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You are not really convinced about the markets yet, are you? You are holding back. I can see it on the charts. A few smarties jumped in at the March low hoping they would continue on with the job and push up profits – whilst we sit back, laze on the beach and watch profits grow.
The Aussie market is up some 5% since the dip and many stocks by twice that and you can double that again if you are leveraged. Yes, it can be a risky ploy but great if it comes off.
So what are you worried about? It seems lots and maybe you have good reason. I will not deny your right to hold back and maybe you will have the last laugh. Here are some issues causing concern – if you did not already know:
- ‘Carry trade’ uncertainty as a result of rising interest rates in Japan
- Rising interests rates in Asia and Europe
- Indecision in the USA about a possible reduction in interest rates
- Who are the markets listening to, the new Fed Chairman Bernanke or the old juggler Greenspan – remember him?
- Middle East ructions and lack of a clear picture on forward oil prices
- The US dollar – how low can it go?
- The sub-prime mortgage default epidemic in the USA
- Stagflation prospect in the USA
- The prospect of another domestic interest rate increase next week
- A rising Aussie dollar that makes it tough for exporters – and will put some pressure on inflation
Next week I will list the next ten woes. But in the space of a week your perception may have spun 180 degrees in which case I will keep the list for another time.
Right now no news is good news. It’s a bit like life – you can always find plenty to worry about if you look hard enough. But maybe you are right short term. Take a look at a possible short term scenario for the DOW:
Chart 1 – DJX Daily Line Chart
click chart for more detail
Note a possible low, further south than the low of almost a month ago. All of a sudden I am back in favour with the bears. But don’t get too carried away – it is only a possibility. The bigger picture is a bullish one:
Chart 2 – DJX Daily Line Chart
click chart for more detail
Yes a possible high for the DOW of about 14,000. All you have to do is decide when you are going to board the gravy train again.
Enjoy the ride!
Tom Scollon
Chief Analyst
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