Australian Investment Blog

Good morning everyone Overview As regular readers know, Market Matters’ preferred short / medium term scenario is that US equities rally to all-time highs i.e. ~7.5% higher for the S&P500. Near term, after an explosive 10% rally over only 4 weeks, some consolidation is due; however, many investors remain short / underweight stocks. This is (currently) supportive and leading to strong buying of any weakness. Regular readers are also aware that we were an aggressive buyer down around 4750 in the ASX200 moving to over 95% invested. Over the last week we have taken excellent profits on BHP, FMG and RIO, moving back to a 17% cash holding. After the 8% rally locally, Market Matters is now firmly wearing its sell hat and looking for areas / triggers to commence selling stocks. "Selling is 50% of the investment process but one that receives under 5% of the attention leading to underperformance by many investors" - Market Matters! Investors need to plan and consider right now if and how they will follow these sell recommendations over coming weeks / months e.g. simply sell shares or, for the sophisticated, using options to hedge portfolios. It is widely recognised that the ability to sell at good levels, whether taking profit or cutting losses, is one of the most significant of investor / trader weaknesses; hence, we are likely to mention this often over future weeks. Remember, longer term we are targeting the 1600 area for the S&P500 irrespective of whether in the interim it can make fresh all-time highs i.e. almost 20% below this morning's level- see chart 1 below.