What this Site is About
This site utilizes technical analysis to determine the status of the current intermediate and long-term trends of the markets. For more information about technical analysis, please refer to this book by Martin Pring, "Introduction to Technical Analysis".
The intermediate trend is very loosely defined as 3 to 9 months, and the long-term trend is loosely defined as 3-5 years. The goal is to define favorable, low-risk intermediate and long-term periods to invest, and to define unfavorable, high-risk periods when investors should exercise caution about the market. Times of caution call for restraint in opening new positions, taking partial-profits, raising cash, hedging current positions, etc.
There is no guarantee that during times of low risk the market will rise. But investing during these periods provides a more favorable risk-reward outlook where the risk of losses is smaller and the potential reward is greater.
It is this author's opinion that the majority of equity investments should be made in diversified products such as mutual funds, and that all investors should use "loss management techniques" as explained in Martin Pring's book mentioned above. Loss management techniques include buying near important support levels so that if the support is broken, the position is sold and losses are limited.
Investors should commit only a reasonable percentage of their total funds to the equity markets, while the remaining funds should be diversified among real estate, commodities, fixed income and cash equivalents. The bulk of the funds should be retained as savings invested in safe vehicles such as money market funds, Treasury Bills and Certificates of Deposit.
Below is a figure from Martin Pring who describes three major trends of the market: the short-term (red dots), intermediate-term (thin blue line) and long-term (thick green line). The short-term trend is too difficult and costly to trade, but the intermediate trend, and particularly the long-term trend, provides opportunities. For more information about this figure, access www.pring.com.
Investing strategies should correspond with the long-term trend. In other words, purchases should be made during long-term up trends, but during the low points of the intermediate trend. On the other hand, investments and purchases should be limited during downtrends in the long-term cycle.
Technical analysis can be employed to determine the cycle low and cycle high positions of these trends. In technical analysis, several approaches are taken to determine the current position of the market. This includes sentiment surveys, market momentum, breadth, time cycles, overbought and oversold indicators and inter-market analysis of the four major investing markets: Bond, Stocks, Commodities and Currencies.
All charts and comments are intended for educational and discussion purposes only. No investment recommendations are being offered.
