On Wall St indexes it is the FAANG
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Before the mid 1990's I was a strict Fundie I originally viewed TA as "dark arts" The meaningless squiggly line method with a voodo type of self-fulfilling prophesy, if most people used TA and saw doom then bad things would happen. Back then a couple of "young turk" investors i occasionally bumped into down at the Pub had this"program thing" running on windows (before windows 95). It happened to be Metastock and these guys were making serious money out of it..Metastock was expensive back then and I bought a share of their program..That was the start of my journey to the "dark side"..Ridiculed by my other investing buddies and University teachers, I stayed with FA and dabbled with Metastock and made more money than them..until ..crash!!! my computer died and so did my Metastock..The "young turks' had finished Varsity and vanished so I started to do it manually and learn't TA from the ground floor upwards..Virtually self taught until early 2000 I then met up with TA Guru Phaedrus on Sharechat and later on Sharetrader forum.he was my Mentor so to speak..There were so many things I didn't know...
Many years ago the Melbourne University had two major text books for their TA courses within their Business degree.
1..Technical Analysis of the Financial Markets --John J.Murphy
2..Encyclopedia of Chart Patterns --Thomas N Bulkowski.
Learn these two books and you will be well on your way to be TA literate.
A part of TA is Charting, this takes a while to understand..It may look easy but you have to develop an "eye" to see the chart's the correct way..this takes time and experience (viewing thousands of charts and their outcomes)
Bulkowski has a website called The Pattern Site
With all the media good news and the NZ overall economy (GDP) running at a very high growth rate (unsustainable?) it may come as a surprise for a few non-observers to find that the NZ stock market index (NZ50C) has fallen about 9% this year.
Nothing unusual for those who know that the Stock market correlates poorly with the economy.
As the recovering economy nears its mature part of the cycle (supply shortages, increased inflation, etc) the market gets a little wary as where too next and can fall back into a holding pattern (rectangle pattern).
As you can see on the chart below we are seeing the NZ50 capital index hugging the weekly MA40 (equivalent to daily MA200) bear line. As long as the index doesn't distance itself too far from that MA40 it should be OK. Rectangle patterns are called continuation patterns, in other words when the pattern breaks the previous trend should resume.
The chart also shows the Bollinger Bands (BB). The BB are squeezing up (see large brown arrows) indicating that the Rectangle Pattern could be nearing the end of its life cycle. Note though the Chart below is a 3 year period chart, so the indicating change could still be month or so away.
The change...is it going to be up or down?
TA is neutral.
The Chart favours an upward breakout
Stock Market theory says Inflation is the primary driver (positive correlation)...therefore rising inflation favours an upward breakout.
Rising Interest Rates favours a downwards breakout.
BUT!!!..the Covid crisis has turned Fundamental theory on it's head. The theories I had learnt over the decades aren't working very well
I'm not sure which way the NZ50C index is going to go...I only know that the Chart is telling me something is going to change, warning me to be cautious, alert and focused..
Your Guess?
Attachment 12702
I feel you Hoop. A rise in inflation should lead to a rise in interest rates.
Fascinating chart. Thanks
Hoop, I hear what you are saying ...
... however, not quite sure that the drop of the NZX50 is a useful indicator in this context. We should not forget that it was the dismal performance of a small number of big NZX 50 companies like ATM (coming down from speculative heights to reality), FPH (recovering from the Covid price bubble), SML (paying for their non diversification policy) and the Gentailers (coming down from their safe haven bubble) which brought the index down. Not sure we can read into that too much about the general status of the economy?
For what it is worth - my NZX portfolio had this year a healthy gain, but admittedly - I don't own any of above companies (well, I bought recently a handful FPH).
I agree however that caution is always appropriate when one is in uncharted territory, though personally would I think that the reserve banks are in the meantime so used to print more cheap money, that this will (together with all the planned infrastructure projects) keep the economy still going for a while. But yes - interest rates will be interesting, and markets don't seem to be sure where they are going either. No question however - a crash will come, and it might well be big.
Still remembering the good old times when our governments and economies owed a pittance compared to today and we thought already that this might be a problem. Well - some day it will be.
After consolidating for about 6 months ....most likely NZX50 will break on the upside with FPH also doing the same which will help index move up
After many months index closed over 12700 !!
Me is on the upside breakout of this sideways movement .
Also too soon for another crash to happen IMHO
Bonds yields plummeting the world over ...At least bond market thinking no big growth ahead ...no big inflation fears ahead ...US10year from recent top of around 1.75% hit 1.25% in just 2-4 months time frame !! That should be making some stock investors sleepless ?
Normally bond prices go up as money moves from stocks to bonds ...at present both bonds up and stocks still holding ...something is going to give in soon
Maybe change Hoop was predicting after finishing of rectangle consolidation is round the corner
NZX being defensive market but very yield oriented ...so we may start to outperform wider world markets ....
NZX50 has some catching up to do ...with 4% down on YTD
Still trying to think why bond market suddenly become so bearish on future growth ....Do they fear long term Covid problems ? Or something else ??
NZD coming down also helps NZX going up !!
Bond market pricing in deflation can be seen from dropping yields ...but why ? What makes them think so ? Why they thinking suddenly from growth and inflation to this new scenario ...maybe due to many countries admitting defeat in war against CORONAVIRUS . Many already saying publicly that we need to learn to live with it !!!
Maybe that makes quick recovery and tremendous economic activity on back burner for a long while .
Now if bond market is right then stock market will catch its vibes sooner then latter
Will TA consider todays NZX over 12800 convincingly as a Breakout ? We are making 7 months highs now ..
If you had a decent chunk of cash to invest...and let's say you subscribed to the Jack Bogle notion that index fund investing over time was the way to go...
Would you just buy into an index fund over time (or funds) and pay the modest management fee?
Or would you construct your own 'index fund' by weighting the stocks appropriately, but owning each business directly? For example, you might construct your own "NZ50" and then all you need to do over time is rebalance occassionally based on your own tolerance for how close you need to keep your weighted percentages for each company to the actual NZ50. More effort, but no management fee at all.
What would be the better approach?
Just buying a Smartshares ETF over time is defiitely the 'easiest'...but is it the best approach?
I think a simple way to determine what is best for you is to compare the two options in terms of cost. Determine the total management fee you would incur using an etf, then compare that to the time it would take to invest in companies yourself, and the value of that time. Balancing 50 stocks to replicate the nzx50 sounds like a huge time consumer, especially keeping book work to track your returns, dividends etc. Lets not forget the risk of being labelled a trader because your making buy and sells of 50 different stocks quarterly. The management fee for NZ50 smart shares is like 0.20% or something? You'd need a lot of dosh to make DIY worth it from a cost point of view. Personally, I'm aiming to use etfs for majority of my holdings (Especially foreign) and compliment it with a few personal picks.