Sunday, 9 June 2013

Reading the runes

The Non-farm payroll came in slightly better than expected and the market moved up strongly. It has now recovered close to 61.8% of its move down from the peak. 61.8% is a Fibonacci number, one of those magic numbers that market watchers like to think dictate changes in the market. It's superstition, a bit like reading horoscopes in the papers, but there is something that impels you to do it.

My sell signal was triggered on Thursday and a new resistance line was broken on Friday. However, the move from break of support has only lasted four days so I will need ten days of upward movement before I re-enter the market according to the new ten day rule added to the S&R system. (See the last few posts for an explanation).

Those of you who have been paying attention will know that I have been anticipating this down signal and disposed of most of my shares before it was confirmed. A system is all well and good but emotions tend to get the better of me. I can't be sure that the same will not happen on the way up (i.e. I will buy too soon). But for me fear is a stronger emotion than greed so I may be able to control myself better.

When I started trading I developed a share picking system for the UK market. Repeated back tests on share picks that were made by the system in the past confirmed that the system yielded an typical annual rate of return of around 30% pa if shares were bought and held through any but the worst downturns. But I could never relinquish control of my portfolio and hand it over to the system entirely so I have had to live with an annual rate of return of just 17%. Emotions are funny things and its hard to keep them under control when you're dealing with something as important as money. You think you know best and your heart rules your head.

Nevertheless the system means that I have a guide for what to do. I'm not sitting here wondering will the market go up or will it go down? That is a question to which no-one has the answer. Never be duped and don't get swept into the arms of a would be guru who says he knows it all. What the system does instead is that it tells you what to do once you know which way the market is going. Nevertheless I will hazard a guess that the next move will be down. I'll admit to reading the horoscope and believing that "tomorrow is a day when you will have to act with caution" because I was born under a wandering star.

London Pride 

I had the huge pleasure yesterday of taking my two grandchildren (5 and 8 years old) to the London Aquarium. Not the best aquarium I've seen, that was in Hong Kong, but good enough.

As a country bumpkin I was staggered by the sheer mass of people that thronged the South Bank and the variety of languages that I heard spoken. It would have been an easy place to loose the two little people who were in my care. But they behaved impeccably.

They never strayed too far. They held my hand when we crossed roads. They stayed well away from the platform edge on the Underground. They did not fight with each other or bicker. They did not wine about things they wanted. They chose and ate their lunches. And when we got home, six hours later, they were able to tell their mum all sorts of things they had learnt about fish.

That was even though in the mean time they had played in the sand pit that is provided for children on the South Bank and had climbed on the massive stone plinth of Nelson's column in Trafalgar Square. That has successfully morphed into a massive playground for children of all ages.

I must have bought up my daughter well for her to have brought up two such lovely children.

No comments: