Trend is friendly despite small fall

Published in the Geelong Advertiser, May 2015 by Dale Gillham

When our politicians tell us something is good for us, should we listen?

This week the RBA made a further cut to the cash rate, which means cheaper money, and you may have heard Federal Treasurer Joe Hockey say that now is a great time to invest in Australia.

However, a survey revealed that around 75% of respondents disagreed, which left only 25% siding with Joe. So, who is right?

Studies of human behaviour show that often we do the opposite of what is good for us.

How many times has your wife told you not to have that extra helping or your husband told you to relax and you don’t? \

It is so easy to do what we are in the habit of doing, or what is easier.

This is also true when it comes to investing. For example, when the masses are fearful about investing, it’s human nature to want to follow the herd, whereas successful people often do the opposite.

Did you know that less than 10 per cent of people own an investment property and invest in direct shares, so what faith can you have in the opinion of the masses?

The only way to know what’s right, and make good investment decisions is to step away from the herd and get the right knowledge.

So what do we expect in the market?

This week, we saw the All Ordinaries Index (XAO) finally pull back into the target zone between 5600 and 5700 points, to find support for a further rise, a move that appears to be largely driven by bank and property related stocks.

The positive about the fall is that the market is behaving as the analysis indicated it would in terms of price, even though the timing of the decline is not in synch.

Also, the 6000 point level is still up for grabs, and my other targets haven’t been reached.

If they had I would be concerned about the current fall.

Given the strength of the decline this week, the market may fall just below my support zone, to around 5500 points, before it finds support to meet the angle of the longer term trend.

Remember, the trend is your friend, and markets often work their way back to trend after strong rises and before continuing higher.

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