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Should we be worried?

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by Peter Switzer

My charts champion Lance Lai predicted a sell off on the stock market last week on my Sky News Business Channel program virtually a day before it happened. In fact why his call was so memorable was that he admitted he was 100 per cent in cash!

So, is this a sign that we should be worried about what lies ahead?

Now you have to remember that Lai is a constant trader from his North Sydney-based Accountancy Invest business and has managed a private fund for Japanese investors, so he could be 100 per cent cash today and 60 per cent invested tomorrow. This is what a guy like Lance does.

Wall Street lower

But should we be spooked especially with Wall Street down again over the weekend?

The Dow Jones lost 2.2 per cent for the week and it was the worst week for the index in three months. The current concern is a slowing China, which is overblown as per usual and more European debt worries have reappeared.

But keep this in perspective — the S&P 500 index is up 7.54 per cent for the year to date and the Nasdaq is up nearly 11 per cent and most of this has happened in the US over the past three months. A sell off or consolidation or profit-taking was to be expected.

In fact, Lai pointed to the S&P 500, the S&P/ASX 200 and the increasingly important Shanghai Composite that all showed a tail down on the charts, which suggested a sell-off was building momentum.

Bullish outlook

However, looking at the bigger or longer-term picture, Lai said he was bullish on the market, given what the charts were telling him. Let’s hope he’s right again.

Looking for good news, the Thomson Reuters/University of Michigan consumer confidence index rose more than expected but that didn’t sway the market, which was primed for a sell off.

The week ahead

Ahead is a big week for US economic data: retails sales, industrial production, inflation, leading indicators and the Philadelphia Federal Reserve Survey.

The Yanks need a good week of economic data to offset some concerns over the Irish economy and debt where their famous luck looks like it has run out! However, it still doesn’t look as bad as Greece, which the global markets learnt to cope with.

For advice you can trust, contact Switzer Financial Services.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

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Published on: Monday, November 15, 2010