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After a somewhat frightening sell off in the second half of 2008, the Australian Dollar has virtually done nothing but rise in the eighteen months since its October 2008 lows.

A diversified approach is important in any investment strategy. There are varying levels of diversity from Macro to Micro levels. It is commonly accepted that using a combination of property, stocks and cash is a sound diversification strategy on a macro level.

Well the markets have faltered at the altar of the 50% retracement level – well and truly.  I think we can say that the 1.4% fall last week and the solid 4.5% for this week - as at the time of writing (Thursday) - is a significant retreat:

We left off our discussion in Issue 355 with the market stopping us out of our Long position in Santos (STO:ASX) on 13 April. I mentioned very briefly that there were reasons why the market was indicating that it wasn’t going to go higher.

There is a long standing though controversial theory known as the Efficient Market Hypothesis. Basically, it rather bizarrely claims that well informed markets react with almost perfect efficiency in pricing new information into shares.