Upfront Investor | History Doesn’t Lie….

This reporting season brings to the forefront of mind market principles that few investors understand but really need to know so as to prevent their portfolios being hit when the next market correction occurs. Most have the belief that markets are erratic and unpredictable, however, history tells a completely different story if you know what to look for.

Presenting for an audience recently I was not surprised to see the shocked looked on many faces when I revealed my analysis. It can be quite confronting for a lot of people who for years have been told something different, but the data does not lie and shows how history repeats. Around every 40 years the market corrects for two to six years by at least 40 to 50 per cent. From 1894 the market declined 40% over a period of 6 years. Count forward 37 years and the market fell for three years by around 50%, then 43 years on another decline greater than 50% across a time frame of 6 years. The most recent correction, being the GFC, was 35 years later and by around 50%.

The next time I present to a live audience I know I will again see a show of hands and people will say they don’t believe that the market is predictable. However, in seeing the reality of the market I know how lives can be changed.

So what do we expect in the market?

This week the All Ordinaries Index continued up slightly to a high of 5471.8 points, above last week’s high. Not surprisingly, given the strength of last week’s run, we are now seeing the upward pressure ease as the market settles back down ahead of the Federal Open Market Committee (FOMC) meeting scheduled in the US for mid-March.

The market is likely to come back again next week and we may see this weakness persist over the next week or two before strength returns to push prices higher which I believe will see the market take out this week’s high and continue on to my target zone between 5600 and 5800 points. Depending on how the market unfolds will indicate whether the next high is likely to be towards the low or high of the target zone. That said as an investor or trader with money in the market it is important that you always be prepared for the unexpected and have a plan to manage your portfolio for the best and the worst case scenarios.


To your profitable trading,

Dale Gillham
Chief Analyst
Wealth Within

Dale Gillham, ‘one of the country’s most respected analysts’ (Wealth Creator Magazine, Nov/Dec 2004), sought after key note speaker and author of the best selling book ‘How to Beat the Managed Funds by 20%’. Dale has assisted thousands of traders and investors to learn to trade shares and become confident and profitable in their direct share investments. Tired of an industry saturated by quick fix gimmicks and expensive short-courses, Dale co-founded Wealth Within to provide ‘ real education and ongoing personalised support’, as well as independent investment adviceto traders and investors who have become disillusioned by the market for one reason or another. As testament to this, Wealth Within launched Australia’s first and only nationally accredited Diploma and Advanced Diploma of Share Trading and Investment.