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Welcome to this newsletter

In this issue

Market Commentary

No 52 Week high signals for 3 weeks

Traders Emails

A Traders Story

Recently amongst some market commentary I have noticed some extreme negativity and nervousness. Some well known market followers predicting doom and gloom, a huge correction because the European economies are a basket case, the US  print too much money, the China is boom is over, there will be war in the Middle East and oil prices will sky rocket.

We all have beliefs about the best way to trade or invest, everyone being entitled to their opinion.  One of my beliefs is that one of the best ways to trade or invest is to be a responder to what IS happening, not a reactor or a predictor, as so many attempt to be. The market “climbs a wall of worry”, it always has and probably always will, that is human nature.

In this newsletter I will look at what is happening, to attempt to gauge a strategy moving forward (is that saying ok to use now we have a new PM?!)

Lets keep it simple and look at this chart

In previous news letters I mentioned that the US SP 500 has made an all time high a few months back. This significant event normally means higher prices to follow, as has been the case.

Now look at the next chart.

This one is a daily chart of 2 years comparing the two "500's" The Aussie and the US.

Notice the close (scary) correlation. What they do in the US, we do...unfortunately. Ocassionly there is a difference, like in May/June this year we corrected more than they, but most of the time its very similar.

Conclusion: pour over as many charts and stats as you like from Europe, Britain, Asia, commodities and even widgets. This SP500 is the one that effects us the most. Sure, different sectors move at different times, and not all shares behave the same within a churning market, but this news letter comment is addressing the question "is there doom"?

That long term chart of the SP500 is strong, until that breaks down or shows signs of weakness its a bull market.

What will happen here is what happens "over there".

 Predicting V Responding

This is a difficult market to predict, but nothing changes because markets are always hard to predict. I wouldn’t like to be attempting to pick direction either way at the moment, particularly as the tendency is for the market to rally unexpectantly on any news, so therefore if anything, and you want to predict, you should be long this market, as the charts suggest.

 As Ed Seykota famously said in the book Market Wizards “everyone gets what they want” from trading.

If you want action, excitement and stimulation, along with a degree of frustration,  stress and a lot of work…short term trade these markets.

If you want to trade with a degree of detachment, less work and therefore hopefully less worry and stress, do this.

1/ Pick your trading vehicle and stick to it (in my case strong trending shares)

2/ Pick your time frame and stick to it (in my case weekly)

3/ Learn how to position size your buys to reduce volatility and risk

4/ Know your expected drawdown and historical performance of your method to help stop you panicking so that you……

5/ Know your exit strategy if things do turn nasty….but also know when not to sell when the market is on a tear like now.

It is just as important to hold shares going up(particularly in a strong market) as it is to sell ones going down. If you know what that exit strategy is you can then focus on trade execution and being disciplined, rather than your energy being wasted on wondering “what if?” or “what should I do now?”

Replying to Emails and 52 wek high signals

I normally get quite a few emails from inquisitive minds after a newsletter. I reply to all enquiries, sometimes at length! However apart from being busy with a few new clients, I am travelling overseas soon and I will not be taking my computer :) so if I don’t reply straight away, don’t worry I will at some time.

If you are curious to where I am going its Northern Thailand to study Chi Kung. I am hoping 3 weeks there will refresh my body mind and soul...a much deserved break after a busy year to date. I wont be listing the weekly highs on the website while I am away, but I will list the ones that signalled during that 3 weeks on my return.

One more chart:

In my opinion this is the main reason we have not made an all time high in our 500 like the US has. Resources are dragging the chain, but it is showing promise. If this index gathers speed my tip is we start to outperform the US. Lets see what happens heh?

A Traders Story:

I am not sure if I posted this link or not before. Its a short documentary about me and life at the buddhist centre.....for those that are interested it runs for about 5 mins.

http://www.mygosford.tv/residents-stories/37-peter-castle

Until next time

cheers Peter

(the resident teaching monk here reckons when I return I will be able to break wooden planks with my little finger.....I doubt it)

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