Bullish FTSE: When will it end?

The 17.6 Year Stock Market Cycle

Is The FTSE 100 Topping?

Recently the broader market action has had me questioning where the markets in general are heading. The economy is stuck in first gear and the markets are struggling to make progress. I have heard commentators talking about markets climbing a "wall of worry" but a the first chart below shows, the FTSE has been range bound for years.

 

 

Although the FTSE has been in an uptrend since March 2009, 5100 to 5900 has contained the markets since April 2010 and we are now back at the top of the range.  Where next is the big question.

The next chart shows a close up of the last 2 years, what can be seen is a potential topping process similar to 2011.  Tops tend to be a gradual process over months, whereas bottoms tend to be short and sharp.

The 20MA has crossed below the 50MA and although they are both above the 200MA, the 200 MA has flat lined.  I think we may test the lower trend line at 5550 or even the bottom of the range at 5100.  QE is having less and less impact and policy makers and the market know that.  A new policy response is required for us to move forwards and a new crisis may be the catalyst for that.

Of course next week we could pass 6000 and this post will look foolish, we just don't know.  However I feel on balance the market is more likely to fall 10% than go up 10%.

Buying is easy, knowing when to sell is the most difficult thing.  In my opinion the markets conditions favour traders over investors (buy and hold) and I think it is right to take profits now and again.


Portfolio Update

Taking into consideration the above, the recent highs have provided an opportunity for realising a profit.  I had started to sell a few positions in October after Aberdeen Asset Management and Amerisur reached new 12 month highs.  Both spiked up on open (3-4%) for no good reason and I thought I'd sell these two and wait to see how thing progressed.  Both are still under there October highs and this was the prompt to consider the wider market.

I wanted to sell those stocks that were close to 12 month highs based on my view that the broader market would fall.  I was also conscious that I didn't want to sell my winners and hold onto the losers so I sold the underperformers too.  This has led me to sell virtually everything, as follows:

Amerisur Resources	39.0%
Advance Computer Software	24.1%
Aberdeen Asset Management	23.0%
SpaceandPeople	16.9%
Staffline	8.1%

Shire	-7.1%
Maintel Holdings (2 positions)	-10.0%
Tricorn Holdings (2 positions)	-13.0%
Hargreaves Services (2 positions)	-32.0%

I have held onto Pan African Resources as they are about to have a rights issue to fund an acquisition and I am bullish on gold, I have also retained my silver positions.

Overall performance is break even after costs, but underperformed the wider market.

I have heard people say that you make your money when you buy i.e. buying bargains during market sell offs is the key to profits.  This is basically what I hope to achieve, reinvest during a Q1 2013 sell off in order to ride the next wave up.  The risk is that it begins without me.  I guess that I am a market timer at heart.

New Gold Uptrend Underway

This is how I see things with gold.  We broke out of the multi-month downtrend (green line) and we are in an uptrend (blue line).  We retested the green line and we should be headed up.  There may be one more attempt at the green line and this is where I intend to buy, just around $1650.

However the risk is that we go down through the green!  Good luck.

6 Month Review

Well its been over six months since I went live with ValuableGrowth and all I have to show for my efforts break-even, excluding costs!

However this isn't a short term effort, I am in it for the foreseeable future and considering that the portfolio was -12% back in June/July this is not too bad.  The FTSE All-share is up 1.31% in the same period so I am roughly tracking the index.

Hargreaves Services reported full year profits in September and operating profits were up by 14.9% and the dividend was increased by 14.8%.  However the good results were completely overshadowed by the update on the Maltby Colliery which management have warned shareholders may now need to be closed.  This caused a major sell off in the share price down to 530p, however they have now recovered and sit at 740p.  Following this announcement I decided to sell my second tranche of share after the first bounce at 620p.  I will hold the remainder into next year.

I also sold my second holding in Maintel Holdings as the Hargreaves news was a timely reminder of the risks involved in owning shares and I don't want to be over exposed to any single share, especially one that is underperforming the market at present.

New additions are Amerisur Resources (oil miner), Tricorn (pipe manufacturer) and Staffline (provider of temporary and permanent staff).  Amerisur has provided an immediate boost to the portfolio, increasing 18.9% since purchase.

One of the reasons for writing this blog is that numerous people claim to be great at selecting shares but conveniently 'forget' the poor performing shares.  I want to document a transparent and honest approach and see whether I can manage my own money better than the professional.  If I can't then I'll give up and invest it in a managed fund.  If I can then without incurring management fees my funds should grow more quickly.  A few years performance is required to see how well I am performing but it was the good gains seen during my trial that gave me the confidence to get started with this portfolio.

In terms of the winners, these are as follows:

SpaceandPeople	20.8%
Amerisur Resources	18.9%
Aberdeen Asset Management	17.1%
Silver (2 positions)	13.7%
Advance Computer Software	10.6%
Pan African Resources	5.1%

But they haven't all been winners and the losers are:

Staffline	-6.4%
Shire	-10.5%
Maintel Holdings (2 positions)	-13.8%
Hargreaves Services (2 positions)	-54.6%

Hargreaves has really hurt performance but such is life, hopefully the share price will come back over  the next 12 months and the increased dividend means that I am paid to wait, which I like.

The whole portfolio looks like this:

We have the US elections coming up and the usual euro shenanigans coming up and so I believe that the markets may head lower in the near term, part of the reason for raising some cash, but if the US housing market has bottomed and is turning higher once again, as JP Morgan said alongside its good interim numbers, then we may see further upside in the medium term.  But I think volatility will be an ongoing feature of the markets for some time to come and what happens at 5500 will be key.