Tom
Scollon
Chief Editor		 Welcome to spring – the skies are blue, the sun is shining, the birds are chirping, flowers blooming, property prices still booming, stock market seeing no limits – life is wonderful! But do we have to pay a price for this good fortune?

We do know from history that markets over extend themselves – in both directions. We also know that markets do correct themselves and when they do, it is frequently an over correction and they then go beyond “fair” valuation at the other end of the spectrum. It follows that an upward overextension increases the probability of an overextension on the downside.

One does not have to have a view about where the market might go - be that a bullish or bearish outlook. What is important is to watch for any major turn in the market or the positions you hold. That applies whether you are in share, options or futures.

The share markets have generally reached a point where they are stretching the technicals and fundamentals. And they could continue to an extreme for some time yet. So what if the markets ignore the technical and fundamentals? What else may trigger a retracement? There is always of course the lurking “X” factor.

“And what might that be?” asked the leprechaun. It can be almost anything besides the technical and the fundamentals. It can be the September 11 factor – it can be a global scare like SARS – an escalation of troubles in the Middle East - it could be a major IT drama like a more insidious computer virus that to date we have never experienced. None of these would we wish on our worst enemy, but they do happen. When the “X” factor affects the market it is often only the catalyst for a market burn out because the market has overextended. But the real reason for the burn out is the overextension. Had the market not over reached, then the effects of the “X” factor are often benign.

When trading the markets it is always healthy to have your thinking challenged. You may not always agree with the line of thinking but having your views confronted may at least reassure you that your accepted wisdom and strategies are on the right track. But this is a time when the complacency factor is rising and it is far-sighted to be a contrarian thinker – ever alert to the unforeseen.

Talking about a challenge - here's one for your diary! The Safety In The Market Annual Traders Conference 2003 is on at Bondi Beach in November this year. This is a great two and a half day event which will surely exercise your trading brain. There will be a host of great speakers and yours truly will be presenting a comprehensive market review and forecast on the likely 2004 strong performers for both equity, global and futures markets. You may not agree with all I say, but I promise to give you plenty to think about for the forthcoming year. I am told if you register between now and 30 September you'll save $500 off the registration price. Check out www.sitm.com.au/atc or ring 1800 622 858. So I look forward to seeing you for an early morning surf in those Bondi breakers in November!

Tom Scollon
Editor