Something for the Weekend: Big Difference across a Small Pond

I remember when Red Ken was running for Mayor. Livingstone you presume, recently exposed by the Daily Telegraph as having funnelled a couple of hundred grand through a tax avoidance scheme – which is something I haven’t seen any lefties reposting on social media. That was before he was in office, but once he was I heard from a reliable source he let Madonna off her Congestion Charges. Apparently, if she turned one way out of her house she had to pay and the other she didn’t, but kept forgetting. That’s probably how she fell over at the gig a while back: forgetting which way to turn. Anyway, she kept ringing him up on his direct line and he caved. These whacky socialists have obviously mixed up the words ‘socialist’ and ‘socialite’. In any case socialism isn’t about redistributing wealth. First and foremost it’s about redistributing hope. From those with hope to those with none. That’s why socialism doesn’t work: it takes hope from those with aspirations and gives it to people who can’t create wealth.

I read in the Evening Standard the other day that the mayoral candidate for New Labour/Tory Lite/Old Labour (delete as necessary) said tube tickets are “pricier than a business class flight to New York”. Well Ken came out with this very similar helpful piece of information in 2000: mile for mile the tube was pricier than Concorde. I was running comedy clubs at the time and there was a very bright young hopeful, Tom Nichols, who (sadly for comedy) quickly became a journalist. He pointed out this Ken factoid in his routine and said “that may be true Ken, but Concorde lacks the comprehensive coverage of the Metropolis. In fact it serves only Heathrow Terminal 4. Maybe that’s what you’re paying for”.

All that isn’t really helping the FTSE much. It’s still in a downward trend. You’d expect that the markets would be doing better with a majority Tory government, but instead it’s quite clear that the economy is not doing that well. This could well be because we don’t really have any economic growth, except by smoke and mirrors. I’ve posted the chart here showing the General Elections since 1984 colour coded for the winning party. The log scale gives more perspective on relative growth in the stock market. So I’m still not a big fan of the FTSE and it’s not exactly putting on lipstick and a short skirt to try and change my mind. Even if it did it’s not even predictable enough to short confidently.

By contrast, across the pond the US markets are poised for a big move, as is the dollar. The S&P may well not be faltering as it appeared, but about to break up from what has been an almost two year congestion area. That being the case, it’s reasonable to expect a measured move, and with a starting point around 1,400, where it broke up from the last congestion area, and entering the current congestion area at around 1,800, we should expect a 400 point payoff. Something around 2,500. It’s probably not going to burst out tomorrow, but when it does it should do so confidently. Of course the whole congestion area could be interpreted as a slow rolling over, something I’ve certainly looked at on the Dow, and that is a slight concern. But with such an important breakout, and it being an index, it can’t run away too fast. So for those who don’t want an early entry this might justifiably be a trade to enter after the breakout – something you’ll rarely hear me say!

As for the dollar, I wrote a couple of weeks back about the Loonie. H+S patterns are much easier to see on Point + Figure charts. They basically look like the Empire State Building. And here is a classic. I’ve shown the candlestick chart as well to emphasise the clarity you get with the P+F. The price has entered the cloud, and that should mean we’re going to the other side, which in turn means breaking down through the support shown in blue.