Fear and Greed in the Market

http://www.youtube.com/watch?v=A4LE3Lvnyxo

Last week I was reminded of a quote by Warren Buffet who stated following the extreme market pull in 1974 that we are fearful when others are greedy and greedy when others are fearful. Times have definitely changed, and people have swung from the greedy heights of the long bull-run between 2003 and 2007 to being fearful of the recent bear market.

Research by AMP Capital Investors, however, indicates that the average rise out of a bear market in the first 12 months is 34% but only those who take action will avail themselves of this gain. If we accept that the low that occurred on 21st November 2008 is the end of the current bear market in Australia, then probability suggests that investors who follow Buffets wise words should be well rewarded.

Sadly, however, most investors will sit on their hands and do nothing rather than avail themselves of the opportunity, and in so doing will potentially see their portfolios continue to underperform for quite sometime. In my opinion, it will be the investors who educate themselves and who take an active approach to their share market investments that will be profitable in the next 1 to 2 years.

So what can we expect in the market?

As I have said before in volatile markets we can expect the unexpected. While the volatility has eased, I expected the All Ordinaries Index to rise over the past two weeks. And while it did rise last week, this week it is now trading at its lowest levels in three weeks and continuing the sideways trend it has been in since last November. Given this and the fact that the market has so far failed to break above 3762 points to confirm the low of 3201.5 achieved on 21 November was the longer term low, we now need to reassess our position.

Often when a market falls heavily, the resulting rise struggles to gain momentum and instead displays signs of bearishness, which is what I believe is occurring right now. It is possible that the current sideways move will continue for the next month before we see any strong move up into around mid year to levels of between 4200 and 5000 points. There are a number of good shares that presenting profitable opportunities for those who are prepared, but as always we need to be careful and wait for confirmation.

Dale Gillham
Chief Analyst
Wealth Within

Dale Gillham, ‘one of the country’s most respected analysts’ (Wealth Creator Magazine, Nov/Dec 2004), sought after key note speaker and author of the best selling book ‘How to Beat the Managed Funds by 20%’, has assisted thousands of traders and investors to become confident and profitable in their direct share investments. Tired of an industry saturated by quick fix gimmicks and expensive short-courses, Dale co-founded Wealth Within to provide ‘ real education and ongoing personalised support’, as well as independent investment advice to traders and investors who have become disillusioned by the market for one reason or another. As testament to this, Wealth Within launched Australia’s first and only nationally accredited Diploma and Advanced Diploma of Share Trading and Investment.

For more information please visit www.wealthwithin.com.au

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