HOW WAS 2014 FOR HOUSEWIVES?

One of the funniest parts of analysis in stock markets: if you look back couple of months or a year how people forecasted the future. I have loved during the whole year the bearish sentiment about the market rally. But finally the 2014 has been quite a good year again for investors in stock markets in row for 5 years.

2014 Index returns:

• S&P 500 +12,55%
• Dow Jones 8,48%
• Nasdaq +14,39%

It has been proved again the best investment is still the stock markets and you had should forget the gold and property in 2014. So, at the beginning of 2014 there was a survey what pops & moms are thinking about the best investment in 2014. This year they had good shots since last year 2013 was an exceptional good year for stocks so the mean used to be very optimistic about stocks this year generally and they were right. They didn’t trust in commodities and gold and they were right again, the whole commodity asset group suffered its biggest drop since decades. But it seems clearly after three years of falling of gold the love has gone away.

They were super sceptical about bond market, but this asset group performed quite well. All in all if this kind of choppy and volatile market they really put the bets on stocks they made nice returns, but I am concerned a bit that they really did since we had two big corrections in US indices closely 10% in 2014, and those days and pops & moms usually capitulate.

Start your investment here with us: http://www.bfmassets.com/managed-accounts

The BFM Assets Team.

6 RULES I LEARNED FROM SEAL SOLDIERS AS A TRADER

The military is far from trading, but I have found some similarities between SEAL (Special Operation Forces Sea, Air and Land) and investment: the preparation, the professionalism, the special skills and the commitment. The soldiers have many great habits which we should consider as investors being more efficient and profitable.

During the trainings of SEAL they get new habits and lose the wrong and useless ones. They are trained for the mission as we are as investors on our horizon there is only one goal at the end of the day– the profit. They learn from their mistakes day by day and the purpose is to get good habits and stick to them.

1. Be loyal. Team loyalty in SEAL, but in trading means you should be loyal to your system. Don’t change that often. Never let your emotions rule your trading. Follow your rules around the clock. 
2. Be reflective. Analyze yourself and your trading history and reflecting on your mistakes and learn from them. Ensures you never repeat them. 
3. Be obsessively organized. Sleep, do exercises and make your whole day organized. The best traders are very well organized and work hard. 
4. Assume you don't know enough. Because you don't. Any effective trader understands that training and learning is never complete. Being an investor is a long life learning process which never stops. 
5. Be detail-oriented. Take all your attention at the small informations and news and analyse them. Be well informed and read as much as you can to get more information to make better decisions. 
6. Never get comfortable. The trading arena and the floor is not that place where you are going to have comfort feeling. It is a battlefield and you should push yourself outside of your comfort zone.

This list is the beauty of trading and proves why is one of the most fascinating and inspirational job in the world. Maintain these habits, and encourage yourself to follow them.

Start your investment here with us: http://www.bfmassets.com/managed-accounts

The BFM Assets Team.

EXPERTS’ CRYSTAL BALLS ARE CLOUDY

Most of them forecasted a big fall, but finally Mr. Market has delivered a nice rally in December. Experts stated during the month that the market will crash, new correction will happen, but they are wrong. They convinced many investors with this negative sentiment staying without positions, so they lost again an opportunity to invest in this rising market.

Around Xmas days there were no volume, but the markets are gained further nicely. We saw new highs in the major indices S&P 500, DJIA, Nasdaq, Russell 2000. This is a very strong confirmation of the bull market is alive and well for all those doubters. Nasdaq closed at highest level since March 2000. The Dow index has gained for seven consecutive trading days, and enjoyed its biggest seven-day point gain since 2008. The Nasdaq has been up for eight of the last ten weeks, while the S&P 500 has gained for nine of the past ten weeks. This is a typical end of year rally.

In technical terms the Dow made a clear breakout last week at 17.960 and stayed in the untouched territory, so any forecast without indication of resistance levels is just guessing. What we are expecting is the index is going strengthen further in the following 5-10 days.

Start your investment here with us: http://www.bfmassets.com/managed-accounts

The BFM Assets Team.

GETTING CLOSER TO SANTA RALLY?

One of the most famous market phenomenon is the Santa Claus Rally at the end of the year. Obviously we don’t know this year will come or not since we don’t have a crystal ball, but we can find some data from the past to understand better this phenomenon. Namely this pattern means the last trading 5 days of the year and the first 2 days of the new one. Typically the markets are trending in those days, and mostly they are bullish.

According to the Trader’s Almanachs since 1969 the Santa Claus Rally occurred 34 times out of 44 years. So the winning ratio is pretty good, it is over 72%. The average cumulative return is around 1.6%, but there is always one day at least of decline. If we look back in longer period since 1896 the Dow Jones gained in 77% of the years with around 1.7%.

What is the underlying lift-power of Santa Claus Rally? To be honest I don’t have a faintest idea, my bet is more mass psychology than fundamentals, might be the year-end tax-related portfolio adjustments or optimism during the holiday season.

The BFM Assets Team.

IT IS TOUGH BEING SHORT IN THIS BULL MARKET

The U.S. stock market ended a great turbulent week punctuated with collapse of the Ruble, gyrations in the oil prices and the Federal Reserve’s policy meeting and most importantly with the biggest weekly gain since October 2014.

Once again Mr. Market proved that nobody knows anything. Nobody expected this low oil price early on and nobody expected the last week volatile rally. Most of the investors anticipated quiet pre Xmas weeks. On the contrary the S&P 500 had its biggest gain since 2009 and gained during the week with more than 3.4%, Dow gained +3%. Who shorted the market, he burned out for sure. Being on the sell side it has not been only hard mentally, but might be a super loser deal either.

Friday performances:

• S&P 500 +0.46%
• DJIA +0.15%
• Nasdaq +0.36%

The S&P hit the 2.075 previous record level last Friday, which is a great sign of the bullish sentiment, without any doubt we are expecting more gains on the index and it is going to get higher in the untouched territory over 2.100 shortly.

The BFM Assets Team.

MONSTER RALLY WITH EXTRAORDINARY BULLISH SENTIMENT

The rally has arrived as we forecasted beginning of this week. We have had many new records this week. Yes, this week will be in the books of trading history. The market not only rallied in crazy way with around 5%, but scored the best 2 days gain since 2002. I see the comments that traders are blaming for this fast rally the FED and new Cuba policy. This sounds like some kind of a conspiracy. Whatever they say, the point is that at the strongest bull market rallies you don’t really know what the main force behind the gains is.

The Dow delivered its biggest one day gain since 2011 and got back really close again to shouting distance of 18.000. First time happened since 2008 the DJIA recorded 200 points daily gain. The S&P 500 delivered its biggest one-day gain since 2012. And first time since 2002 the S&P500 posted two consecutive days of gains bigger than 2%.

Yesterday:

• DJIA +2.43%
• S&P500 +2.40%
• Nasdaq +2.24%

The other stock markets are also massively in green territory:

• DAX +3%
• ASX 200 +2.9%
• Nikkei +2.4%

Technically the Dow Jones deleted the 10 days drop in December within 4 days and recovered back to the record territory and erased all resistance levels. Recently the index needs to retest the 17.960 level and then after a few days consolidation the bullish sentiment is going lift higher the index into the untouched territory.

The BFM Assets Team.

BREAK-OUT?

Might be – I would say a small yes now, but tomorrow could be a big yes. In our interpretation the FTSE index delivered a break-out and pivotal point break-out last night, which usually means rebounce from the seven days free falling streak.

And the chart technically also developed a double bottom pattern which also supporting the bullish rally and sentiment in the following days. From the daily lowest point of 6.175 the UK benchmark index probably will retest the 6.415 key resistance level shortly.

After the great plunge which was closely 10% in December, the FTSE index might come back to a consolidation and gaining period and in 2-3 weeks the chart could go back to the previous prices territory around 6.750.

Start your investment here: http://bfmassets.com/managed-accounts

The BFM Assets Team.

25 YEARS OLD BULL

Yes, the famous one, this:

The Charging Bull also known as the Wall Street Bull bronze sculpture was installed without permission in front of the New York Stock Exchange in December 1989. This month the bull is 25 years old. Arturo Di Modica spent his own money US$360,000 of this bull.

The sculpture is both a popular tourist destination which draws thousands of people a day, as well as one of the most iconic images of New York and a Wall Street icon symbolizing Wall Street and the Financial District. This piece is not only the symbol of Wall Street but the symbol of financial optimism and prosperity as well.

The sculpture was the artist's idea, not the city's one. In an act of "guerrilla art", he trucked it to Lower Manhattan and on December 15, 1989, installed it beneath a 60-foot Christmas tree in the middle of Broad Street in front of the New York Stock Exchange as a Christmas gift to the people of New York. That day, crowds came to look at the bull, with hundreds stopping to admire and analyze the gift as Di Modica handed out copies of a flier about his artwork.

It was 10 nights before Christmas, and all the way down Wall Street the coast was clear. A truck turned the corner and lurched to a stop directly in front of the New York Stock Exchange. Arturo Di Modica and his small band of co-conspirators jumped out of the truck and got right to work — the night watchman had just completed his patrol of 11 Wall St., and, having cased the block for several nights. They lowered the bronze beast — all 3 ½ tons of it — right into the middle of Broad Street, and right under the exchange’s Christmas tree. The truck zoomed out of sight, but Di Modica stood at the corner, watching and waiting for morning.

“It was love right away,” Di Modica, now 73, told “They wanted to touch it, embrace it — it was beautiful. I stood there watching until about noon, when I took a break and went to lunch.”

Whenever the market is down, people stop him in the street and ask, “Why isn’t the bull working?” he reported. “I tell them he’s resting, he’s tired, but he’ll get back to it soon.” But every couple of week he pays a visit to his most famous creation, watching the tourists pose with it the way they first did 25 years before.

The BFM Assets Team.

MARC FABER AND STOCK MARKET CRASH

Marc Faber he has been forecasting since the Carter-era a new crash of markets and crisis. That is pity after decades of falls forecasting many investors out there still listen to him and tend to believe him when he opens his mouth and forecast and another end of the world day. Like N. Roubini the other doomsayer who is always concerned about the market’s performance and he has anxiety about the bull market. He shorted this strongest bullish rally till 2013 and he lost huge amount of money. In contrary, all fact proves that in the last decade the stock markets were the best investments in US comparing to any other assets.

Just for fun I collected below some great predictions of Marc Faber from the last couple of years. During this period the S&P500 gained closely 150%. Funny isn’t that:

• 'The Bear Market Is Starting' Marc Faber –CNBC, August 3, 2011
• Faber: The Dollar's Value In The Future Will Be Zero –Business Insider, 4/18/ 2011
• Marc Faber: We Could Experience A 1987-Style Crash This Year –Business Insider, 5/10/2012
• Marc Faber: Look out! A 1987-style crash is coming. –CNBC, August 8, 2013
• 2014 crash will be worse than 1987's: Marc Faber –CNBC, April 10, 2014

And I am sure he is going to continue his crash predictions.

The BFM Assets Team.

DEAD CAT REBOUNCED

This week is not the best one for the markets after three days of falling Thursday was the first winning day without any impressive jump, the market only delivered a “Dead Cat Rebounce” pattern, so might come another negative day today. Not only US markets are suffering by losses, but European indices are also in negative territory in weekly basis.

This Dad Cat pattern usually means that one modest green day after couple of following days would mean further losses. That is another warning sign that from the intraday record in the middle of session the indices almost turned into falling mood at closed at daily lowest points.

Yesterday data:

• DJIA +0.36%
• S&P 500 + 0.45%
• Nasdaq +0.52%

So, we moved to our bunker and reduced massively in the last couple of days our exposure on long side of indices and waiting for some bullish break out confirmation. Namely 17.550 is the resistance level of DJIA below that key level we are on hold and waiting to jump in again.

The BFM Assets Team.

IS THERE ANY CORRELATION BETWEEN WALL-STREET AND MAIN STREET?

I am not sure about that. But my longer answer is the following, sometimes yes, sometimes not. Many folks, especially the fundamental investors out there are the real believer of the macro numbers determines the direction of the markets. Normally I don’t like the easy and cheap answers. If that would work in trading that could be the easiest job in the world, just take a look at the GDP chart of US and if it is positive territory buy the S&P and vice-versa.

I could bring hundreds of examples when the macro numbers were horrible and the market did nice returns – juts take a look of the performance of Venezuelan, Spanish and Greek stock markets in 2013.

Or here is a great chart by Alliance Bernstein, which proves clearly the macro parameters don’t give any determination to stock market’s performance. This chart is more than interesting and help us to understand the underlying the psychology of the mass and the investors.

In the last two decades the Chinese economy boosted by 15% and during the same period the stock market has basically gone nowhere. And, on the contrary the Mexican GDP is closely flat, but the stock markets performed much better.

The BFM Assets Team.

THE GAME CHANGER OF INDEX TRADING – JOHN BOGLE

He is an authentic and real game changer for trading, especially for retail clients. He is fully convinced that investing into indexes is much better investment strategy than invest into stocks. Last time when he bought stocks was at his college years since that time he has been only owning US indices, especially S&P 500.

He changed the investment industry with his Vanguard company. Nearly 40 years passed since he introduced his low-cost index fund Vanguard 500. At those days many folks thought that Bogle is crazy, but now his fund is the second biggest one in US and investing more than 1.7 trillion $ in US based indices. He founded that the best tradings are boring and most of the cases you don’t have to do anything just sit and watch the market. He invented the passively managed broad based index following strategy. The idea was behind the index trading:

• It is cheaper than actively managed funds
• Charge only 0.2% fee yearly
• Lower volatility
• It is small investor friendly – low costs
• Trading stocks is too risky - Doing the wrong thing(bad stock) at the wrong time(bad timing) is killing you.

He is only focuses on US markets and doesn’t care about other regions in the world, because the world market’s capitalization’s 52% is still in US. Today after 5 years of bullish market his fund is still bullish because he thinks you have to invest for long term and what seems today pricey in one year would seem cheap.

The BFM Assets Team.

SANTA’S CORRECTION?

Yes, for yesterday for sure. For tomorrow? I don’t think so. Friday the Dow was flirting with hitting the psychological benchmark of 18,000, but yesterday US stock market suffered its biggest daily drop in the last seven weeks. There were some underlying bearish effects like oil’s price slide, dragged down the oil companies and other uncertainties and bad economic reports from China(disappointing trade numbers), Japan (GDP has contracted again) and Europe(German industrial production smaller than expected). Losses led by energy sector stocks. The changing of sentiment was shown in the VIX index, which rose by 20% on Monday.

• SP500 -0.73%
• DJIA – 0.59%
• Nasdaq -0.84%

All in all this less than 1% drop is nothing, we are still confident about more gains in December and some Santa Claus rally. There is some pressure on prices after the 7 weeks rally and prices are in untouched record territories, but after couple of days consolidation might come again more gains. In terms of technical analysis we only open new long positions if the resistance level at 17.960 would be taken on DJIA.

The BFM Assets Team.

THE V-SHAPE PATTERN

The markets run in cycles, some days up and some days down this is usual and part of this business. Some days the drops and recoveries are faster than normal and this happened in the last two months. US markets shaped V-shape recovery in October and November. The index returned within two weeks to its previous high as quickly as it dropped. There was no any retest before the real bounce. The strength of this V-shape recovery was a bit surprise, normally comes corrections in each 2-3months but the recent one was really fast and rapid.

The depth of the selloff was closely 10% in SP500 and took 3 weeks the recovery was only for 2 weeks.

How long and far will do this recovery? Obviously nobody knows for sure. An average V-shape recovery lasts between 41 and 58 days so in the worst case scenario the bulls stays with us till middle of December since we are now at 34 days.

The price goes further than the previous top between 4.1% and 7.1%. So there is still place for more gains 1%-4%, the target might be this area 2100-2150.

The BFM Assets Team.

DRAGHI OPENED HIS MOUTH...

and the European markets dropped sharply yesterday. The investors are concerned about that the ECB would soften its broad-based package of quantitative easing in January 2015. The ECB President Mario Draghi had poured cold water on hopes the ECB would begin a program of sovereign-debt purchases called QE. The Central Bank held interest rates at a record low. The red arrow shows the reaction on Super Mario’s speech on CAC40.

And you can find the same template on DAX as well:

All Europeans suffered quite sever drop and just have recovered slowly. The US indices finished a modest day, after the intraday records they had turned into red territory.

• SP500 -0.12%
• DJIA -0.07%

Most of the investors are waiting for today’s monthly job report so we are expecting some big moves later today. The outlook is good for SP500, the index still holds steadily the resistance level at 2.073, so after 7 consolidation days might come a bigger rally today and Monday.

The BFM Assets Team.

SANTA CLAUS IS COMING TO FLOOR

Will bring Santa gift to the investors, and does again the Santa Claus Rally? So far, he has done, but there is strong chance to deliver more gains in US stock markets. December is typically investor friendly month. This month is the second most profitable one historically so the chance for more gains is really high. According to the Bespoke Investment’s statistics, in the last 50 years the Dow Jones gained on average 1.6% in December, posting gains 70% of the time.

By now, the S&P 500 has posted its sixth winning streak week. And, another indices like Nasdaq and DJIA rallied nicely as well in November and December so far. Officially the Santa Claus rally means the last 5 trading days of December and first two days of the New Year. The statistics are impressive, since 2009 the S&P 500 delivered within seven days positive return. Santa Claus Rally gains average 1.5% over the seven-day period, according to history of the markets.

We do believe the Santa Claus rally is already underway and the outlooks are really promising for more gains in US and European indices.

The BFM Assets Team.

THE MOST POPULAR STOCK IS THE MOST PROFITABLE?

I don’t think so; honestly my one decade experience says the opposite of that. The most popular means most traded and most loved and owned by small investors, pops and moms and housewives.

The list of 20 most-traded U.S.-listed stocks was put together at the Journal’s request by AJO, an investment firm in Philadelphia, and is based on trading volume of 2014. This list it proves again that the most loved stocks by the mass they are far not the best investments. It seems to me this is an evergreen rule of the market, but most of the investors still love to buy those stocks which are recommended by CNBC or by family member or colleagues.

Out of 20 stocks 14 have declined, even as the broader stock market has rallied and 12 out of 20 most-traded stocks of the year are all down by double digits in percentage terms.

Here is the list of 14 losers and their 2014 performance:

1. Splunk down 2% 
2. Netflix down 6% 

They are in double digit loss:

1. First Solar (the solar-energy firm), down 11%; 
2. Lululemon Athletica, 18%; 
3. GameStop, 23%; 
4. Stratasys (one of the 3D printing firms), 24%; 
5. Pandora Media, 26%; 
6. Twitter, 34%; 
7. Groupon, 36%; 
8. Herbalife, 45%; 
9. Peabody Energy (the coal producer), 48%; 
10. SINA, a Chinese Internet firm, 55%; 
11. 3D Systems (the other 3D printing firm), 62%; 
12. Nu Skin Enterprises, down 70% this year. 

Here is the list of 6 winners and their 2014 performance:

1. American Airlines Group
2. Micron Tech. up 65%
3. Tesla up 63%
4. Facebook up 42%
5. Yahoo 28%
6. Salix Pharm., up 14%

The BFM Assets Team.

10 BAD HABITS OF LOSERS

Being precisely, these are the10 rules of unprofitable traders. If you do the opposite what they do, you are in a good way to be profitable. This list is subjective, but worthwhile to bear in mind, this is a good list for rookies and newbies to learn from their mistakes.

1. Overpositioned and use high leverage. 
2. They are typically overtrading. Open and close to often positions. 
3. They ignore the trend and want to be on the both side of the market, always wanting to catch up the tops and bottoms. 
4. Cut the profit, and let the loss run and hoping for it bounces back. 
5. They buy high and sell low, do totally the opposite of the golden rule.
6. They want to be right and always want to predict. They think trading is about being right. 
7. They are listening to others – CNBC, anchors, gurus, friends…etc. 
8. They buy because they think something is cheap. 
9. They think trading is a fast way of being rich. 
10. They concerned about the profit but don’t concern about the loss.

The BFM Assets Team.

THE SHOW MUST GO ON

The green days, weeks and month continued, US indices finished the holiday shortened week and November in green again. During last week the Dow Jones rose to another record and in November closed its second month of gains and its best performing month of the year. The index has ended the month without having lost ground since 15th October. The Dow Jones has held onto their 6th straight week of gains, this the longest winning streak in 2014. The DJIA and S&P posted their second straight month of gains. 8 out 11 months they gained which is prove of bull market. The Nasdaq closed up 1.7% on the week and posted its six week winning streak since February 2013 and also posted a second month of gains also. The Tech Index gained only 7 out of 11 months.

DJIA rose 2.5% in November, finished its 31 record and showed the strength of the bullish momentum. What about the coming December? Historically it is the best month in the history of DJIA for more than a century and the performance can boost further.

Technically all three US benchmark indices are in uncovered territory at historical record levels. The DJIA has been consolidating at the area of 17.750-17.900 in the last week, so to be more bullish we have to see some breakouts from 17.900’s level.

The BFM Assets Team.

MOM AND POP IN 2014

Mom and pop is referring to inexperienced investors who play the market casually. Beginning of 2014 they were asked about their expectation of different stock markets. They had to forecast which region will be the best and worst performer in 2014. Closely to the end of the year is a good time to check those typical small investors had right or they were wrong. I have to tell you first of all that they are mostly wrong, that is statistically proven and the pattern occurred more or less the same this year again.

This list was made in January – from best to worst:

1. US
2. EU
3. Japan
4. UK
5. China
6. India
7. Russia
8. Brazil

This week Deutsche Bank came out with this chart below of the winners and losers of the market in 2014 to date. And the chart shows the current situations in the markets – from best to worst:

1. India
2. China
3. US
4. EU
5. Brazil
6. Russia
7. UK
8. Japan

All in all, moms and pops were again mostly wrong, the closest shot was Russia. Here is the 2014 January and November scores and rankings:

Recent reality            January 2014

1. India                        6.
2. China                      5.
3. US                          1.
4. EU                          2.
5. Brazil                      8. 
6. Russia                     7.
7. UK                          4.
8. Japan                       3.

They said India will perform poorly, but the fact is that it has been the best performer in 2014. They were really sceptical about Brazil, but that was not a bad year for Bovespa. They were positive about Japan, but finally the Nikkei is still in -4%.

So being contrarian against the mass might be a good strategy? Yes, I strongly recommend that.

The BFM Assets Team.

DEJA VU

You might have Deja Vu feeling if you hear news from stock markets day by day. Almost each day there is a new high and closes the market on record over and over again. Each day seems to be the same. Like in the fascinating and one of the most hilarious Bill Murray’s movie “Groundhog Day” when he finds himself in a time loop, repeating the same day again and again.

https://www.youtube.com/watch?v=tSVeDx9fk60

The market works like that recently. At this chart of SP500 below (by Michael Batnick) the red lines are indicating the new all time high prices in 2013 and 2014. The funny part is the last 5 weeks, it is almost the entire November is in red.

The bullishness of the recent US indices are brutal and has never happened before in the history. The S&P500 has spent above its 5-day moving average for 28 straight days. This is a new record and surpassed the prior one of 27 days from 1928.

All in all, this monotony might be boring for most of the investors, but I love the boring staff if we make money. I love to be bored while making money than being thrilled, but burned out. This is the magic of trend-following method that you are in the big moves and following the winning side. Be in the market is the bottom line since honestly nobody knows when comes the big rallies, so follow the trend and ride the waves.

The BFM Assets Team.

STAR WARS

Usually we are not analyzing and holding positions in any certain stocks neither in blue-chips like Walt Disney. But recently we found an exception, namely the new Star Wars trailer; the early 88-second trailer of Star Wars Movie: The Force Awakens can be seen in 30 theaters across North America beginning this Friday morning, November 28 and in December 2015 comes the movie in cinemas. Hurraaaahhhhhhh!!!

In 2012 the Walt Disney acquired Lucasfilm for $4 billion and announced that it would produce three new films, with the first film, Star Wars: The Force Awakens. All of the previous 6 films have been huge box office successes, with the overall box office revenue generated by the Star Wars films totaling $4.3 billion, making it the fifth-highest-grossing film series. So our bet is that the Walt Disney stock is a great investment opportunity for middle and long term if you are not thinking investing for days or weeks. The fiscal success of the new series is more than obvious which will turn Disney into a money generating giant in the following 10 years.

Technically the WD has gained since 2009 more than 230% and has massively overperformed the DJIA index as its benchmark, but we still believe it might be a good long-term investment for a decade. Think about that and enjoy from Friday the new trailer.

The BFM Assets Team.

MOVING AVERAGE? IT FORECASTS ANYTHING? OHHH, GOSHHH...

Basically it doesn’t forecast anything. I know millions of investors, traders who believe out there in MA’s, but it is totally worthless, it only shows the past not the future as Peter Lynch’s great bonmot says “Technical analysis is a great stuff to forecast the past.” Same for MA, it is brutally useless in trading. Doesn’t give you any more information about the future than the price itself, it is only able to tell you the past how performed, it was bullish or bearish.

For me that feature of MA is more than enough. In my view, if you understand the main direction of the market you know more about the market than 90% of investors. For me is crystal clear the indices in US and Europe are bullish, there is no doubt about that. That is why we are only on the buying side since we are trend followers.

Our market view is supported also by Moving Average. Indices ended last week at new records again and seems the rally unstoppable. The S&P 500 is closed above its 5 day MA for the 26th consecutive day last Friday. The best all-time streak was 27 straight days in 1986. And, what happened in 1986? The great bull market continued further unstoppable which had started in 1982. That secular trend rally lasted until 2000, for more than 16 years. Is there any correlation? We don’t know yet for sure, but one fact is obvious that this last 5 weeks rally and the stormy V-shape recovery only possible to happen in a very bullish momentum and bullish market conditions.

The BFM Assets Team.

“THE MARKET CAN REMAIN IRRATIONAL LONGER THAN YOU CAN REMAIN SOLVENT”

That is a great quote from J. M. Keynes who basically was a great investor and undoubtedly understood well the psychology of Mr. Market. During the last five weeks rally the vast majority of traders were convinced the market had gone too much up so they opened shorts and stopped out, sold again and stopped out again. They burned out week by week because they forget the great rule of Keynes. If the market goes in euphoria could go much farer than is rational. To predict the top of the rallies is the hardest way to succeed.

The stock markets in US ended the week in rally mode Friday. They ended their fifth-straight week of gains on overseas central banks’ stimulus. Friday, China's central bank made its first interest rate cut in more than two years and the European Central Bank took action to stimulate the economy as well. The cutting rates and central bank stimuluses are supporting the equities in major markets. China’s central bank cut its one-year loan rate by 0.4 percentage points and the ECB began buying asset-backed securities Friday, expanding its quantitative easing program.

The DJIA rallied and registered its best one-day gain in November and closed again at record price for the 28th times this year. Gained the DJIA more than 1% over the week.

• SP500 +0.52%
• DJIA +0.51%
• Nasdaq +0.24%

This rally of US markets predicts further gains in November and December. That is statistically proven it could be even better. In the 20 times when the S&P 500 has enjoyed moderate gains (between 0 and 15 percent) in the year to Thanksgiving, the S&P has added to those gains 18 of 20 times. If the S&P was up 10 percent or more at Thanksgiving, 68 percent of the years were positive, with those 28 years averaging a healthy return of 2.4 percent between Thanksgiving and New Year's. So, we have the reason why still buy the indices.

The BFM Assets Team.

I KNOW IT’S BORING, BUT SP500 AND DOW CLOSED ON RECORD AGAIN

I understand if you are sick and tired by the records, which seems to me a weekly permanent pattern. The Dow Jones ended the day again at a record for the 27th time this year, the S&P 500 closed at a record for the 44th time, almost each week have been statistically new record. Thursday stocks turned in green after the U.S. jobless claims data that fell more than expected at 291,000, which is the best data since 2000.

All in all the US indices finished the session slightly higher. The gains on the S&P 500 and the DJIA were enough to send the indexes into record territory again.

• S&P 500 +0,20%
• DJIA +0,19%
• Nasdaq +0,56%

Thursday the Russell 2000 overperformed all other indices with +1,1%. The small cap index made a nice and strong rally. There is a huge and wide optimism between the investors, but the latest AAII data show some weakness in bullish sentiment, which might be good news for more gain, while still out there are many sceptical investors who later will be buyers.

http://www.aaii.com/SentimentSurvey?adv=yes

The bullish sentiment is still over the long-term average (38,9%), but the good sign is that since last week it has been moderated by 8.8%. Ceterum Censeo the bulls still have more room to run further.

The BFM Assets Team.

WAITED AS THE RAIN IN MAY...

... I mean some consolidation in US indices, after one of the best 4 weeks rally in the last 5 years, plus after the 4 winning days. The SP500 ended its four-day winning streak yesterday. US stock markets little changed on Wednesday, they all closed near all-time highs after the FOMC meeting. The FED voted to end of QE, the bond buying program by a 9-1 vote and repeated again that they are going to keep the interest rate close to zero for a considerable time. The considerable could mean 2015, so next year the FED possibly will start to raise the rate. Frankly this announcement was not a really significant announcement; the markets haven’t moved much on the release.

• S&P 500 -0,15%
• DJIA - 0,01%
• Nasdaq -0,57%

Technically really nothing to say more since yesterday, we are still holding out long positions specially we are really bullish in DAX and CAC40 in Europe.

The BFM Assets Team.

SHHH! DON’T SAY TOO LOUDLY THAT THIS IS A BULL MARKET!

You have to live on Mars if you don’t see that. I am still amazed day by day when many smart guys are telling me that they are planning to open short on European and US indices. Ok it is a free world, anybody can do whatever they want, but I don’t get it why they are trying to catch up the short side if the long side is the winner one. This is a brutal bullish market week by week SP500 and DJIA hit new record again, Dow Jones made 26th times this year and 43rd time the SP500 closed in record territory this year. What I can only recommend “Don’t argue with the tape.” Now the tape says pretty clearly just buy this market don’t short.

Yesterday European breakout from 10 days ranging was a clear sign of bullish momentum. In the last 10 days the volatility was extremely low, it is normal before the storms. The SP500’s volatility was extraordinary low, was one of the lowest one in last five years. This usually happens in December or in August and typically before big moves and rallies. So we are expecting more gains in European indices like FTSE, DAX and CAC40.

What will come? It is more sense for more gains for sure. The yesterday break out in Wall Street and Europe was only a bell for more records. The bulls have been so strong in the last four weeks and we are forecasting they stay with us further. Would it be bubble or there is any turning point I don’t think so. The bulls just started the ride in middle terms.

Take a look at the chart and tells you better than 1000 words what is going on now.

The BFM Assets Team.

JAPAN IS IN RECESSION, WILL NIKKEI GO DOWN?

Yesterday came an unexpected news from Japan that its economy dropped by 1.6%. In Q3 means officially Japan is in recession. In the prior quarter the GDP declined by 7.3%, which is the definition of a recession. After this disappointing news the Nikkei suffered its biggest one-day tumble closely 3% this year. Due to this recession anxiety the US markets stayed flat, which is not a real bad news in terms of sentiment. This means Nikkei will go down and we should sell? I doubt that. I would say the opposite of that.

Tonight the investors almost deleted the whole Monday loss and Nikkei gained 2.2%. The world’s third largest economy recession not really scared the investors for more than 24 hours. It is a good sign for more gains. Don’t forget the Main Street and Wall Street they are not walking hand in hand, the stock markets can perform really well against the ugly fundamentals.

Monday Japanese Prime Minister Shinzo Abe called for tax cuts and cash handouts as part of a stimulus package valued at more than $25 billion, which would mean more demand for stocks.

The Nikkei this year on YTD performed really well, and just broke out from the huge triangle pattern in October, so the long side is widely opened for more gains technically.

The BFM Assets Team.

SANTA CLAUS RALLY IS COMING?

US indices are for four weeks in a row in green. US stock markets still managed to post a fourth-straight weekly gain. Friday the main benchmarks switched between small gains and losses throughout the trading session, was a bit muted day. The markets and investors are optimistic also about the cheap oil.

• SP500 +0,12%
• DJIA -0,10%
• Nasdaq +0,18%

The SP500 and DJIA gained +0,4% over the week. The Nasdaq gained +1,2%. There are some optimism between investors about the about the cheap oil and good holiday-shopping season. That retail sales for one-third of consumer spending the main engine of U.S. economic activity.

The market seems pricey but in longer term there is still free place enough sentimentally and technically as well in US indices. If the Xmas rally means more gain in the following one and the half month we can say yes and we are expecting more gains until Xmas, especially in European indices like DAX, CAC40 or FTSE.

The BFM Assets Team.