Business News

The charts predicted the slump

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by Peter Switzer

A couple of weeks ago, my charts guy on my Sky News Business Channel program predicted that those damn wriggly lines with their trend lines drawn in were pointing downhill. And Lance Lai was right!

It doesn’t surprise me because the charts often get it right as they show where the weight of money is going and the weight has been up but not convincingly up.

To be factual, the S&P 500 has found it hard to beat the 1127-level and when the US continually came out with slower economic indicators and then China produced a more conservative economic report card, it made sense for short-term investors to head for the exit doors.

Bad day at the office

The Dow dropped 2.49 per cent, the S&P 500 gave up 2.82 per cent and the Nasdaq dumped 3.01 per cent.

That’s a bad day at the office for Wall Street.

For those who buy and sell to make profit this, is a tricky time, but for the long-term investor, I reckon it’s another buying opportunity.

The market is a bit spooked by the Fed’s decision but there are those who see it as a smart move.

Value in the market

Robert Weissenstein, the chief investment officer at Credit Suisse Private Banking Americas, told CNBC that the Fed was simply being careful to keep the recovery on track.

He sees value in the market.

"If earnings continue at the rate they’re going, and even if they come in lower than where expectations are, the equity markets are cheap," Weissenstein said. "People have priced in a pretty awful outcome."

What I have liked is company reporting. Yesterday it was Disney and overnight it was department store chain Macy's, which saw its stock rise over five per cent after better-than-expected results and, importantly, after it produced a rosy outlook statement.

Economy vs. company reports

The news right now gets down to a softening economy versus great profit results and pretty good outlook statements.

For long-term investors, they should be looking for great companies at good prices and, after yesterday and after today, both Westpac and the CBA will look like targets for the long-term investor.

Keep the faith and buy great companies and I will keep an eye on those damn charts!

For advice you can trust, contact Switzer Financial Services.

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Published on: Thursday, August 12, 2010