Looking at the US market it is apparent that despite the recent rally in the S&P500 from 670 to 1078 between March and September 2009, the market is still in a downtrend. The implication is that the market tanked when its downtrend was being challenged. The question therefore becomes - how low will it fall? I am expecting a fall back to the 942 support level, then consolidation from that point.
I would not be surprised to see the S&P500 return to its lows of 670, however that will not occur for some time yet.. 12-18 months as I believe the motivation for that move will be the prospect of higher interest rates to fight inflation. This will all be conjecture to cynics who need to experience things first hand before they believe.
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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.
Looking at the US market it is apparent that despite the recent rally in the S&P500 from 670 to 1078 between March and September 2009, the market is still in a downtrend. The implication is that the market tanked when its downtrend was being challenged. The question therefore becomes - how low will it fall? I am expecting a fall back to the 942 support level, then consolidation from that point.
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