Monday, November 19, 2007

Big Picture Update

A good article about where we currently seem to be in somewhat longer term market cycles. I am also looking for the market to go down after a Thanksgiving rally to a bottom at a similar level to the August 2007 low. In fact I am looking for the final leg of this big triangle to play out:

Support for this idea is provided also by the McClellan Summation:

The stochastic on this chart has plenty of space to fall yet... There are likely several weeks till the bottom is reached. The NYSE McClellan Summation presents an identical picture.

At that point I am thinking to make a major change in strategy and significantly increasing the beta of my portfolio as well as buying financial stock funds like FF and XLF. If the market gets back to the August lows the atmosphere is likely to get very bearish - when everyone agrees on something in the investment world it is probably wrong. Everyone currently thinks the US Dollar will fall and the Australian Dollar Rise. Until very recently they've been right. I've been taking the contrarian bet to a minor degree. 61% of my assets are in Australian Dollars and I aim to reduce that to 50% over time - so I'm not making any big bets on the US Dollar rising - on the other hand we've tried to avoid spending our US Dollars and I haven't converted any of them into Australian Dollars since March 2006. In fact I bought US Dollars in April and May 2007.

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