This week I have moved away from psychology training as I feel that it is important to add my commentary on the current market conditions.
I’m not one to normally predict the direction of the market. To be honest I don’t get caught up in the economic noise or the negative press articles on the economy or market factors but I must say I can see this current market moving even lower, purely using technical analysis. Actually, I think we need to condition ourselves to this fact and that the bear market may be around for a while yet. This may help many traders and investors align their expectations to their trading plan.
Recently I reflected my thoughts in the Share Wealth Systems Active Investor eNewsletter and clearly stated that, “if the Friday 25 June low does not hold this week then the ALL-ORDS must find support around the 4325 level or it could fall to 4200 (there is weak support around 4275 where the trend line is drawn). If 4200 does not hold then the next target is around the 3954 – 3961 level which is some way below where the ALL-ORDS is now”.
With the All Ords closing at 4324, I beleive this market does not have to move much further for it to go much, much lower. If the price action at 4200 does not hold this market could move a further 200 plus points down in the blink of an eye.
Whilst I am sharing my thoughts and technical analysis experiences, most of you would know that I am a pure advocate for mechanical trading. I would always much rather react to the market than attempt to predict it. Attempting to predict what the market will do next is a sure fire way to lose both money and face! That being said, a disciplined application of technical analysis can provide some valuable insights into market trends and internal market structure.
The SPA3 system I designed and released 12 years ago triggered a short or hedge signal only yesterday. Whilst the last hedge trade our customers made back in May was a profit trade, the previous three previous trades before this were loss trades. Rather than questioning our rules and making changes based on a small sample we follow our predetermined trading plan. It now remains to be seen where the market goes. Perhaps it can hold support around these current levels, but if it doesn’t, then the technical indicators appear to be pointing to further price falls. As always, now is the time to be disciplined and consistent in the application of our trading plans and trading rules so we are able to once again take advantage of suitable market conditions when they do re-appear.