To plan well for the coming year, investors must foresee opportunities and risks that might present, and how they can be best exploited.
Serious investors will undertake their own specific fundamental research but a study of the charts of the the major indices may provide pertinent additional information. For this post I have chosen to look at two charts of the All Ordinaries Index (XAO) only, for a view of the strength and direction of the overall Australian stock market. It is an index of the top 300 ASX shares by market capitalization.
The first chart is a ten year weekly chart (from Incredible Charts).
It depicts the dramatic collapse in the ASX market from a high of 6873 on the 2nd November 2007 to a low of 3091.6 on the 6 March 2009.
Eight years later the XAO (an index of the 300 largest stocks on the ASX by market capitalisation) is still a long way below its former high. It was 5719 at close on the 30th December 2016, a rebound of 69.5% from its low. It therefore must regain another 30% to make a new high, as indices have always done in the past. Recovery has been frustratingly slow, but importantly, the index has oscillated in a consistently upwards trend channel.
The second chart, from Metastock, shows a daily candle-stick chart of the XAO in the past year.
In 2016 market gains were modest with the uptrend peaking in July-August at about 5670. September-October are bogy months for investors, and not surprisingly the market this year again threatened to sink lower, but encouragingly the year has closed strongly with the index breaking through the resistance of the previous high at 5670.
Now is the time to re-examine your portfolio performance for last year, and to consider how you might have avoided some of your unprofitable trades. Determine to do better in 2017 by making appropriate resolutions and setting ambitious but realistic goals. In doing so, seek to work smarter rather than harder, and to enjoy the tasks and challenges of the coming year.
Although there may be positive market sentiment at present, investors might well remember that the price of successful investing is vigilance, and adherence to one’s considered strategy. (“Eternal vigilance is the price of liberty” has been attributed to Thomas Jefferson)
Investors should always take advantage of professional advice specific for their needs.
Categories: Chart Review, Trading opinion
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