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Can It Really Be?

Posted on the 29 January 2016 by Technicalanalysistalk

Greetings all,

It is always so much clearer to look at a chart once, wait for a few months, then look at it again. I find enjoyment in looking at how the market unfolds with hindsight; it is always crystal-clear - no fog, no blur, though there lies a possibility of deception in the short-term! Anyway, since my last post, markets rallied a little before making another dive. I have been feeling rather uneasy looking at the charts for the last several months. While we do not trade with our emotions based on empty feelings, my uneasiness stems from the general bearish picture I see on charts of most of the global indices. And with yet another plunge, the picture becomes clearer. I am now warning my friends to be careful in taking long positions on equities; likewise, I do the same here for you all: be wary, look at the charts, and see the general bearishness. Compare recent price action with that of previous major crashes. From my technical analysis point of view, the market is definitely behaving like it is at a major top.

As usual, when stating a belief - or, as unbearable as it is to me to use this term: a prediction - there comes along with it a sense of trepidation, a feeling of doubtfulness. "Can it really be?", "No, you must be succumbing to the tendency of heralding doomsday prophecies", are some of my thoughts. Seriously, can it really be? It was only in 2008 that the market collapsed utterly, and the following years saw entire countries, economies trying very hard to recover. Austerity was the often heard and hated word; both country and household had to rein in expenses, bite the bullet, endure hardship, and what have you. Can it really be that we are going to face another economic collapse?

The weakness of my mind then turns to irrational rationalization (if that makes sense): if I can figure out the case of fundamentals supporting a disaster, then it is confirmed! Maybe I went searching in the wrong places but I have not found many doomsday reports yet. At the same time, the Fed finally raises the interest rates in what was dubbed a "historic move". Perhaps, the markets are just pricing in the raise in rates, which at the basic economic level, is supposed to be a negative move meant to slow down much that is growing. (This is where I always find it hard to reconcile with basic economic teaching: should a rise in interest rates not be seen as a positive thing? Chances are, rates rise to combat inflation, too much investment, too quick or too much growth, etc. If that is the case, is the economy not doing too well? Is the economy not booming? Should a rise in rates not be evidence of a growing economy - "the good times".) After some time, I got back on my horse, and remembered that I am a chartist, therefore, I should not fret over the fundamentals when it pertains to trading.

Ultimately, as a chartist, a trader who bases my decisions on charts, I should not worry what the media is saying, or even what specific people are saying. Therefore, with my reputation on the line - as a writer on financial markets, with my money on the line - as a retail trader, and with my internal belief system on the line - for I know what I have believed, I declare the strong probability of a sharper downturn in equities in the year ahead.

Like Gary Neville, who should have retired a season earlier than he did, I should end this post with the earlier paragraph; nevertheless, a few more words need to be said. Time will go by, and the market will leave winners and losers in its wake. The adoption of the trend-following philosophy helps me to understand why I still persist in the game: if my prediction turns out wrong, I can still admit error, and switch. The learning will come after that, when the candles form on the chart, and price action reveals more of the nature of market movement; for that is what chartists ultimately rely on for direction: a chart - price over time.

P.S: What is with the STI?

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

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