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Welcome to the final Safety in the Market newsletter for 2009. I think it’s safe to say this year has flown past both professionally and personally for me. This year the markets have restored some level of faith to investors mauled by the losses of 07/08, however, this is not the time to switch off on your investments or trading as the post-Christmas period has often resulted in strong rallies followed by sell-offs in January.
It’s amazing that Gann’s work details how to trade Christmas rallies in his materials that go back decades and are still working in the current environment. The position of the major stock indexes still provides some more clues as to what is ahead and what we can expect. The retracement of these bullish moves when compared to the 07 top to 09 bottoms confirms that we are not yet comfortably above the 50% point between the two.
This simple form of analysis confirms to me we are still in a traders market rather than the investing phase. I cannot commit to the idea of a raging bull market until we see this level comfortably cleared. Here are some of the world’s major indexes and how they are positioned.
Chart 1 –Weekly Bar Chart SPI200
click chart to enlarge
Chart 2 –Weekly Bar Chart S&P 500
click chart to enlarge
Chart 3 –Weekly Bar Chart FTSE 100
click chart to enlarge
Chart 4 –Weekly Bar Chart Nifty 50
click chart to enlarge
Chart 5 –Weekly Bar Chart Nikkei 225
click chart to enlarge
With the exception of the London index and the Indian Nifty, the other major markets Australia, US (S&P 500) and Japan are all on the south side of the 50% level. The emerging markets have seen a greater bounce in comparison to the established markets.
What this means is that we have some levels particularly in the US and Australia that could come into play if the Christmas rally unfolds. I would be happy to trade long or short around these areas based on the position of the market and trend at the time. That being said blind luck investing in the market as a whole will require some caution. There are many shares that we are holding or trading in; you can use the same analysis to judge the position and relative support or resistance that may be in play.
I have included a chart on WES (ASX) that is currently sitting above the 50% mark and may be primed for a run up? If it holds above this level Gann would look to be long and trade this market with the uptrends. If it fails to hold this level we would look to our swing charts for potential short trades.
Chart 6 –Weekly Bar Chart WES
click chart to enlarge
The markets in 2010 are likely to do enough to mug most people like they have the last few years. Your 2010 trading year starts now so it’s time to set some goals and commit to them, remember knowledge and experience are no weight to carry once you have them. Next year is likely to continue with volatility and surprises so stay sharp with your focus.
Finally it’s been a big year of change and achievement at Safety in the Market, we have launched a record number of new components in the suite of education with a large focus on using online technology. You, the trader have supported us and driven us to give you the best of our knowledge and experience. We look forward to seeing you in 2010 and improving our delivery and service to you.
On behalf of the dedicated Safety in the Market team I would like to extend our best wishes for the festive season and may you exceed all your profit goals in 2010 in your trading
Merry Christmas
Aaron Lynch
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