FTSE - best January since 1989

So, the FTSE100 ends January with a performance of over 6% for the month, the best for over 20 years. The FTSE250 has also been going well, even though it reflects more closely the UK economy and much of the economic news for the last month or so hasn't been that hot to perhaps justify such a move. Nevertheless, history suggests that a good start in January is often a good sign for the rest of the year as originally mentioned in this post.

Here is some further evidence;

Fidelity Worldwide Investment has analysed the performance of the FTSE 100 since it started in 1984 and found that stock markets have risen in the first month of the year in 17 out of 29 years, with this year likely to make it 18 out of 30.

Most interesting for investors is the fact that in all but three of the 17 years equity markets have continued to grow in the 11 months following a positive January, suggesting that there really might be something to the January Effect. 14 out of 17 is an 82% success rate.

http://www.morningstar.co.uk/uk/news/105294/An-80-Chance-of-a-Positive-Market-in-2013.aspx

The markets will pause for breath at some stage and perhaps we are beginning to see that today, but increasingly evidence suggests that the home for all that new money that has been created may be the stock market going forward.

Dow - A look at the monthly chart

Yesterday I posted the monthly chart of the FTSE100 and the bullishness of the move up since the new year began was clear to see. Today, I post the Dow monthly chart which again shows a strong bullish case. The FTSE tends to follow the Dow, so no one should be surprised that the latter is also getting a little ahead of itself. Yesterday there was some pretty poor news concerning consumer confidence, perhaps as a result of fiscal cliff jitters in December, the market shrugged it off. The Dow has a look about it that it wants to go higher, especially as 14000, a nice round number is within reach, it would be a surprise if it didn't go past it soon regardless of news. 

However, there is a risk of complacency setting in after this start to the year which could easily pull those who have been sitting on the sidelines in just when the smart money begins to sell out. A pullback has to come, just a question of when and by how much.

Dow Monthly

FTSE100 - A look at the monthly chart

The monthly chart for the FTSE100 is looking quite bullish. We have a potential breakout in progress with only a resistance point at around 6400 ahead.  Worth noting that the Bollinger Band is opening towards the upside and given that this is supported by the MACD indicator it suggests that there is plenty of room for more upside as the year goes on. The FTSE has already put on over 6% in January alone which is better than the whole of last year. While it's clear that this pace cannot be maintained, the upward trend is now looking fairly solid outside of pullbacks. While the fundamentals don't necessarily support it, it wouldn't surprise me if at some stage this year we hit 7000. The monthly chart almost looks too good

FTSE100

Video market round up for the week ending 25th January 2013

A week ending round up of the markets from Steve Briggs YouTube channel. Included this week is a look at the UK banking sector and Lloyds PLC.

Links:

Steve's YouTube site http://www.youtube.com/user/sjb5555.

Useful charts and analysis can also be found at http://www.flickr.com/photos/stevebriggspics/

Profit warnings jump

Perhaps as a timely warning that despite the euphoria in the markets since the start of the year it isn't necessarily a one way ticket, yesterday there was a report that profit warnings from UK listed companies are at the highest level since 2008.

The number of UK stock market listed companies warning over profits leapt to 86 in the fourth quarter from 68 in the previous three months, taking the total to 287 or 15% in 2012 - the highest since the credit crunch and banking sector meltdown in 2008.

http://www.independent.co.uk/news/business/news/profit-warnings-jump-to-highest-level-since-height-of-financial-crisis-8468045.html

This isn't a disaster, but reminds us to be careful and perhaps suggests that looking for key words in company reports is just as relevant now as before. This is a system that the Naked Trader, Robbie Burns talks about in his book for finding both long and short opportunities which can be quite profitable. Companies announcing a profit warning often deliver more than one, a case in point being HMV before its demise, while companies that produce a good trading statement that exceed expectations will often deliver again and again. It is always worth looking out for positive or negative trading statements ahead of results as often the trend will continue in the direction of expectations, good or bad.

FTSE250, new year, new high, can it keep going?

The FTSE250 has been going well for some time, which may come as a surprise as it is considered an index that reflects more the UK economy than the FTSE100, which does much of its business overseas. Below is the weekly chart which shows the breakout from around the 12200 mark at the end of last year and it is now heading towards 13000.

Question is, can it maintain this impressive upward momentum? You would have thought that at some stage soon there has to be a pullback at the very least and given that there is now clear daylight from the old resistance at around 12200, it can retrace several hundred points and still be bullish as resistance becomes support. All things point to any volatility in the next few months coming from the US and the debt ceiling talks which will almost inevitably go to the wire. Other than that the bulls seem to have the upper hand at the moment, but putting new money into the market now is fraught with pullback fears that could come at any time.

FTSE250 Weekly

32Red, the next Sportingbet?

Smaller companies in the gaming sector are always likely to be talked of as possible takeover targets of bigger predators looking to expand their empire, Sportingbet being one that was long put in such a category before finally accepting a bid from William Hill . For investors a takeover is never guaranteed and even if it does happen it might not yield the return that some thought possible, but one of the attractions of buying into smaller companies is that at some stage they might attract the interest of someone bigger. 32Red looks to be one of those attractive, solid smaller gaming companies which even if it doesn't attract any interest is worth investigating in its own right.

It reported fairly solid numbers this morning;

Trading in 2013 to date has been strong across the Company's products with Gross Win for the first twenty-one days in January up 15% on an exceptionally strong corresponding period in 2012 that benefitted from significant promotional activity.

Commenting on the performance, Ed Ware, CEO of 32Red, said:

"32Red has enjoyed another strong year of revenue and profit growth, driven by new player recruitment and our focus on the delivery of exceptional levels of service and entertainment to casino players.   

The Group will announce its preliminary results on Thursday, 21 March 2013.

http://www.digitallook.com/news/rns/20640312-134513/TTR-Trading_Update_html

They are expecting to deliver profits in line with market expectations for 2012 and the current P/E is 13.5, forward P/E 11.2, which for a company still experiencing considerable growth isn't too demanding. In general, its fundamentals look fairly solid based on past performance.

One to note for that March result date.

Video market round up for 2012

A year ending round up of the markets from Steve Briggs YouTube channel.

Links:

Steve's YouTube site http://www.youtube.com/user/sjb5555.

Useful charts and analysis can also be found at http://www.flickr.com/photos/stevebriggspics/

Buying shares in companies that have a good story.

Back during the heady days of the tech boom it seemed to be quite easy to buy into the latest blue sky company that in no time at all would take off. If a company wanted to boost its share price all it needed to do was say it was setting up a website offering, or going into some area of "blue sky" technology and often the share price would be off to the races.

Those days of more or less putting your money into anything that sounded good and getting a great return in a short space of time are probably long gone, but there is something to be said for buying into a company that has a good story behind it. Even if the fundamentals may be stretched in the present, the hope of delivering something big in the years to come and enjoying the returns of a ten bagger or more is something that most investors perhaps can only dream about.

In one sense this explains the popularity of smaller companies and the traditional "penny shares". In another, the chances of finding a big winner in the FTSE100 is remote and only slightly higher in the FTSE250. It's not that it can't be done, but in the big cap indices you are often looking for something that has collapsed in a market panic and crash, which is still fundamentally sound and then comes back big time.

Back in the financial crash days of 2008 I recall the collapse in price of FTSE100 silver and gold miner Fresnillo. It's IPO price was a little over 500p in 2008, but fell all the way to around 100p in the market crash, today it stands at a little under 1800p. Trouble is, few probably had the bottle to buy when it was 100p, even though it was about as cheap as it is ever likely to get.

So, leaving aside recovery stories in the big cap shares, it is the smaller companies that are more likely to deliver the investing equivalent of a lottery win, although your entry fee in buying the shares will be a lot higher. A few potential blue sky stories that I like in the smaller company sector are IDOX and Monitise which have been mentioned before. Others worth investigating are IQE, Blinkx and Vislink. All have a good story behind them, all have an element of risk and can be quite volatile, they could be big or could fade away if things don't work out. They may not be 10 baggers, but if the good story works out they could be priced a lot higher in a few years time.

ASOS, a short seller's nightmare and potential dream.

ASOS is one of those stock market stories where you wonder how does it manage to maintain stock market gravity with its share price? For those that don't know it is an online fashion retailer listed on AIM. It has just announced its latest Christmas trading which on the surface looks good.

British online fashion retailer Asos on Thursday posted a 41 per cent rise in sales over the Christmas period as reduced prices lured shoppers.

Asos, aimed at twenty-somethings, said global retail sales in December climbed to £78.1m year-on-year for the month ended December 31st.

Christmas sales were strongest in the group’s overseas market with a 57% increase in the US and 42% elsewhere, while UK sales jumped 34%.

http://www.digitallook.com/cgi-bin/dlmedia/security.cgi?csi=38216&action=news&story_id=20629286

Its last pre-tax profit listed on DigitalLook was £13.24 million, in total for 2012 it was £47.59 million and expected to grow going forward, ASOS is a retailing success story. However, its share price stands at 2714p, P/E over 90 and a market cap of around £2.225 bllion! That's a market cap that would put it in the top 50 of the FTSE250.  Well known competitors Debenhams currently has a market cap around £1.300 billion, Brown N Group, just over £1 billion, ASOS is valued at just about the same as both of these put together. And although in a totally different retailing sector, Dixons is valued at £986 million.

Still, despite the valuation it has been a bit of a nightmare for anyone wanting to short it. There is lots of good news and sentiment in the price, but with that valuation it needs to continue to grow and impress, one bad result or perceived poor showing could see this one go south big time. For now however, you need pretty deep pockets to short this one with any confidence and if you are a bull, deep confidence to be sure it can keep going.

A good analysis can be found here;

http://tradingresearchpoint.co.uk/2013/01/18/asos-trading-statement-evil-knievil-and-the-bears-will-carry-on-getting-burned/

Christmas cheer for Home Retail Group and Dixons

I mentioned on the HMV post the other day the potential for other retailers, Home Retail Group and Dixons and that both would be reporting this week.

Dixons share price had been falling prior to its results, it had been going well for some time and there was a case to be made for saying that the good news was in the price, but a pre-results rumour of a possible profit warning also didn't help. Home Retail Group on the other hand didn't seem to have any questions raised against it. Today's results and market reaction suggest that the market likes it more than Dixons, but both have actually done well and defied the consumer gloom and bad news story on the High Street.

First, Home Retail Group.

As a result of good operational management and cash generation over the peak trading period, we now expect Group benchmark profit before tax for this financial year to be about £10m ahead of the current market consensus of £73m and the year end cash balance to be in excess of £300m.

http://www.digitallook.com/news/rns/20628399-198512/HOME-Interim_Management_Statement_html

HMV, a comedy of errors

Well, the inevitable has finally happened for HMV, after a long battle to fight off its decline and after another bad Christmas, the decision to go into administration does not come as a surprise.

Music and DVD chain HMV is to appoint an administrator, making it the latest casualty on the High Street and putting about 4,350 jobs at risk.

Deloitte will keep HMV's 239 stores in the UK and the Republic of Ireland open while it assesses the prospects for the business and seeks potential buyers.

Trading in HMV shares on the London Stock Exchange has been suspended, HMV said in a statement.

http://www.bbc.co.uk/news/business-21021073

Since coming to the stock market back in 2002 it has been almost a comedy of errors watching the company, the last five years being particularly painful for it as everything it did seemed to backfire. It became one of the favorites for short sellers who no doubt will now argue that they were right all along. Probably so, but for HMV listing on the stock market was probably the wrong decision in the first place. Once the decline set in, the pressures from the market would speed everything up. The need to do something is far greater when you have the market breathing down your neck and institutional shareholders to please.

Part of this comedy of errors was the decision back in 2005 to turn down a takeover bid.

FTSE100 - Best start to the year since 1999

Reading this morning that the start to this year is the best for the FTSE100 since 1999 makes me feel that this new found bullishness in the market could be a two edged sword. On the one hand it looks like shares are being seen in a more positive light, on the other the move up since early December does look a little stretched and might be getting ahead of itself. It could quite easily suck people in here as the fear of being left behind takes hold. Then just as you buy, the correction comes. The trouble is, waiting for pullbacks which often never come or are never as bad as you might hope for, are often themselves a two edged sword, you never quite get the price you were hoping for and curse all the times you missed getting in. The market has a habit of leaving you behind, there are no easy answers

First some figures.

At close on Friday the FTSE is up for this year by 3.8%.

The FTSE All World index is at its highest level since May 2011.

Money flowing into equities is the highest for 5 years. Flows into equity funds were £13.8 billion in the week up to Jan 9th, the highest since September 2007.

World markets have also been enjoying an early new year rally, the S&P reached a 5 year high last week. Emerging markets took a lot of the new money mentioned above.

Already there is talk that the risk play is back on, away from the more safer investments and trades.  If so, this may be good news for more risky shares, especially in commodities, energy, mining, etc. If the money feels that emerging markets are the place to be then that is usually bullish for companies that sell and have their business in those markets. This may however be a false dawn, the euphoria of a Fiscal Cliff part deal still having its effect on markets. Soon, politicians will get back to talking about spending cuts and debt reduction, volatility and a move to the downside could then return, especially if as usual everything goes to the wire.

Source; http://www.investmentweek.co.uk/investment-week/news/2235961/ftse-enjoys-best-year-start-since-1999

FTSE100 Update

The FTSE 100 still looks quite bullish, although you would have thought that after its most recent run, the early Santa and new year rally, it would be due for a rest. Both the daily and weekly chart looks pretty positive that there could be more upside.  The 20/50 dma crossover that happened back in December looks strong. MACD indicator looks very positive on both the daily and weekly chart. Other than bullish over enthusiasm there's not a lot here for bears to grab hold of yet to say that a big fall is on the cards from here.

Who knows, but it looks like a risk on attitude seems to be back and this may carry on until the spending and debt ceiling debate starts again in the US. I would expect some level of pullback soon, but unless it gets really bad the charts are looking good for more upside.

Charts:

The trillion dollar coin

Is it April first already? There has been quite a lot of talk about the US producing a £1 trillion dollar platinum coin to help it bypass its Fiscal Cliff spending difficulties, even the mainstream media seem to be reporting it, in the UK the BBC joining in.

A campaign is gathering pace on the American left to mint a single platinum coin and assign it a face value of a thousand billion dollars as a neat way of resolving the impending row between Congress and the White House over the US debt ceiling.

A Democratic congressman has endorsed the idea and a Republican one has introduced a bill to block it. 

http://www.bbc.co.uk/news/world-us-canada-20954258

So here's the question.  If it really was that easy why not just mint 20 and then the US could wipe out all its current debt and have a nice surplus as well.  In fact, the amount could be any figure.

The workaround would come from exploiting a 1997 law that allows the Treasury to “mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the secretary, in the secretary’s discretion, may prescribe from time to time.”

The idea was that a secretary might authorize the creation of a commemorative eagle coin, for instance, to be put on sale for collectors. But the law inadvertently gave the Treasury secretary the power to mint, say, a $1 trillion coin, or even a $5 trillion coin, or even a $1 quadrillion coin.

Rather than selling it, he might deposit it at the Federal Reserve. Presto! The shiny new asset would erase a trillion dollars in debt liabilities. 

 http://www.nytimes.com/2013/01/10/business/a-trillion-dollar-coin-brings-a-jackpot-of-jests.html?_r=0

Surely they haven't run out yet of paper printing inflation making ideas that this would be taken serious? If this ever happened, you wonder how long it would be before they felt the need for that $1 quadrillion coin.

Online shopping - don't get left behind, a lesson some struggle to learn

There has been much written about the growth of online shopping and the effect that this has been having on the High Street. In the UK companies like HMV have seriously suffered from most of its products now being offered either cheaper online or simply in the form of a new technology that makes the old way of doing things, selling a physical product, almost defunct.  HMV is now in a serious battle to survive, which to a large degree is down to its own failure to adapt to change earlier.

In the gaming sector, companies like William Hill have stolen a march on rival Ladbrokes, with its involvement with Playtech and takeover of Sportingbet in order to enhance its online offer. Ladbrokes, turning down the opportunity to buy Sportingbet itself got left behind, it's web presence being seen as inferior, something it has now resolved to put right, the latest being a deal with Betdaq.

http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/leisure/9786343/Ladbrokes-nears-deal-with-Betdaq.html

Yet despite all the evidence of the importance of an online presence, some companies still seem to think that they can get by without it. It's even more amazing when the company happens to be in the FTSE100 and is still largely sitting on the sidelines while its competitors are enjoying massive online growth.

So, let's talk about WM Morrison.

FTSE hits 6000, almost 6100 partying like its 1999.

So, the FTSE finally managed to get over the 6000 mark as the US Fiscal Cliff part agreement euphoria took hold and now has a little daylight as it is just below 6100. It did get to 6000 back in 1998, spending much of 1999 and 2000 above this level, looking like it might even get to 7000 at one stage, but not to be. 7000 still looks a long way off. For most of the last decade the index has been up and down, spending most of the last 4 years regaining the lost ground brought on by the financial crisis.

What has changed quite a lot over that time is the make up of the index itself and this is something that isn't talked about as much, often giving the false impression that the index is somewhat fixed in terms of its constituents. The index itself can potentially change every quarter depending on the cap value of the lowest FTSE100 compared to the top cap values of those in the FTSE250. One of those recently promoted was Melrose, while companies like Man Group have dropped out in the last year.

What did the index look like in 1999?

Tesco, Sainsbury and Morrison update.

Next week is a big week for the three big food retailers in the FTSE100.  All three of Tesco, Sainsbury and Morrison are due to report updates, telling us how things went over the Christmas period. All three have a lot to gain and potentially lose depending on what they report.

It has been approximately a year since Tesco reported its UK profit warning that resulted in a share slump of around 20% in a day.  Having almost touched a price of 300p over the summer, the share price has been in recovery mode on the back of a huge investment in its UK operations and its recent announcement that it is to look again at the loss making US operation Fresh and Easy. It is expected that Tesco will either scale this down massively, take on a US partner or more likely sell up completely. The market is probably looking for a further announcement on this when the company reports on 10th January. As the share price has been going up recently the good news may already be in the price, but don't be surprised if there is a further up-rating should it be announced that they are pulling out of the US. If that is also accompanied by an improvement in its UK results, then market sentiment of the good variety may suddenly be with Tesco.

January, historically an important month for the markets.

January is usually an important month for markets as it is often the case that as January goes so does the rest of the year. 

Data below is for the US markets.

Market Watch reports:

Since the late 1800s, when the Dow Jones Industrial Average was created, it has gained ground in 63% of the Januarys. The comparable proportion for all other months of the calendar. in contrast, is 57%.

Largely on the strength of these increased odds, the average January gain for the Dow since the late 1800s has been 0.9%, in contrast to 0.6% for all non-January months.

It goes on.

Since the late 1800s, an “up” January has been followed by an “up” rest of the year 67% of the time. The comparable percentage for a “down” January, in contrast, is 55%. The difference in average 11-month returns is 8.3% (follow an “up” January) vs. 4.2% (following a “down” January).

http://www.marketwatch.com/story/how-special-is-january-2013-01-02?link=MW_story_insert

If January is a very good month then the rest of the year often follows suit.

Since 1970, there has been 13 times when the US market has been above 3.75% in January. Every time the index completed the year with a substantial gain.

The 13 Januarys with returns of 3.75% or greater were in 1971, 72, 75, 76, 79, 83, 85, 87, 88, 89, 91, 97 and 99.

The average gain for the rest of the year was a surprising 19.6%.

http://www.marketoracle.co.uk/Article32875.html

While there is a need to be weary of such stats in that there is no guarantee that history will always repeat, it is worth noting as part of an investment/trading strategy that some months do tend to see better performance than others and as with behaviour in general, the markets often repeat what they have done before. It will be interesting to see how long and how much of a positive Fiscal Cliff sentiment carries on into the new year.

Happy new year and a prediction - sort of.

2013 is here and for now it would appear that the US Fiscal Cliff has been averted. I'm not one for making too many predictions, but over time I have come to the conclusion that there is one prediction that can be made where you have a pretty good chance of being right or mostly right. It's a prediction that can be made at more or less any time, but the new year seems appropriate as it is around this time of year that attempts to predict the future are quite popular.

Here's the prediction.

Most predictions that you will probably read about over the next week or so will be wrong.  Most, especially the doom and gloom or overly optimistic type, will be way out wrong and never happen.  Chances are that for the most part the world will carry on, for better or worse, pretty much as before. Ups and downs, good times, bad times, occasional shocks and surprises. Markets will get their fair share of all of these.

To all readers here's to a happy and prosperous new year in whatever you venture to do.

Some popular posts from 2012

Here are some of the more popular posts, in terms of hits, from the last year (or 6 months or so that the blog has been going).

It would appear that we all like something that is free, even better if it is helpful as well. There are quite a few good free online trading, investment magazines and when I find something new I add it to the list.

Something for free - online trading/investment magazines

What time frame are you trading/investing in

Should you follow the news?

Vodafone

Dividend Payers

Technical Analysis

US Fiscal Cliff