Dubbya Bottom

Back in July of last year I wrote about the W bottom pattern that had formed in Vietnam’s stock market ( “Good morning, Vietnam”). It occurred after a long one and half year downtrend that was followed by a one and half year sideways consolidation potential bottom.  At the time I mentioned that If it broke out above the upper blue resistance line and held, it suggested an upside target of $18, a 20% move higher. The chart I posted at that time was:

Fast forward 6 months and I am happy to report VNM closed at $18 yesterday as you can see in the updated chart below. 

As always, when our targets are met we have to ask, “what now?” My investing rules are such that if my upside target is achieved, I am required to sell at least half of the position. In the case of VNM, because the chart still looks constructive and there appears to be more room to the upside (2014 prior highs near $21 is the next target), an investor should consider selling just ½ and letting the rest run. Of course, each person needs to make those decisions based upon their own risk tolerance. If you decide to hang on to some shares, be aware you will need to give it some room to wiggle as it is currently very overbought and due for a pullback/consolidation before a big move higher can occur. For those that are watching and wishing, do not chase, the next opportunity is just around the corner

December 2017 Charts on the Move Video

I do a quick recap on 2017 and take a look at what 2018 will likely bring for investors in this months Charts on the Move video.

https://youtu.be/KrBsM59DhM8

It's Coming, Are You Ready?

Automation may wipe out 1/3 of America’s workforce

In a new study that is optimistic about automation yet stark in its appraisal of the challenge ahead, McKinsey says massive government intervention will be required to hold societies together against the ravages of labor disruption over the next 13 years. Up to 800 million people—including a third of the work force in the U.S. and Germany—will be made jobless by 2030, the study says.

The bottom line: The economy of most countries will eventually replace the lost jobs, the study says, but many of the unemployed will need considerable help to shift to new work, and salaries could continue to flatline. "It's a Marshall Plan size of task," Michael Chui, lead author of the McKinsey report.

In the eight-month study, the McKinsey Global Institute, the firm's think tank, found that almost half of those thrown out of work—375 million people, comprising 14% of the global work force—will have to find entirely new occupations, since their old one will either no longer exist or need far fewer workers. Chinese will have the highest such absolute numbers—100 million people changing occupations, or 12% of the country's 2030 work force.

The details:

• Up to 30% of the hours worked globally may be automated by 2030.
• The transition compares to the U.S. shift from a largely agricultural to an industrial-services economy in the early 1900s forward. But this time, it's not young people leaving farms, but mid-career workers who need new skills. "There are few precedents in which societies have successfully retrained such large numbers of people," the report says, and that is the key question: how do you retrain people in their 30s, 40s and 50s for entirely new professions?
• Just as they are now, wages may still not be sufficient for a middle-class standard of living. But "a healthy consumer class is essential for both economic growth and social stability," the report says. The U.S. should therefore consider income supplement programs, to establish a bottom-line standard of living.
• Whether the transition to a far more automated society goes smoothly rests almost entirely "on the choices we make," Chui said. For example, wages can be exacerbated or improved. Chui recommended "more investment in infrastructure, and that those workers be paid a middle wage."
• Do not attempt to slow the rollout of AI and robotization, the report urged, but instead accelerate it, because a slowdown "would curtail the contributions that these technologies make to business dynamism and economic growth."

All the Right Moves?

All the Right Moves

While this chart does not show it, Inphi Corp., IPHI, a semiconductor company right here in our backyard rose almost 600% from the end of 2012 until the beginning of this year. Since peaking early this year, it fell 35% and then began to consolidate sideways (underneath blue horizontal resistance zone) bouncing between $32 and $41/share.

Interestingly, last week it broke and closed above resistance on higher than average volume. Since then, as quite often happens, price is back-testing that same level testing support on lower than average volume.  Yesterday closed with a hammer candle which, if we get confirmation in the next few sessions, indicates at least a temporary bottom. A breakout from this horizontal pattern indicates a price target back up to January’s highs which is more than 22% higher.

A price correction followed by at least a six month consolidation, a breakout on higher than average volume with a back-test of support is an almost perfect setup from this technicians view. A hold above support provides a compelling argument for additions to patient, risk tolerant investor's portfolios.  

Happy Thanksgiving - The Bull in Perspective

Thanksgiving is a blessing in disguise. With your friends and family near, make this day as special as you can and thank them with your heart. May you be bestowed upon with the best of everything and have the strength to surpass any obstacle.

Have a blessed thanksgiving