Publish Date:  2nd July 2005

More Important Than Worrying About Bulls and Bears

Many of our subscribers contact us asking whether or not we believe we are in a bull or bear market. This question is certainly a hard one to answer and reflects the indecision at present in the market. As a trader there are other factors to consider prior to making an investment decision.

Always Check the Index You Are Trading

If you look at a chart of the All Ords Index you will see it was only 8 short weeks ago that the "new" bear market had formed falling 350 points over a 4 week period. Now in the 4 weeks since, we have seen a new high posted and now things are being tagged as the "new" or continuing "bull" market.

That was a week ago and as I write we have just had a 30 point rise after losing nearly 100 points over the last 6 trading days. No wonder people are shaking their heads craving direction in this market and questioning the bull and bear struggle.

Key Levels of Support

One thing I want to say is that you must always look for key levels of support in any market, bull or bear. Today's 30 point rise came from a key level of support at 4184 on the All Ords marking a possible bounce in the current decline. Now this is never going to be etched in stone but what it will be is a reasonably reliable method of timing your entry into a related stock or share price index.

Look at Other Indexes

Always think a little outside the square. Have a look at today's chart of the Dow Jones in the U.S. Now as we know this index can have a major effect on our own economy and what we see here is also a line of support, this one diagonally at 10230. Clearly this is not as defined as the horizontal support on our own index but a line of support all the same.

Will this level on the Dow hold? Well I guess tomorrow will give us that answer.

So Tell Us - Bull or Bear?

Sorry readers, I have no great comment on this one, but do I have an opinion? Sure I do, but I trade for the now when it comes to our alert services. The Bull and Bear market factor becomes much more of an influence for me on longer term strategies.

My point in writing this is to highlight the effect on your trading returns by monitoring support levels, not only your individual stock's levels but also the index that relates to it.

Any entry should encompass an overview of many things. Support levels help with timing entries, qualifying direction and looking for short and long term plays. Bulls and Bears have their place as well but try not to get caught up in the fight.

As always - safe trading.