Wednesday, 2 September 2009

Wait it out and join the game!

I’m temporarily sick of politics so I’m making do with reading the opinions on the outbreak of WW2 on other EN-language blogs, I’d rather focus on what I’ve been awaiting since April. It seems it has just began and is going to grow apace. The abrupt rally of stock indices since late February has been put on hold for a while. Having risen by around eighty per cent within just six months, share prices need to do a U-turn to return to the levels set out by macroeconomic conditions.

It doesn’t really matter now, whether the recession is over or if we are going to be hit by a second wave (hopefully not). It’s time for a typical correction – the market’s reaction to the unreasonable surge we witnessed. A month ago polls conducted among investors from the States showed the predominance of bulls, today moods are getting downbeat and soon bears might even outnumber bulls. History would prove drop-offs are much more likely in the autumnal months. I’m not in favour of trying to predict future on the basis of past figures, but all I see implies the comeback of pessimism to the markets.

If the correction is inevitable, the open question is only its scale. The readers of are as always into those euphoric, claiming “two or three days of sale and we’ll be heading northwards” or the ones asserting the new trough will be reached. This time the truth might lie somewhere in between – the correction will wipe out about a half of the current bull market (thus I assume the last upsurge was a beginning of a new trend, not a long correction of a downward wave), so my investment recommendation* is to wait until WIG 20 index drops to around 1700 – 1800 points and enter the game. The tide will turn at around this level and venture should fetch a decent profit

* DISCLAIMER – don’t take anything for granted, you should rely on your common sense (don’t forget about intuition) – there are as many opinions as analysts…

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