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Monday, October 4, 2010

FTSE 100 Prediction - October 4th 2010

The Bears have fortified their position in the FTSE 100 at the 5,600 level and fought back bullish attacks for over 16 days. The fighting was fierce and casualties in the bullish camp, while not yet severe, started to accumulate. The FTSE 100 has rallied 16.88% from its summer intra-day low of 4,790.00 to its highest close of 5,598.50 on September 24th. Market moves on September 28th, 29th and 30th further illustrated severe resistance around the 5,600 level with a hanging man, spinning top and a bearish inverted hammer formation respectively at the top of a rising wedge formation.

The FTSE 100 has a somewhat unique "problem"

The FTSE 100 is a commodity heavy index and always carries a little stumble block with it. Commodities are traded in U.S. Dollars, which is a terrible thing as it is but that is a different story and will likely be solved over the next few years, and they have enjoyed an inverse relationship. The U.S. Dollar drops, the price of commodities increases. Since the FTSE 100 is a commodity heavy index, just like the ASX 200 over in Australia, it tends to get a little extra boost at times and vice versa. It is important to keep that in mind as you trade and invest. Financials are also a leviathan in the FTSE 100.

Will the FTSE 100 correct in a similar fashion the S&P 500 will collapse?

The FTSE 100 will correct once the Bears will launch their counterstrike from the 5,600 level. So far they have allowed the Bulls to charge into resistance and get tired. The 5,800 level offers an additional layer of support for the Bears who have massive reinforcements at that level, which are not likely to be mobilized.

A rather interesting secondary battle which will impact the strength of the correction for the FTSE 100 is again centered around the commodity issue. The secondary battle will be taken out between the lift commodities get from continued U.S. Dollar deterioration and the decrease in demand for commodities. Ultimately, the Second Wave of the financial crisis will eradicate the lift from the weak U.S. Dollar and the effect on the financial sector will bring down the FTSE 100 along with the rest of major markets.

In addition, the FTSE 100 is already overbought and momentum has started to shift to the downside which should be accelerated as third-quarter earnings season will fall short of reduced expectations with fourth-quarter guidance which should point to a further contraction in economic activity in the near future.

A few levels to keep in mind

Over the next twelve weeks, the FTSE 100 should correct to a level of 4,478.80 with a range between 4,344.44 and 4,613.16.

Some Bulls out there will try to push the FTSE 100 to the 5,800 level and after that to the 6,000 level so traders be careful. Data this week should create nice opportunities to initiate a few short positions, but what out for some Bulls who have yet to be slaughtered which could cause a minor temporary headwind. Don't move full force, Bulls are stupid so use that against them.

Photo Credit: The picture in the top left corner was created by Simon Howden and downloaded for free use at freedigitalphotos.net.

Friday, October 1, 2010

S&P 500 Prediction - October 1st 2010

The S&P 500 has been stuck at resistance around the 1,150 level and has failed to close above that level for the past two weeks which comes as no surprise after a 13.63% rally from its summer intra-day low of 1,010.91 reached on July 1st to its highest close at 1,148.67 set on September 24th. The price action viewed on September 30th speaks volumes and may have marked the intra-day high for the S&P 500 at 1,157.16 with a spinning top which was preceded by two hammers all around resistance of a rising wedge formation.

Yes fellow traders, it is time for our year end BBQ and slaughter the Bulls.

So, what is next?

A correction towards the end of the year should be taken into consideration. We may have already had our Santa Clause Rally, a few months early which is linked to the fact that consumers may have already spend what they could not afford to spend during the summer. Holiday shopping season will be a bust and mainly driven by heavy discounts which will be an overall negative for retailers.

More important, third-quarter earnings season will be unimpressive while fourth-quarter guidance will deliver a big blow to equities over the next few weeks into December which will fail to give Bulls a reason to enter the market on the long side. The November elections should have little impact. Equity markets are extremely overbought, the stimulus is fading and leaves traders as well as investors with the reality which eliminates the recovery myth.

Short sellers were already squeezed out in September and are ready for action. Retail investors have entered the markets en masse and as we all know they buy at the top and sell at the bottom. There will be bumps during this correction due to the renewed bullish stubbornness which will carry over from September and last for a few more weeks.

A few levels to keep in mind

Over the next twelve weeks, the S&P 500 should correct to a level of 925.73 with a range between 897.96 and 953.50.

Bears be careful, there are some Bulls around and they will attempt to push the markets towards the 1,200 level. Ease your way into shorts and monitor developments carefully. Next Fridays employment report should move the markets and if the number is just slightly better than expected you will have plenty of opportunity to add to your shorts. At current levels it is not a bad idea to get your feet wet with a few minor shorts.

Photo Credit: The picture in the top left corner was created by thephotoholic and downloaded for free use at freedigitalphotos.net.

Thursday, September 30, 2010

Forex Market

You have probably heard the term Forex before. It refers to the global foreign exchange market or currency market. It is the largest financial market on the planet and its daily turnover is close to $4 Trillion and it keeps growing. The Forex market is not only the largest financial market, but at the same time the most liquid market. Those two factors alone are reason enough for any portfolio to be invested in the Forex market. It offers a great resources to complement any trading style and portfolio management strategy.

The number one purpose of a portfolio is to generate returns, short-term as well as long-term. Those returns need to be consistent returns in order to be able to depend on the portfolio. The idea, especially for small retail investors, to purchase equities especially through participation in mutual funds is ludicrous. The Forex market offers a great, if not the greatest opportunity, for investors of any size.

Here are some facts and figures about the Forex market

1. Daily turnover close to $4 Trillion and growing
2. High liquidity
3. Operates around the clock except for weekends
4. Low margin requirements
5. High leverage potential
6. Very competitive
7. Global center for foreign exchange is in London, about one-third of all transaction are accounted for there

Keep in mind that the Forex market is a speculative market, and the same degree of risk applies as with any other market. Risk is simply the lack of knowledge and in order to enjoy the countless opportunities presented in the Forex market you need to understand the market. The conditions of the Forex market comes close to perfect competition, but since perfection does not exist there is a minor drawback often temporary. Central banks may interfere with exchange rates due to the stupidity of politicians and policy makers.

Those market manipulation moves have a strong ultra-short term effect. Exchange rates will be manipulated, but effects can diminish as fast as they arose and often provide great opportunities as well. 

Photo Credit: The picture in the top left corner was created by renjith krishnan and downloaded for free use at freedigitalphotos.net.

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Picture Credit: The picture in the top left corner was created by jscreationzs and downloaded for free use at freedigitalfotos.net

Wednesday, September 29, 2010


The Last Bear is, despite the suggestion of its name, an unbiased provider of true financial as well as economic news. The Last Bear takes various financial and economic news in order to dissect them which enables The Last Bear to get you the news behind the news. This sets The Last Bear apart from your financial entertainment channels which are filled with biased unprofessional reporters who lack any knowledge about the topics they cover.

When financial and economic news hit the wires, they are almost guaranteed to have a bullish twist to them for one simple reason: 90% of market participants, in an attack of media induced stupidity, require a bull market or an increase in the price of the underlying equity in order to be the proud owner of a portfolio which produces profits. The sad but true story is that, again with the help of unprofessional professionals, most if not all those gains are eaten away by inflation as well as currency deterioration. 

There has been a decade long disconnect with what the media wants the news to be and what they really are. The most recent example is the financial crisis which unfolded in 2007, although it has been over 30 years in the making, and which continues to keep the global economy in a downward spiral.

The Last Bear is a rare outpost for those few individuals who care about the news behind the news and who are fed up with biased bullish coverage about every report that is released. Information passes fast and the same rules apply here. Once you read it it is already too late to act on it, but do not worry. The Last Bear will also provide forward looking analysis based on facts which may or may not help you.

Don't get it wrong, there is a time for bullish bears and bearish bulls. It all depends on reality. Sounds very simple, but to the majority it is a rather hard fact to grasp. Reality is something the majority attempts to avoid at all costs which explains not only the problems faced by individuals, financial as well as general, but also the reason for the increase in appetite for socialism.

By the way, a new avenue which will be covered by The Last Bear are developments in the Forex market, which is the biggest financial market with the highest liquidity and daily turnover of close to $4 Trillion. Do not dismiss the Forex market as part of your overall strategy unless you are as dumb as a mutual fund mismanager, but even some of those unprofessional professionals have started to embrace the Forex market although, as expected, with little or no success.

Do you run your own portfolio?

Great! That is much better than to rape your portfolio with the lack of sophistication offered by a mutual fund mismanager and you should yield much higher returns.  

FYI: A Simple Portfolio

A mix of index futures, most preferably the S&P 500 for the U.S., the FTSE 100 for the U.K. and the DAX 30 or CAC 40 for the EU, and some currency pairs plus 20% cash is enough for a successfully balanced portfolio. Stay away from over-diversification and keep it simple. Another thing to avoid is fundamental analysis as it is a waste of time and indicates nothing. Stick to technical analysis unless you want to run your own mutual fund and always find yourself three steps behind the curve.

Picture via wikipedia.