
The Dow Jones Index has had a good rally of late running from 6700 points to 8,000 pts. It has been sold off at this juncture because its a point of resistance. It remains to be seen whether the index remains above this strong resistance. I would expect some temporary weakness to 7800 points, but I would expect the rally to continue to up to around 8,500 points before it gets sold off.
The reason for the weakness will once again be real estate, not to mention the growing queues of unemployment in the US. The reality is that the US will probably test those lows of 6700 points once more later in the year. This will likely coincide with the worst of the ARMs resets, and perhaps renewed fears of inflation.
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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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