Before I sit to compose my editorial I generally think several days in advance of my topic and usually have a variety of topics I would like to explore. But this week there can be only one topic. Yes the DOW, the gloom and all that goes with it. After a few ugly days it is not surprising most of the investment world will feel a little rung out and the weekend cannot come fast enough.
Today my low of ‘4600 or thereabouts’ for the All Ords was more than met:
click to enlarge
So am I ready to come back in?
Well not quite. I have never had a sense of urgency to jump in. A number of friends have been telling me how they have been topping up on banks. The banks have lost about 10% for the last few days and to me that is a lot even in the long term context. Especially if there is another fall ahead of a few percent and more. Do you need to take the risk? Do you need the stress of picking the exact bottom?
I have highlighted above, consolidation levels and it is possible that we could see the current market rest at these levels which will act as support and resistance in the future.
The critical feature we are looking for is a consolidation that will act as a base or a spring board for the next move higher. We need to be especially alert to the prospect of weakness at these levels as if that happens then we are down to 4300/4400.
I am not wishing to be pessimistic I am just saying there are smart ways of dealing with this market.
Enjoy the ride