OPENING POSITION
February 2003
Will we be experiencing negative growth in the equity markets for the third consecutive year? If we do, that wouldn't surprise me. Technically speaking, the broader equity markets have shown no signs of taking off in any given direction, moving listlessly within their support and resistance levels. When the market is in one of its upward swings, like the one we saw in October/November 2002, the media's optimism is almost amusing. I may have overlooked something last fall, but I didn't see any signs that the market had hit a bottom and the worst was over. Then, when the market started a downward swing, that optimism quickly turned to pessimism.
If nothing else, these quick shifts should be a learning experience for investors. And it seems that finally, investors with a long-term buy and hold mentality are beginning to view the markets one day at a time. In fact, many have taken their money out of the equity markets and are either sitting on them or looking for safer venues.
One of these safer investments is gold, which has attracted the attention of bulls lately. The surge in gold prices is not something we should ignore. A rise in the gold market suggests that investors consider gold to be a safe haven, especially during times of financial and political uncertainties. This just goes to show that it may be a long while before equities can be considered a viable long-term investment.
Short-term market players, however, are still participating in the stock markets. This, of course, presents great opportunities for swing or position traders who can take advantage of short-term or volatile moves.
But when you are taking advantage of these short-term moves, timing is important, since you are looking to enter and exit close to tops and bottoms. Various strategies can be applied in a directionless market. One method is the use of zigzags, as discussed in the feature article by William Cringan starting on page 24. In it, Cringan addresses how to determine where the market is and what price action to expect. In the STOCKS & COMMODITIES interview this month, Alan Farley of HARD Right Edge discusses the mindset behind swing trading and the importance of creating a disciplined trading plan in order to successfully trade short-term moves. As Farley points out, if you can trade well in the current market, you'll be able to trade any market.
Here's to smart trading!
Jayanthi Gopalakrishnan,
Editor
Originally published in the February 2003 issue of Technical Analysis of STOCKS & COMMODITIES magazine. All rights reserved. © Copyright 2003, Technical Analysis, Inc.