Market Update

Trading is often thought of as an exercise in applying tools, knowledge and skills that give the trader some definite advantage. One tool that fits into this category is the Economic Clock. It is a major component of many publications and courses available through the National Institute of Financial Studies.

Australia is well into the final stages of the “Real Estate” part of the clock. That has two main consequences. First, it means that there is still a lot of scope for continuing share market declines before the next period of overall share market boom. Second, informed investors and traders will be watching for the signs of the “Fixed Interest” part of the cycle before they go big-time into the share market. Rising interest rates and a period of economic recession are strong indicators that a new share market cycle is about to commence. Neither of these markers is in place at present … so do not expect any sudden turn-around in the share market.

For now it is a matter of carefully selecting stocks that are showing upward strength in a tide of negative sentiment toward share prices. Once selected, the trades are to be managed strictly in accordance with documented trading plans and with strong discipline applied to money management and risk management procedures.

Another way of preparing a watch list for potential trades in this environment is to identify those companies that are conforming to well-established levels of support and resistance. Even in a period of price retreat technical traders can identify a level of order or precision that will provide a guide for the timing of their trade entries and exits.

*This article was taken from Volume 4, Issue 3 of the “Share News” publication released in October 2002.


What is Investment Timing?

Investment timing refers to the purchase of an asset when the economic conditions are favorably disposed toward optimal capital growth. The greatest growth in the shortest possible time will produce the greatest return.

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