Wednesday 17 November 2010

This Correction Shouldn't Last for More Than One Week

There are a pletoria of indicators to look at when we wish to know if the correction is just profit taking (< 5%), a real correction (6 - 19%), or a bear market (> 20%). So far, they all point towards a correction that will not last beyond 2 weeks. We are in the 2nd week of the correction so I think it's buy on dips.

If you look at the AUDUSD, it is at 0.9757 from 1. The trend line is still in tact.

I usually don't just look at technicals. 5 out of 5 people who indulge purely on technical analysis gave me dates of the next big correction. One told me it is 23 Nov 2010. Another told me not yet. None of them told me correction would start last week.

Ultimately, it is an art, not a science. You have to look at fundamental factors, then look at technicals. QE2 is still going on. Generally, QE is associated with stock market rising. Economic indicators from the US is improving. Yes, the Chinese are raising rates to curb overheating. But between 2005 - 2007, interest rates and stock markets were rising too. It's the economy stupid.

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