There was something for everyone in last week’s trading action. The optimists who dream of our market decoupling from the US can take hope from the fact our market rose half a per cent last week while the US dropped nearly 5%. Pessimists will say that merely means we have a lot of catching up to do.
Any way you cut it, today is likely to be challenging. Major US markets fell 1.6 – 2.8 % on Friday after the release of some ghastly unemployment numbers. There was nowhere to hide, with financials, REITs and oilers all copping a whacking.
Oil slid another 2% but recovered from earlier heavier losses. Gold held steady while base metals surprised by rallying strongly after the unemployment figures were announced. That’s the best clue to where the strength might lie in our market today, despite the SPI tipping an open around 65 points down. Today’s Fin Review points out that copper and zinc are now 25% off last year’s lows and iron ore is up 30%.
We’re in for a big red start and on that sort of day I look to open a few positions as panic selling/profit-taking in individual shares hits its peak anywhere between 10.05 and 10.30. I scan my watchlists for shares that have been performing well in recent days but are sold down hard after the open with no obvious justification but profit taking/panic. Essentially I try to pick the bottom of the initial down-move as the selling exhausts itself and bargain-hunters move in. Of course, that’s easier said than done. Generally, I’m happy to settle for a few points of profit, often selling within the first hour, but I’ll hold on if a genuine recovery looks likely. Ideally, I find around four new positions manageable but I’ll only buy up to that number if the market offers opportunities at the right price.
A tricky but as always potentially profitable day ahead. Good luck to all.
