GML - Where to from Here? - 06th March 2007
TURNING POINT OR CORRECTION?
Since last May I have highlighted the actions of informed buyers showing them selling into the FTSE rise. Throughout my time in the financial markets this index has never let me down having warned me of all major downturns since the 1970’s. During this ‘warning’ period I have restricted our trading to short term only with close stop losses and have considerably widened my analysis. This strategy provides increased safety against any sharp falls as recently experienced.
As of today my Hedge Fund has 47.5% in Bonds; 25% in equities and the balance in cash. There has been a slight fall in value which is always to be expected as markets turn at the tops if indeed this is the top. Our guarded view on the markets has allowed relief from recent market turbulence ensuring future decisions can be taken with a clear mind uncluttered by fear or lack of confidence.
The matter now at issue is whether the recent set back is the start of something more sinister or is just another correction in a long running rising market. I had been looking for a last final blast upwards but to date this has not materialized. Perhaps we are not to have a big final push. The market action over next few weeks should supply the answer to the dilemma. How will we be able to determine whether there is a change to the downside or whether there is to be a new leg up for the bull market?
Our Gann guide to establishing longer term trends is to use 2 week charts as seen on the charts below. The FTSE 250 & the S & P 500 both show that the upward trends are still intact. The indicator on the left hand side of the charts show the 2 week charts showing higher tops and bottoms. What we don't want to see is a two week chart with a bottom broken on the downside as can be seen on the Dubai market chart before its annihilation. As soon as a low is established the chances are high that a fall and not a correction is in place.
ANTICIPATING NEAR TERM PRICE AND TIME SUPPORT
However a much more profound sign of weakness is when a predetermined support level and timing angle fails to provide a buy signal but penetrates the support level and angle.
This weeks world market report has focused attention on no fewer than 27 stock markets which are now within reasonable distance from likely support. The chart for the FTSE 250 indicates that the market will probably fall to the 10,200 area this spring. The S & P 500 chart indicates that the market could fall to the 1340 area this spring.
If these areas do not arrest the falls together with the other world markets investors will be in for a torrid time. The alternative scenario is that markets recover and the bull market continues. If this were to be the outcome then Austria, France, Germany, India, Japan Italy & Switzerland look particularly interesting Always remember don’t tell the market what it should do; let the market tell YOU what to do!
Subscribers will be receiving regular updates reviewing events as they materialize. If the Bear takes charge don’t despair...bear in mind the thunderous 200% profits we enjoyed in the last 2001/3 bear market. I just love bear markets.