The Week Ahead

Hi all,

Thought I would just upload a few comments about the trading week which lies ahead; there are likely to be a few big movers in the financial markets - particularly surrounding the outcome of the Brexit process.

At the end of last week, the EU was kind enough to allow Britain a short extension to the Brexit process in the event that May's deal passes so that we both have time to sort out of all the legislation necessary to enact the withdrawal agreement. Similarly, in the event that May's deal does not pass, there will be an emergency summit of EU leaders to work out a way forward and a short two-week extension for the UK to decide its fate.

The options which lie open to Theresa May involve asking the EU for a longer extension, leaving the EU without a deal (although there are questions about whether this would be legal), or revoking Article 50 altogether. Also, there is the possibility that May could resign in the coming weeks - and then this leaves the prospect of a Tory leadership contest (and general election?......) and then who knows what would happen to Sterling.

This is the pattern I have been trading all week with Cable and as we can see the downward sloping trendline has now been violated and it seems highly possible that Cable starts to rise from a technical perspective.

However, the technical analysis seems somewhat irrelevant with the cloud of a no-deal Brexit lingering, and I currently have a selection of pending trades which execute if the pound falls below a certain level ($1.298) as this would be an indicator that the pound will continue to fall. According to analysts surveyed by Bloomberg (https://www.bloomberg.com/news/articles/2019-03-21/no-deal-brexit-possibility-suddenly-comes-alive-for-the-markets), the pound could fall to a value of $1.20 if there is a no-deal Brexit - yielding a tidy profit for me.

However, it remains highly unlikely that such an eventuality would materialise, and consequently, for the short term, I anticipate much volatility in the pound between the ranges we have been in recently - fluctuating between $1.30 and $1.335.


In other news, we have the Mueller Report. We are currently waiting for the interpretation of the Attorney General, William Barr. Potentially, this could cause some volatility in the financial markets - particularly with regard to US stock futures. If there is anything in the report which particularly damages Trump's chances of winning the election, we could see some downside movements in all of the major indices. This is because the financial markets have benefitted from the Trump tax cuts and an end to his presidency may result in a more conventional President who would be more committed to fiscal responsibility and this would result in a bad reaction from financial markets.

Looking at the last week as a whole in the S&P 500 we can see that actually there has not been much overall movement in the financial markets. However, throughout the week there have been a couple of massive swings in the indices and this was largely due on Wednesday to Federal Reserve Chairman, Jerome Powell, and the FOMC announcing that the number of expected interest rate hikes for the year would fall from 2 to zero. Essentially, this meant that monetary tightening in the US economy was slowing down, and as a result of this, financial markets had more cash available to them for low cost - i.e. interest rates remaining low.

This resulted in a large spike in the indices which can be seen by the successive green candles in the chart above. However, the news was somewhat limited by the fact that the financial markets now believe that there is something the Federal Reserve is keeping quiet - why the sudden change of policy?

Could it be the R-Word coming?


Nobody knows.

Anyway, my trades for the week ahead will continue to focus on Cable as this will be the area where there is the most news and consequently will cause me the most stress.

To provide you some more information on the investment trades I currently have open:

I recently closed my AAPL trade as a result of reaching my price target at $195 a share. Whilst I believe that AAPL could return to touching a price at the $230 level, the market outlook is starting to sour again and I do not wish to have my fingers burned as I did in the October bull run again. With the recent hardware boost from AAPL as well, it is highly possible that we could see a further upwards run, and naturally, with the increasing pace of buybacks from Apple, we could see an increase in the share price quite comfortably further. Finally, I just bought Airpods 2 as it was my birthday on Monday so treated myself to the new releases.

My Disney positions have currently lost a couple of percent, but I continue to maintain a positive outlook for the DIS future. Furthermore, I have actually used the profits from AAPL to increase the size of my position. I am anticipating selling these shares at the $118 mark.

In addition, I have also increased the size of my position in Coca-Cola - the company is almost recession proof and with the dividend day being quite recent, there has been a little bit of selling off. Thus, I took advantage and increased my position.

Finally, I have also opened up another short on the DJI because I believe that the market sentiment may soon sour. It is of course highly possible that we see another all-time high before the market turns down, but better safe than sorry.


I remain highly confident regardless, that the investments I have selected will outperform the market as a whole.


My final comment of the day, I have also decided to start benchmarking my performance by investing in £100 in Fundsmith to try and determine whether or not I am "beating" the performance of legendary investor Terry Smith. Whilst I appreciate that he does not believe in speculation, and takes the attitude of investing in Good Companies as I do, I anticipate that with a little creativity, I may be able to outperform the fund if market conditions allow. Regardless, it will be an interesting test, and I look forward to the comparison.


Thanks for reading this week - and I will try and post an update mid-week.


P.S.

Please check out my Twitter @LukeYoungInvest - I try to post all of my speculative trades and tradingview ideas there so it may be worth watching throughout the week.


Thanks!