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The Reserve Bank Head of Economics said this about the recent rate cut....

"its not that thing were getting worse” ... “just that the recovery was delayed a bit”. 

It was evident that the Governor  believes the economy is fundamentally sound; however confidence levels or 

"the animal spirits” are yet to take hold. And effectively the February rate cut was largely

delivered as a result of weak confidence levels. The rate cut was essentially

delivered to provide the economy “with a bit more help"

Above is a comment about Glen Stevens recent rate cut decision. Now if he wants MORE animal spirits where will that push the market to? In fact many people, including myself, were a little surprised at the recent rate cut, as things didn’t seem that bad. More rate cuts mean higher house prices and stock market prices. Although I don’t think we have a bubble in the housing or stock markets Glen Stevens seems to want to make one! Such is the desire it seems of central banks all over the world, to stimulate, we are just joining that methodology a little later.

Recently I attended a free trading seminar in the city of Sydney, about 300 hundred people attended. I have not seen that many people at a trading talk since the mid to late 1990’s. The beginning of the infamous tech bubble. Also, this may sound a little off the wall but the other day I noticed the style of pop music being played, its bopity and “up” , the last time I noticed that too was the late 1990’s. Artists and musicians are sensitive people, they catch on quick to the emotions of the crowd, in fact they are often ahead of the curve! Have peoples mood changed now the frustrations of 2014 are behind us?

I am not predicting a crash, far from it. Last year I mentioned a few times the opinion of economist and investor Colin Nicholson that investors were in the “disbelief” stage of markets rising. The population were still stuck in mental GFC depression. In other words the probability was the markets would rise, not fall.

I hear a lot of people say the bull market is old, its been running for 6 years now since 2009, the average is 5 years, we are due for a pause. As you know I do not make predictions but consider the facts and charts. I would suggest its possible that in Australia the bull market didn’t start till 2012. Like Glen Stevens we are late to the party. A combination of the reserve bank being slow to cut rates ,the slump in commodity prices, political instability and government incompetence has held us back…until now.

The Bull market in Australia may not have started until mid to late 2012, so its only 2.5 years old. The charts are suggesting the markets want to run further, and it's already a very impressive run up considering commodity stocks have been sold off so hard. As I have mentioned many times, trends often run longer and harder than many people expect. I had a colleague say to me the other day “how do I make money now in this stimulated market?” Well, here I go again.

Have a method and stick to it. Most traders and investors have no method or plan, if they do they don’t stick to it from panic and fear. There are 12 months in a year, just one month like the recent one can make the same amount for your portfolio as 3 or 4 months would, but you need to be in the game, positioned in the best up trending stocks. Nothing new, technically trading is easy, psychologically it is not.

This year I will focus perhaps a little more on the thinking of trading and investing, what stops you and why? As I travelled around last year giving seminars and courses the thing I noticed, and was quite disheartened by, was the negativity amongst many people I met. A recent happiness survey of Australians revealed only 56% of people claimed they were happy and confident. No wonder people are scared to take a risk. Perhaps if they understood fear can be reduced by calculating probability and using risk control, rather than just using blind predictions and hope, they may be a little more confident.

Many investors wait, and wait, and wait, and wait, until it is "safe" to enter the market, then they eventually enter out of sheer frustration from missing out. It is when everyone is "in" that the market is at it's most dangerous. So in this case, fear is a good thing! because it means the markets can rise further. Crazy is'nt it? Human nature. Well, not really, no one likes to feel alone and be the odd one out.

Good luck in this raging bull market.

Peter

I once asked one of the world's greatest traders, "What's your secret to handling your emotions and psychological problems?" His response surprised me at the time. He said, "I just notice that I'm emotional and then I continue to trade the system."

Mark Douglas from Trading in the Zone

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