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I like to think I am not a lemming and that I can think a little like a contrarian when necessary. Naturally, I don’t always get it right. (Although, just quietly, I bet against Facebook making a spectacular debut). Consensus told me that underwriters were talking up their book and they looked great for a short while. They are now paying the price of having to go into the market to support the exorbitant launch price and even their money is not abundant enough to keep the stock from heading underwater – and maybe staying there for a long time. Already the underwriters would be feeling considerable pain after basking in unconfirmed glory just a week ago. FB is not yet a great monetising business model – you and I and 900 million other users have come to regard it as our right to have free Facebook!
However, this is not my topic today.
Today I write about consensus of a different kind – that of world markets. When we take a look at global equity charts we see them all showing similar patterns:
The Mother of them All:
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Note the oscillator – it does not suggest much of a reverse rally.
FTSE:
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DAX:
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Hong Kong:
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S&P
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We may see a quick reverse rally – consensus thinking – but no guarantees. The media call it bargain hunting – but I say amateurs would be dicing with death. I have been thinking deeply about the consensus in these charts and am looking for another angle, which I have not yet found.
Traders should stand aside if they do not understand the patterns they see. This is also a time to be very clear on what time frame you are trading – 10-minute charts, 30-minute, 60-minute or daily? I do not include ‘weekly’ here as I don’t consider it a good time to buy for the long-term, even though Warren Buffett is doing so. Timing is critical right now.
At this stage I still don’t expect to see markets fall off a cliff. Just nervous times ahead, even though there is a view Central Banks will step in. Then again, perhaps something unimaginable is yet to emerge that has not yet been factored in by the markets.
Enjoy the ride
Tom Scollon |