MIDAS package will have been aware of the potential significance of the Nikkei at 13,974.  I say “potential” because only on Wednesday, reaching this level so quickly seemed extremely improbable.  Below is a MIDAS chart, taken this morning.

Nikkei 225 MIDAS 24_5_13 distribute

Please click for full image

 

On the MIDAS chart, note the APR2013 support line (light blue on the diagram).

The Launch Point of APR2013 support is April 4th 2013.  This was the date that the Bank of Japan announced it was initiating the largest, most open Quantitative Easing programme global markets have yet seen.  The Nikkei was already in a strong bullish pattern, but this announcement shocked investors around the world and started an immediate, substantial spike in prices.  A flood of money entered the Japanese stock market. Continue reading

21st May 2013 — Gold on the brink

Gold is on the brink.

But the question is on the brink of what?

This is shaping up to be one of the most exciting (nervous?!) periods for metal investors in recent years.  A number of key charts are at extremely significant levels and patterns are forming all over the place.  The confirmation or breakdown of these is likely to set the tone for the rest of this year’s trade.

To finish reading this article please click here to visit www.shareprophets.com.

20th May 2013 – Could the Fed cool this market?

So shorting super-charged markets wasn’t exactly the best idea was it?!

Selling in May doesn’t appear to have worked at all well this year.

On reflection it was a risky trade, but I picked what looked like a good entry point and was able to manage my position with extremely tight stops.  The risk/reward on it still feels right and when a correction comes there is a long way for this market to fall.

For the time being though the euphoria shows no sign of abating.

As soon as the Dow started to make its final push on 15,000 it was obvious which way the wind was blowing.  Perhaps I should have gone long at that point.  The truth is I am just not comfortable buying at this level.  The Dow could stick on another 1,000 points from here, but I am happy sitting this one out.

I just don’t understand this fever pitch that seems to have gripped so many participants.  There are plenty of warning signs that this is all getting a bit out of control.  I’ve seen some incredibly outlandish predictions of where the Dow could head to (which I won’t bother link to as the less exposure this garbage get the better).  Usually such headlines are a great contrarian indicator that a top is coming.  However in this case the market just keeps on rising.

I am now keeping a close on the Federal Reserve’s schedule.

I have nothing to substantiate this view, but I’ve had a sneaky suspicion recently that there could be a surprise interest rate increase around the corner. Continue reading

15th May 2013 — Matra Petroleum; a troubling development for AIM?

Originally published on www.shareprophets.com

This morning Matra Petroleum (MTA) issued a fairly irregular RNS.  Rather than publish a Competent Persons Report (“CPR”), Matra has instead published its own internal resource estimate, which has not been independently verified.

This is a possibly troubling development in the evolution of general company communication on AIM.

Now before I go on I want to make sure I am being fair to Matra.

I am not accusing Matra of anything untoward.  The RNS is concisely worded and goes out of its way to make absolutely clear that this is not a CPR and has not been subject to third party review.  The casual reader will have seen in the headline that this is an “Internal Resource Estimate”.  Anyone who buys the stock on the basis of this announcement is expressing their faith in management’s technical ability in interpreting the data they have received from their licenses.  There is nothing wrong with making such a decision and Matra has visibly spelled out the risks of making such a call.

So it’s not Matra’s news which bothers me per say.

What I am more concerned about is the precedent this RNS sets.

I have increasing misgivings about the general standard and reliability of so-called independent CPRs on AIM.  As private investors these documents matter a great deal to us as they usually form the basis of any investment decision we make.

If a company says it has a 1 in 6 chance of finding 300million barrels of oil, it is going to cost $10million to drill and the current market cap is £7million the maths should be fairly simply in deciding how much to invest.

But of course it rarely works out like that. Continue reading

12th May 2013 — Chasing New World Oil and Gas’ mud logs

Originally published on www.shareprophets.com.


Two weeks ago I wrote this piece, publicly calling for New World Oil and Gas to release the mud logs of their recent drills in Belize.

The main reason for this request is because of, what increasingly look like, highly ill-timed comments by New World Chief Executive Bill Kelleher, a mere three days before the official announcement of the latest Belizean failure.

To recap on Tuesday April 23rd Mr Kelleher gave this interview in which he said “we are very encouraged by what we have seen in the well thus far to date.”

By the end of the week, on Friday April 26th, the Company released this RNS stating “following analysis…, it was determined that insufficient commercial quantities of moveable hydrocarbons were present to economically justify running casing and well testing operations.  As a result, the Company has deemed the well non-commercial and decided to plug and abandon Rio Bravo.”

So what exactly was it that Mr Kelleher was so encouraged by, only to decide not even to test three days later?

I’ll admit I am baffled by this.  The timings just don’t make sense to me, but this can all be cleared up quite easily by New World simply releasing the mud logs, taken during drilling operations.  These will categorically show what Mr Kelleher was so encouraged by and give confidence to suffering investors that there is still an opportunity to play for in Belize.

I followed up my article, by contacting the Company directly on Thursday May 2nd at 8.40am, through the contact form on their website.  I gave my personal contact details and pointed out that by releasing the mud logs, New World could help restore the faith in it that the wider market has so evidently lost.

I’ve heard nothing back.

I don’t think I really expected to.

Even so there is another point to consider in all this.

This concerns New World’s plans for its Danish licenses. Continue reading

9th May 2013 — Copper at a crossroads

Originally published on www.shareprophets.com

 

The recent decline in copper has just reached a crucial level of technical support.

Thanks to its widespread application in industrial, manufacturing and construction processes, copper acts as a very useful indicator of economic activity.  As I recently suggested in my piece on the Baltic Dry Index there are warning signs that the apparent “recovery” may not be as healthy as many would like us to believe.  The fall in the price of copper is further confirmation of this.

Even so there is an argument for going long (but with caution).

The screenshot below is taken from the demo version of a proprietary trading system I am having built.  Based on Paul Levine’s MIDAS Method of technical analysis this charting package provides a unique view of looking at markets.  Rather than plotting daily prices against time, daily prices are plotted against On Balance Volume (“OBV”).  This is more useful than the traditional chart display as the width of each month is determined by the amount of volume present at that time in a given market.  This gives an immediate view of how weak or strong a market is based on the amount of buying or selling (assuming buying occurs in a rising market and selling in a falling one).

The MIDAS Method itself is a fairly sophisticated calculation which allows the user to plot support and resistance levels in trending markets.  It is most commonly used for individual stocks and indices but the principle can be applied to commodities as well.

Copper has been an excellent example with a high degree of conformance to the MIDAS method in the last ten years.

 

You’ll note the primary support line (pink) starts on October 8th 2002.  In the last 10½ years this line has only been breached once, in October 2008.  This was at the climax of the Financial Crisis, in the immediate aftermath of Lehman’s collapse.  When the copper price broke through this level there was nothing to support it underneath and it went into freefall.  Remember this was at a time of extreme economic stress and the future looked pretty bleak.  Financial markets seized up, liquidity was next to zero and real world economic activity collapsed suddenly.

However we all know what happened next.  Central banks stepped in, Quantitative Easing was launched and everything resource related went on a wild run.  Continue reading

1st May 2013 – The bearish Baltic Dry Index

The bad news just seems to keep on coming for small cap miners and explorers.  Share prices are in the dumps, funding is hard to come by and some companies are starting to exhibit signs of severe stress.

The contrarian in me would like to view this environment as the perfect buying opportunity, but unfortunately there are indicators that suggest things are going to get worse before they get better.  Much worse.

To continue reading please click here to visit www.shareprophets.com.