With the Presidential elections -- or should I say the election outcome uncertainty factor -- out of the way, it seems there is increasing interest in the equity markets. At least, that's what the charts of the broader indexes are telling me. Even the price of crude oil seems to have been falling from the $55 highs reached in late October 2004. But there haven't been any signs of a rally in the US dollar, which continues to fall. Does this mean that the US current account deficit will continue to widen? Or will the dollar's depreciation against the euro, yen, and Korean won erode the deficit? The uncertainty continues.
But that doesn't mean you should be just sitting around wondering which direction the market is going to go. It does mean you should fine-tune your trading systems and strategies for application during different market conditions. Each of you will have different systems and strategies that you apply to the markets. Some of you may prefer using quantitative systems, while others will prefer discretionary methods. In this issue we cover both. In the article "Las Vegas Or Los Nasdaq?" by Markos Katsanos starting on page 18, you'll see how you can apply a trading system to low-priced stocks. I'll have to admit that prior to reading this article, I had never considered applying technical analysis to stocks that were priced below $5. In fact, I didn't even consider trading stocks that were so low in price. But I was pleasantly surprised at what the article revealed, and I think you will be too. For those of you who may build trading systems around chart patterns, the article "The Simple Abc Correction" by Thomas Bulkowski (starting on page 52) discusses a simple pattern that can signal a strong move ahead. You will find that taking advantage of these corrections can greatly increase your returns.
For the benefit of the discretionary trader, we were fortunate enough to speak with Don Miller, who has been successfully trading the commodities markets for a number of years. His trading experiences are certainly encouraging.
So whether the dollar falls, or equities rise, or the price of crude oil falls, listen to what the markets are telling you and make sure that whatever systems or strategies you apply are in line with what you hear. Only then will you come out ahead.
Here's to successful trading in 2005!
Jayanthi Gopalakrishnan,
Editor
Originally published in the January 2005 issue of Technical Analysis of STOCKS & COMMODITIES magazine. All rights reserved. © Copyright 2004, Technical Analysis, Inc.
Return to January 2005 Contents