There is no quicker way to get egg on your face than to profess to know whether a market will break-out or not above a major level.
The best you can do is trust the trend and have an escape plan if it all turns to custard.
The Santa rally spiked US and Australian stocks to within a whisker of the all-time high and now we are all waiting with bated breath to see whether a serious uptrend can develop.
Australian stocks have been going nowhere fast for over two years and remain stuck in a range. Conditions are looking more bullish than they have in over a year, but it won’t take much to snuff out the rally.
There was a surprising jump in job losses in the employment figures released during the week in Australia. That may be a sign of things to come and makes you wonder whether falling interest rates due to rising unemployment is a bullish signal for equities.
I have my feet firmly in both camps at the moment because I think the bullish and bearish cases stack up fairly evenly. If markets can bust out above major resistance I will be prepared to go with it, but if the selling returns I won’t need a lot of convincing to go and hide under a log.
Focusing in on sectors that look promising is what is necessary when general market conditions are so up in the air.
I have been banging the drum on uranium for months, and I’m hoping you have benefitted from that call even if you aren’t currently a member of one of my services.
Future facing metals are currently getting hammered and look like they will fall further, but I remain firm in the view that once the dust settles and a new uptrend develops the opportunities in that space could be some of the biggest you may see in the next decade.
In today’s Closing Bell I show you the long-term chart in Lithium and rare earth ETFs to show you why I think the current capitulation phase is pushing prices down into a major buy zone.
Regards,
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Murray Dawes,
Editor, Retirement Trader and Fat Tail Microcaps
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