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It is several years since I have seen such controversy and diversity of opinion amongst the bears and the bulls about market direction. As much as I have tried I just cannot stay away from this topic.
To recap for those who have been on another planet, we saw global equity markets fall apart in the first half of August only to recover just as quickly. Many markets are now due to hit new records whilst others have already gone into blue skies.
I went to cash and still got beat up by the bears even though I purported to be on their side for a flash – and still they punish me with their emails.
Well this week I decided that a trend is in place and I went back to the old adage – ‘the trend is your friend’. I know it sounds like a kindergarten rhyme but there is truth in it.
Even though I thought there was risk to the downside I could see stocks forming nice new Wave Five patterns and I could not resist. I just had to jump back in. As I repeatedly remind myself, even though a market might look shaky there can still be some great stocks.
I am not one to appease those alpha bears but I must say I still think there is still some risk to the downside – mild and short term but potentially larger in 2008, which is too far away to seriously contemplate.
We can purport to be smart boffins about all the elements that make up the future but there is no substitute for the chart:
click chart for more detail
And the chart is saying ‘up’ – not dramatically and probably with the odd dip along the way.
So I am now guided by the most useful adage of all – better to make money than to be right.
Enjoy the ride!
Tom Scollon
Chief Analyst
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