Is This Market Still in the Sell Zone?

“I’ve seen the doc and he says I have gastro. He’s suggested I take tomorrow off as well, which I hope is okay. But because I’ve been so crook I haven’t been able to do anything for Money Weekend.”

That was the email that greeted your editor this morning from assistant editor Shae Smith.

Quick as a flash we fired back a response:

“Hmm, can’t you write something, and somehow use your tummy troubles as an analogy about the economy? Something like, the economy ate a lot of bad food and now the economic stomach is trying to purge itself of the problem? Yet the central bankers and governments are trying to still feed it crap…”

If emails could give you the evil eye then surely Shae’s response to our enquiry would have done so. We won’t publish it here. The upshot is that your editor will most likely be this week’s guest host for Money Weekend…

But it’s not Shae Smith we’re going to focus on today. No, instead it’s one of the other cast of characters here at the Old Moon Factory on Fitzroy Street… Slipstream Trader Murray Dawes.

Before we get on to that, yesterday’s Money Morning seems to have stirred up a proverbial Pandora’s Box of hornet’s nests of vipers. We won’t repeat the article here, you can check it out for yourself by clicking here…

However, we will make one comment on a message left by one of the bloggers:

“Still better, why not be a subscriber to the editor’s newsletters, and just speculate in trading paper while he probably front runs your buys and sells?”

It’s an accusation that’s been levelled at your editor more than once. Usually we just brush it off in this forum. And as you know, we’re not the sort to revert to lawyers to extract an apology. The way we see it is, if you can’t argue your own corner in a public debate then get out of the public debate, it’s that simple.

But anyway, we have pointed out on many occasions to paid subscribers of Australian Small-Cap Investigator that your editor doesn’t invest in ANY of the stocks we recommend in that newsletter.

And so, just to make sure you don’t think the worst of us, I thought it would be worth covering if off here too…

So, just as we don’t invest in any of the stocks we tip, neither do we ask our family, friends, family’s friends, friend’s families nor anyone else – nor pets – to invest money on our behalf. And neither do we tip-off the aforesaid people so they can punt on their own behalf. All our tips are hush-hush until our subscribers receive them.

You see, our good reputation is more important to us than trying to make a few extra bucks by doing something illegal like insider trading.

Although I will point out, it’s not actually against the law to invest in a stock and then tip it. Providing that information is disclosed to the people you’re making the recommendation to then it’s fine.
However, we prefer to not even give the appearance of improper actions, so that’s why we stay well clear of anything we tip.

We make our money from offering subscribers good ideas. If you like our ideas then you’ll keep buying from us. If you don’t then you won’t.

But your editor goes one step further in making sure we’re completely clean. Just last month your editor was having a chat with Diggers & Drillers editor Dr. Alex Cowie. During the conversation the Stock Doc mentioned a stock he was considering tipping.

It just so happens it was a stock your editor had thrown a few hundred bucks at a couple of months prior as a punt. Well, without mentioning it to the Doc, we dropped an email to our compliance officer letting them know that your editor had an interest in the stock.

And because we didn’t even want to give the appearance of improper actions we promptly sold our shares, even though we liked it as a punt. As it turns out the Stock Doc didn’t go ahead and pick it.

But that’s OK. It’s more important to me that I don’t do anything that puts my interests in conflict with those of you and my other subscribers.

Look, it doesn’t surprise us that some people are suspicious of our motives for picking small-cap stocks, “He’s got to be front running.” With the amount of shonky people around in the financial markets and especially the property industry, it pays for you as an investor to be on your toes.

But the thing that we think catches most people out is that they assume just because we publish financial newsletters focused on the stockmarket that we must be unwavering fans of the market, and unwavering stockmarket bulls.

Of course, you only need to read Money Morning – or even Australian Small-Cap Investigator once to know that your editor is probably one of the least bullish financial commentators in Australia. Perhaps second only to Daily Reckoning editor Dan Denning.

You see, right now I continue to believe the stockmarket is a great place for a punt. The emphasis being on PUNT. That is, punting money you can afford to lose. Because if you think this market is set to soar then I’ve got a feeling you’re going to be sorely disappointed.

Quite frankly, on the subject of buy and hold investors, I have to agree with Robert Prechter that:

“Buy-and-hold stock investors will be devastated in a crash much worse than the declines of 2008 and early 2009 or the worst years of the Great Depression or the Panic of 1873.”

If you don’t know who Prechter is, he’s pretty much a stockmarket guru in the United States. He forecast the massive bull run that began in the early 1980s and then predicted the whole thing would come crashing down afterwards.

But it’s not just Prechter who’s bearish on the stockmarket right now. Our in-house technical trading boffin, Slipstream Trader Murray Dawes has been banging on – to anyone who’ll listen – about the cracking up of the market for ages.

But like any good trader he doesn’t let his opinion get in the way of a good trade. That means, even though the Dawes believes the market is set to slump he’s still been happy to tuck in to trades on the long side as well.

The important point is that he knows what’s on the horizon. And that’s a severe market crash. But knowing what’s ahead – even though you don’t know exactly whereabouts – can help to prepare you for it.

Let me show you an example…

A couple of weeks ago the Dawes sent Slipstream Trader subscribers the following chart in his weekly update:

It’s a snapshot of the S&P/ASX 200 taken on the 30th July. As you can see, thanks to his years of technical analysis experience Murray was able to anticipate what he believed would be a market “sell zone”.

But notice how big the sell zone is. This is the key point with Murray’s analysis. He’s not one of those Harry Hindsight traders who claims to be able to pick the exact top and exact bottom of the market.

Rather, Murray’s analysis involves picking particular zones in the charts that indicate to him a key trading point. At that point Murray is able to figure out the best point to take a trade and not only that, but also calculate the potential reward and risk.

How did Murray’s “sell zone” work out? Take a look at the chart below which he sent to Slipstream Trader subscribers on 12th August:

Bosh! Take that!

And right now the market is trading down near the red box I’ve marked on the chart. What’s next? Well, that’s normally only for subscribers, however, Murray has agreed to give you a peek at his most recent Slipstream Trader weekly update.

In that video you can find out whether the market is still a sell, or whether it’s now time to buy.

If you’re already a subscriber, don’t worry, Murray doesn’t give away any info on the current open stock positions, instead he’s focusing on analysis of the broader market.

Our technical guys are working on getting that out to you as soon as possible so that it’s still fresh. Most likely over the weekend. So, just check your email inbox over the next couple of days for a special message from me.

Anyway, that’s all for today. Now we’ve got to figure out what to write for Money Weekend…

Cheers.
Kris Sayce
For Money Morning Australia

Tagged as: economy, market, money, sell zone, stock, trading