UK house prices and Amec

A report by Bill Adlard

Today on UK-Analyst we bring you a Special Report from Chart-Guide.com

I'm very grateful to one of my subscribers for a constant flow of new articles, and here's one which we should all know about, from Der Spiegel. The subheading is:

WORST FINANCIAL CRISIS SINCE 1931?
German State-Owned Banks on Verge of Collapse

It seems that the German state-owned banks have been availing themselves rather heavily of US sub-prime debt. The German idea is that all the banks support each other. Trouble is that on that basis, if they've all been at the sub-prime hooch, there's no-one left to bail them out - except the government, but it won't be able to afford it, of course.

UK House Prices

You can get the data from http://www.communities.gov.uk. Here I've updated the quarterly average house price index which the government compiles. The up trend in house prices from the mid 90's made a nice trend channel, but all the indications are that this trend is over. Average prices have risen during the last 10 years by a multiple of over 3, which is unprecedented in modern times. So is that massive head and shoulders in the MACD histogram. Applying the usual assumptions about heads and shoulders, the target should be the height of the head below the zero line: which means that the slump in property prices which is on the way will be worse than the early 90's. That slump followed on from the 1987 stock market crash. Could we be about to see a repeat: the 2008 stock market crash, followed by a bear market in property?

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Here's monthly average prices, rather than the index. The monthly data only goes back to 2002, but we can see that some sort of a top has recently been made, with the MACD crossing over. I think it's the head and shoulders in the MACD histogram which is the most revealing feature. That's quite unprecedented in the last 40 years. It is very likely to mean significant falls in property prices ahead. There was no big signal like that before the early 1990's property slump, which is another reason why what's coming should be more significant than that was. If so, that would mean big trouble ahead.

Amec (AMEC)

Looks like it's broken the up trend with a double top. It could well see resistance on the 50 day MA now, which might make an excellent stop loss.

Here it is on the arithmetic scale, where the pattern appears more significant, and where a slightly different trendline suggests that the last bounce was a pullback to this line, where resistance may also be expected.

The MACD is rounding over nicely on the zero line. This could be a short now, with an end of day closing stop loss about 1% above the 50 day MA - so about 765p.

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