Global markets today aren’t giving us too many reasons to look for long-term investments. In the recent maze of global volatility, European markets seem to be on the verge of capitulation, US markets are showing little prospect of improvement post QE3 and Australian markets are not displaying much domestic equity leadership, other than the mining boom.
So why bother investing at all? Well firstly, dividend yields across quality companies are better than we have seen for years and second, PE ratios remain attractive and long-term capital gains are still a real prospect. Nonetheless, it seems unlikely we will see the fruits of our investment labours in the short-term with markets stuck in a range-bound direction. But your investment dollars needn’t be worthless. We simply need to look at short-term prospects to bolster returns amid this mass-market volatility.
The first way to do this is to be confident in trading a directional market, regardless of actual market direction. We analysed this and uncovered a number of example trades in a recent Free Elliott Wave Webinar. ProfitSource gives us an instant indication of the technical direction of markets through its Elliott Wave Scan and this revealed a market heavily weighted to downside activity. Pre-computed scans highlighted a number of strong Elliott Wave short trades and these provided the focus of our trade examples.
Regardless of whether you are a long-term investor or a trader, looking at short-term market direction can yield portfolio outperformance. Trading portfolios should be kept separate from long-term accounts and trading profits should not be used to bolster your long-term nest egg.
In the current climate, US markets in particular will respond more to short-term stimulus and political reassurance than to the actual underlying health of the economy and its anaemic growth prospects. For this reason, major announcements and events should be watched closely. Turning points will often coincide with political agendas, Fed announcements and the promise of further stimulus, even if the government simply doesn’t have the money to give!
I’m now based in the US and my future blogs will explore all things US and their implications for Australian equity performance. In the meantime, if you haven’t yet attended our FREE Elliott Wave Webinar, join us next week and see this remarkable directional tool in action.
Stay ahead of the game.