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Welcome to this News Letter

In 2012 and 2013 around May and June the market sold off in sympathy with the American pattern of "Sell in May and Go Away". Will it happen again this year? You can clearly see the big dip in the market last May/June in the middle of the chart below. Ouch!

I talk to many traders and investors and the feeling is one of caution. Caution is a good thing but it can stop you getting involved in a strong market. I think this is a sneaky strong market. The graph below is a simple line chart on a weekly time frame going back 2 years. There is no doubt the fast pace of appreciation has slowed, but it is still steadily going up.

Late last year I had lunch with an economist trader friend, his opinion was the market was in the disbelief cycle. Investors and traders were still psychologically caught up in a crash mentality he said, a hangover from the GFC, they wouldnt believe what was happening. So whats happening? The market is going up. Why do I say that? Look at the chart below.

Yes the pace has slowed, the market sectors are churning, uncertainty exists (whats new?) but as a trend trader that chart is a pretty good looking one. Higher Highs and Higher Lows...text book Bull market stuff.

The path of least resistance appears to be above not below.

Things can change quickly though. Some big companies go ex dividend soon and their share prices will drop, dragging the index down with them. The Aussie XAO 500 is not a particularly well balanced index, being dominated by the banks, Telstra, BHP and a few others. So when those gorillas fall the index gets knocked about.

However if you have a portfolio of strong stocks will it fall as much? Probabilty (and my experience of trading a long time) suggests not.

Below is a chart using the free system I talk about on the website, it might pay you to check out the site sometime.

The graph below is a simulation of the 52 WH 7/12 system. It trades stocks with a set fundamental criteria. You can see the results have slowed of late, but the main point is they didnt fall away like the market did in 2012 and 2013, it just stalled a bit before continuing to climb. This system did 46 trades, or less than one a fortnight, using 10K a trade, no compounding. Notice how the system is nearly always "in the market". No fear exists for a mechanical system, it just follows the rules.

Trend trading is about buying a stock that is going up, holding it as long as it keeps going up, sell it if it starts to fall or go sideways for a period of time. Is there a trick to this? Yes, like any profession there are "tricks of the trade"

1/ Dont do it too often by over trading, most traders attempt to trade far too often

2/Focus on strong stocks only, ones in a strong trend with good fundamentals.

Discipline

Thats all well and good if you stick to your method, and there are tricks to that too.

Courses

I will be teaching a trading course in Sydney around August. Exact dates, time and venue are to be announced, if you are interested or have any questions shoot me an email anytime. In the mean time if you are trading a system, hang in there, stick to the rules, be patient and disciplined and you will be rewarded.

This news letter is over, but the bull market is not.

"What is needed rather than running away, controlling or supressing or any other resistance, is understanding fear. That means watch it, learn about it, come directly into contact with it. We are to learn about fear, not how to escape from it."

Krishnamurti

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