Trading Update Monday 31st January 2011

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Here is our first Traders’ Update for 2011. As has been the case since the onset of the Global Financial Crisis, the world of investment is dominated by activities of speculators and traders. That is, investors and institutions looking to buy and sell a range of securities over the short term to speculate on price movements rather than long term investors in businesses and income generation.
A financial planner is generally not going to recommend action on very short term market movements – planners are usually more interested in the longer term strategies, like attempting to beat inflation over multiple market cycles and keeping investment portfolios appropriate for each individual investor. However, investors and planners are continously subject to the bombardment of data and offers which suggest that a fortune can be made if you could only get your timing right. Even planners can get waylaid from time to time by this slick advertising and marketing, so knowing the vagaries of the day-to-day markets helps to keep the shorter term movements in perspective with long term goals, and maintains focus on those long term objectives.
The fall of the Australian market today signals a retreat to the bottom of the trading range through the overall uptrend. As can be seen from the following chart this is not an abnormal occurrence, with some market weakness late January and early February, followed by market recoveries through March/April  (NOTE : the current market low point during the GFC was reached on March 2009)
 

Looking at the S&P/ASX 200 Index short term trends

 
 Looking at the momentum charts the traders (blue lines) whilst having cut through the value investors (red lines) has not yet seen a “closing down” of those red lines which would indicate a momentum change.  

The very active traders have sold but little change to the long term trend

However, any further significant sell down during this week would most likely signal a market fall to the next resistance point of around the 4600 level but if these levels can be sustained then a break out of the “triangular pattern” formation could see a lift of markets towards that 5000 level. 

Is this a 'squeeze play', building to a larger movement?

 Let’s see how the week unfolds.

John.

 Disclaimer – Please remember the eternal disclaimer of this site – that NOTHING in this post or the site generally is to be taken as personal advice. You should not use this as a basis for investments decisions as it does not take into account your personal situation. This could only be done after consulting an appropriately qualified financial planner, who will follow a series of actions to establish your current financial position, objectives and preferences. Clearly, this cannot be done on this site.

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