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Sunday, 6 April 2008

Market bottom?

Courtesy of CNA forummer SQ009

Friday announcement of job data reflected that it was the worse in 5 years with a loss of approximately 80,000 jobs in the US. However Dow Jones showed resilience to downside movements.

The main question to most traders will be – Is this truly the bottom?

Catching bottoms by itself is a very risky strategy to adopt. Imagine 2 scenarios: Buy low and sell high and buy high sell higher. Both method works very well, but I would favor the latter as no one can really predict the bottom of the market.

A typical scenario would be September 11 – After market resumes trading, the stock market rose 15% in 4 trading days (after the giant plunge). The rise was expected to be a ‘recovery’, however after ‘bargain hunting’, the market continued its downtrend and Greenspan cut the interest rates over and over again to bail out failed companies. This was also the start of the declination of USD.

So, market really hit the bottom? Personally I wouldn’t bet my money on it, although things may be cheap. Bottom or not, with the correct investment strategy, we can all profit from this market.

Good luck to all traders~

SQ

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