Shipman's "Winning Strategy" found wanting

I have today evaluated the investment system advocated by Mark Shipman in his book "Big Money Little Effort" (2008), "A Winning Strategy for Profitable Long-term Investment."

My finding: not so profitable, tested on the S & P Index, 1991 to the present. See my Report.

Moving Averages indicate Bank of Ireland not ready for our cash

Moving Averages indicate Bank of Ireland is still on Down-trend by KrunchieKilleen on TradingView.com

After a severe correction in 1999, Bank of Ireland trended strongly upwards between June 2000 and Dec 2006. 2007 to 2009 saw the company wiped out. After a brief and strong revival in 2009, the share slumped back to the floor. The 15-day Moving Average (coloured pink) gave warning of threatened down-swings throughout this history, including a warning of an imminent down-swing just before the crash. A Down-trend was certainly afoot when the graph cut through the 50-day Moving Average (coloured light green), confirmed when the shorter one also crossed under the 50-day Average. When the 15-day Average met the Support Line (coloured dark green), however, the down-trend was already clearly under way. By the time the time the short and medium term Averages cossed below the 100-day Moving Average, the brief revival of 2009 was happening and had ended, respectively. We move on to a One-year chart to continue the analysis.

Bank of Ireland analysis continued

Bank of Ireland analysis continued (One Year Chart) by KrunchieKilleen on TradingView.com

In this shorter term chart, it is the 50-day Moving Average (coloured light green) that keeps tabs on the uptrend; when the trend moved too far above this, a down-swing was imminent. (The shorter term, 15-day Moving Average, coloured pink, was riding too closely to the graph to be of much assistance except for very-short term trading). However, when the 15-Day line crossed under the 50-day line, the alarm bells should have been ringing. Shortly thereafter, the graph broke through the Support Line (coloured dark green). The current bounce in the share price is not yet sufficient to suggest that a recovery is afoot. We will wait until the graph cuts the 15-day line and then the 15-day line cuts through the 50-day line.

Even Apple can' afford to move too far ahead of its Moving Average

Even Apple can't rise too far above its Moving Average by KrunchieKilleen on TradingView.com
Three Moving Averages are shown on the chart: 100 day, 50 day and 15 day. It can be seen, in general terms, that when the share price of Apple, from the very start, moved strongly above its moving average, it always suffered a correction that brought it down to earth. Since 2004, however, it has escaped from its 100 day moving average, and even, though not quite as successfully, from its 50 day moving average. However, it has never escaped for too long from its 15 day moving average.In July 2012, it had departed severely from this indicator, so August brought it crashing down, through the 15 day and right down to the 50 day average. It has, at the present time again moved too far from the indicator, and is now due a severe correction.

Euro to find new Norm

History of the Euro to the present had it oscillate around $1.375.The 2008 to 2014 simple Resistance Line (obtained by joining the peaks) now intersects this value. The downswing from here may reach no lower than 1.30 before swinging back to 1.35, but the trend will be downward and a new norm may emerge at a lower level.

Euro may fall now

For months the Euro has been rising. It has now (should I say "perhaps?") reached the summit of its climb and the top of the graph has flattened out. The European Central Bank ("ECB") is concerned with deflation, or at least insufficient inflation, in the Euro Zone ("EZ"). If the Consumer Price Index ("CPI") fails to rise, interest rates may be reduced again in June, one effect of which will be to reduce the price of the Euro against the dollar. Already, there are technical indicators  that hint of an imminent decline in value of the Euro, without actually waiting for the ECB action, as the following chart from TradingView.com shows. Click on the graph to read the arguments of its author "Sforex."



Note, of course, that over the last few days the Euro has dropped from its high to the bottom of its range, hitting the blue Support Line in the above chart. There is a high probability that it will bounce off this line, back to its previous height (but, I would say, no higher), before tumbling down.

A correction is due whether it's a Secular Bear or not

My annotated chart of the Dow, from 1915 to the present, explains why I think a correction is due in the markets before the end of the year. The chart can be viewed at the following link. (Click on the chart to access my page at TradingView.com and then click on the chart on that page to enlarge it):



The chart shows the Dow Index and its 50-day Moving Average since 1915. I have encased the Secular Bears that occurred in the period in amber boxes and used purple boxes to highlight corrections that have happened when the share price moved sharply above the Moving Average. Perhaps the recent Secular Bear ended in 2008 and we are now in a Secular Bull Market. Even so, history shows that, when the share price moves sharply out of line with the 50-day Moving Average, a significant correction is due. This correction will, no doubt, happen before the end of 2014.

Analysts disagree as to whether we are still in the Secular Bear (i.e., a long-term bear market) that commenced in 1999/ 2000, or whether we have emerged from the Bear Market into a Secular Bull. My argument is that, whichever view applies, since share prices have risen sharply above the 50-day Moving Average, a severe correction is due before the end of 2014.

The Stock Traders' Almanac predicts that the Dow Jones will fall to $12,000 (from its present c. $16,500) this year. It will then recover to $18,000 by the end of 2015, but fall back to $10,000 by the end of 2018, before the next Secular Bull will start, which will see the markets rising continuously for 15 years.

Stock Trader's Almanac 2014
Stock Trader's Almanac 2015 (Almanac Investor Series)

Killeens Financial new home

Killeens Financial has moved from its former URL. This is its new home.