OPENING POSITION December 2004

Did you Google today? I don't know about you, but I think the rather unconventional initial public offering (IPO) of Google is an indication that optimism is still prevalent in the markets. A 70% rise in share price in a market that can hardly be described as being bullish is certainly impressive.

The year 2004 has been interesting as far as the markets are concerned. If there was one word to describe market performance for this past year, it would have to be "consolidation," but one that was slightly downward sloping. Mind you, it could have been a lot worse, given that we saw a weakening US dollar, a widening deficit, breakdowns at Freddie Mac and Fannie Mae, hedge fund fiascos and, of course, rising oil prices, which as I write this have hit the $55 per barrel mark. Although oil prices are not as high as they were in the 1981 spike on an inflation-adjusted basis, it's still going to have an effect on consumption. And the effects of high oil prices will not be felt just at the gas pump. Many people still rely on oil to heat their homes, and with winter upon us, that's going to have some impact. Already the spike in oil prices has led many analysts to lower their growth forecasts for 2005.

This doesn't look promising when it comes to expectations for next year, regardless of who wins on November 2 (this is being written before the US Presidential elections). But then again, there's no way to tell which way the markets will go. They could rally, or trend lower, or continue within the consolidation range.

In this issue of Technical Analysis of STOCKS & COMMODITIES, we cover various strategies you can apply to a consolidating market. You'll see from many of these articles that the only way to make money is to trade when the market is in a trend, even if that trend is short. The article "Trend Trigger Factor" by MH Pee will show you a method you can use to position yourself in the direction of the trend in all types of markets. "Trading In A Sideways Market" by Anthony Trongone will discuss some of the patterns you see in a market that is moving sideways. Not only that, being aware of these patterns will give you an edge in your trading. We interviewed Larry Connors of TradingMarkets.com, who discusses some interesting findings, quite the opposite of the conventional world view.

As 2004 draws to a close, regardless of how you performed in the markets this past year, do yourself a favor and take some time off to celebrate the holidays. The markets are going to continue moving along in 2005 as they always have. Who knows? Maybe we'll see more Google-type IPOs.

Happy holidays!

Jayanthi Gopalakrishnan,
Editor


Originally published in the December 2004 issue of Technical Analysis of STOCKS & COMMODITIES magazine. All rights reserved. © Copyright 2004, Technical Analysis, Inc.



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