The Dow Jones is fast approaching another resistance level at 13,000 points. After a good rally from 11,800 pts the Dow is set to return to those levels in coming weeks. I dont see it breaking 13,000 points. The reason is high oil prices and likely flagging consumer & business sentiment.
It is possible that the market might be encouraged by the prospect of Ben Bernacke not immediately raising interest rates, irrespective of whether this easy money is not supporting any new lending, not to business at least. What else can you do with easy money but speculate. Surely this money is going to end up driving gold prices higher, and probably oil, despite it at some point collapsing due to economic malaise. I would not be surprised if the market shrugs off high oil prices, higher inflation numbers and rallies through resistance.
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Andrew Sheldon
www.sheldonthinks.com
Investment Strategy
If you are investing for the long term, you still need an investment strategy. Dont be fooled by the rhetoric of fund managers. The reason they advise you to 'buy & hold' is because they dont want to compete with you in sell-offs. Markets and industrial sectors are cyclical, so they demand trading to get the best returns. Fund managers actually cant hope to match the performance of small investors (if you are half good) because they have to manage huge amounts of funds and charge you a fee besides.
MY ADVICE is (i) look at a range of market indices and decide upon what level of correction would give you the justification you need to get in & out of the market. It might be a 5-10% retracement or a break of trend. (ii) Diversify if you dont have an intimate knowledge of the company or management. More than 30% in one company is aggressive.
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