Last week I shared my outlook for financial stocks. I am acutely aware that what I wrote may or may not have hit the right spot with each and every one of you. I call it as I see it - ‘technically’ - and I have no barrow to push in respect of a market going up or down. I am keen to get into the market myself at some point but I have been in cash (equities) for four years and would stay another four years if the market conditions did not meet my criteria. I am not interested in punting and I am sure most of you are not either.
I am conscious that many of you will have exposure to banks – tens of thousands of you - but as I write each week I cannot speak to everyone’s individual perspective and in no way can I provide (nor do I ever intend to provide) individual advice. I was once a financial adviser and am intensely wary of ‘advice’. (Even if you use a financial adviser, you need to know enough yourself to be able to at least macro-manage your adviser).
A financial adviser might ask you some or all of the following questions to assess your individual circumstances - and you would pay for the process:
What financials do you own?
When did you buy them?
What is your risk profile?
When do you need cash?
What is your investment time horizon?
I cannot ask these questions of each of you and so nothing that I write can be taken as personal financial advice.
I don’t wish to see readers experience anguish and therefore I am careful in presenting my views. I aim to cover something that is useful, even if at times it may not be the outlook you are looking for.
So having said all of that, where to in the coming years?
Again I must qualify. When I conduct analysis to help form a view, I look at Elliott projections based on Fibonacci mathematics. Today I am projecting a decade forward using a monthly chart. I don’t often look so far out to do my own precise planning but rather for a sense of what scenarios may lay ahead. That is, major tops and major bottoms.
One of the useful aspects of Elliott and Fibonacci is that you can do time analysis. I never expect this timing to be precise but more an approximation of the big picture.
So let’s go to the charts:
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click to enlarge
The first chart is a monthly All Ordinaries and suggests a top of 7700-9000, which is more or less a doubling from now to the next peak. Feasible? I have no reason to doubt this probability but the chart is also suggesting this may take up to ten years to unfold. Feasible? Again, I have no in-depth reason to question this. Ten years from bottom to top is not out of the question. It could be sooner but don’t depend on it.
We cannot however ignore the second chart, which is a weekly that suggests the prospect of a deeper low first – another 10% of easing still ahead. This may or may not happen but I am more inclined to plan for the prospect that it could. A fall to 3600 in the overall context of what many investors have been through is not too diabolical but it will be unpleasant for some if it eventuates.
I expect some clarity to emerge in the next few months and expect to be back in the market in perhaps the first half 2013. In the race to 8000/9000 there will be plenty of opportunities to get on board as it will not be a straight line to the top. There will be plenty of volatility and it may not be a smooth ride. You will never at any point need to rush to get on board.
History will ultimately repeat itself and as we get toward the top, greed will dominate and there will be the usual carnage we see at market tops with both old victims and first timers getting caught out. That is the way it is.
I want to see our readers succeed so as soon as I believe green lights are flashing I will be quick to print. In the meantime, do your homework.
Enjoy the ride